SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter
ended June 30, 1999 Commission file number 1-12278
URBAN SHOPPING CENTERS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-3886885
- ------------------------ -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
900 North Michigan Avenue, Suite 1500, Chicago, Illinois 60611
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 915-2000
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 [ ]
The number of shares of Common Stock and Unit Voting Common Stock, $.01 par
value, outstanding on August 6, 1999 were 17,506,484 and 407,935,
respectively.
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 17
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . 28
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 29
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . 33
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
($000's omitted, except share amounts)
ASSETS
------
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
Investment properties:
Land, including peripheral
land parcels. . . . . . . . . . . . $ 209,396 $ 157,045
Buildings and improvements. . . . . . 1,421,783 1,095,431
Equipment, furniture and fixtures . . 4,963 4,065
Construction in progress. . . . . . . 41,696 101,188
------------ -----------
1,677,838 1,357,729
Accumulated depreciation. . . . . . . (181,810) (163,845)
------------ -----------
Investment properties, net of
accumulated depreciation. . . . . 1,496,028 1,193,884
Investment property held for sale . . . 12,568 --
Investments in unconsolidated
partnerships. . . . . . . . . . . . . 130,983 135,052
Investment in the Management Company. . 51,597 48,552
Cash, cash equivalents and
short-term investments. . . . . . . . 2,237 422
Interest, rents and other receivables . 15,793 18,978
Deferred expenses and other assets. . . 14,453 14,522
------------ -----------
$ 1,723,659 $ 1,411,410
============ ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
Liabilities:
Mortgage notes payable. . . . . . . . $ 1,030,540 $ 765,501
Land sale-leaseback proceeds. . . . . 75,000 75,000
Deferred lease accrual. . . . . . . . 21,804 20,733
Accounts payable and other
liabilities . . . . . . . . . . . . 69,042 51,270
Investments in unconsolidated
partnerships. . . . . . . . . . . . 44,172 42,893
Commitments and contingencies
----------- -----------
Total liabilities . . . . . . 1,240,558 955,397
Minority interest . . . . . . . . . . . 164,455 129,739
Stockholders' equity:
Preferred stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 3,772,915
shares in 1999 and 1998 (liquida-
tion preference of $125,000). . . . 38 38
Common stock, $.01 par value,
authorized 140,000,000 shares,
issued and outstanding 17,506,484
shares in 1999 and 17,380,193
shares in 1998. . . . . . . . . . . 175 174
Unit voting stock, $.01 par value,
authorized 5,000,000 shares,
issued and outstanding 407,935
shares in 1999 and 1998 . . . . . . 4 4
Additional paid-in capital. . . . . . 494,926 489,880
Retained earnings (deficit) . . . . . (176,497) (163,822)
------------ -----------
Total stockholders' equity. . 318,646 326,274
------------ -----------
$ 1,723,659 $ 1,411,410
============ ===========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
($000's omitted, except share amounts)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents . . . . . . . . . . . . . . . . . $ 34,755 $ 29,496 $ 66,007 $ 58,852
Percentage rents. . . . . . . . . . . . . . . . 881 1,449 1,526 2,692
Recoveries from tenants . . . . . . . . . . . . 19,837 15,280 36,164 30,174
Other . . . . . . . . . . . . . . . . . . . . . 2,535 1,202 4,022 2,228
---------- ---------- ---------- ----------
58,008 47,427 107,719 93,946
Interest income . . . . . . . . . . . . . . . . . 196 445 377 834
---------- ---------- ---------- ----------
58,204 47,872 108,096 94,780
---------- ---------- ---------- ----------
Expenses:
Shopping center expenses. . . . . . . . . . . . . 20,867 17,189 39,178 34,823
Mortgage and other interest . . . . . . . . . . . 14,258 10,632 26,234 21,466
Ground rent . . . . . . . . . . . . . . . . . . . 1,142 1,212 2,229 2,400
Depreciation and amortization . . . . . . . . . . 12,264 10,383 23,109 20,697
General and administrative. . . . . . . . . . . . 1,417 1,083 2,921 2,418
Write-off of assets . . . . . . . . . . . . . . . 1,393 32 1,393 113
---------- ---------- ---------- ----------
51,341 40,531 95,064 81,917
---------- ---------- ---------- ----------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
Operating income. . . . . . . . . . . . . 6,863 7,341 13,032 12,863
Income from unconsolidated partnerships . . . . . . 2,908 2,830 5,409 4,680
Income (loss) from the Management Company . . . . . 276 (511) 308 (1,346)
----------- ----------- ---------- ----------
Income before other gains,
minority interest and
extraordinary items . . . . . . . . . . 10,047 9,660 18,749 16,197
Other gains . . . . . . . . . . . . . . . . . . . . -- 479 -- 479
Minority interest . . . . . . . . . . . . . . . . . (3,348) (3,224) (5,951) (5,221)
----------- ----------- ---------- ----------
Income before extraordinary
items . . . . . . . . . . . . . . . . . 6,699 6,915 12,798 11,455
Extraordinary items (net of taxes and
minority interest). . . . . . . . . . . . . . . . (486) -- (1,618) --
----------- ----------- ---------- ----------
Net income. . . . . . . . . . . . . . . . 6,213 6,915 11,180 11,455
Dividends on preferred stock. . . . . . . . . . . . (2,113) (1,575) (4,226) (3,196)
----------- ----------- ---------- ----------
Income applicable to common and
unit voting common stock. . . . . . . . $ 4,100 $ 5,340 $ 6,954 $ 8,259
=========== =========== ========== ==========
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
Basic income per common and unit
voting common share:
Before extraordinary items. . . . . . . . . . . . $ .26 $ .30 $ .48 $ .47
Extraordinary items . . . . . . . . . . . . . . . (.03) -- (.09) --
---------- ---------- ---------- ----------
Net income. . . . . . . . . . . . . . . . $ .23 $ .30 $ .39 $ .47
========== ========== ========== ==========
Diluted income per common and unit
voting common share:
Before extraordinary items. . . . . . . . . . . . $ .26 $ .30 $ .47 $ .47
Extraordinary items . . . . . . . . . . . . . . . (.03) -- (.09) --
---------- ---------- ---------- ----------
Net income. . . . . . . . . . . . . . . . $ .23 $ .30 $ .38 $ .47
========== ========== ========== ==========
Weighted-average common and
unit voting common stock outstanding. . . . . . . 17,905,975 17,743,463 17,895,881 17,731,318
========== ========== ========== ==========
Dividends declared and paid per common
and unit voting common share . . . . . . . . . . . $ .5600 $ .5250 $ 1.1200 $ 1.0500
========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
($000's omitted, except share amounts)
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 11,180 $ 11,455
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . 23,109 20,697
Write-off of assets . . . . . . . . . . . . . . . . . . . 1,393 113
Provision for losses on accounts receivable . . . . . . . 540 983
Income from unconsolidated partnerships . . . . . . . . . (5,409) (4,680)
Loss (income) from the Management Company . . . . . . . . (308) 1,346
Minority interest . . . . . . . . . . . . . . . . . . . . 5,951 5,221
Deferred lease accrual. . . . . . . . . . . . . . . . . . 1,071 1,070
Extraordinary items . . . . . . . . . . . . . . . . . . . 1,618 --
Other gains . . . . . . . . . . . . . . . . . . . . . . . -- (479)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . (773) (791)
Other changes in assets and liabilities:
Interest, rents and other receivables . . . . . . . . . . 3,280 1,462
Deferred expenses and other assets. . . . . . . . . . . . (2,352) 579
Accounts payable and other liabilities. . . . . . . . . . 8,486 4,915
----------- -----------
Net cash provided by operating activities . . . . . 47,786 41,891
----------- -----------
Cash flows from investing activities:
Additions to investment properties, net of change
in related payables . . . . . . . . . . . . . . . . . . . (43,927) (10,815)
Acquisition of investment properties and
development parcels . . . . . . . . . . . . . . . . . . . (122,927) --
Proceeds from the sale of development parcels,
net of selling costs. . . . . . . . . . . . . . . . . . . -- 490
Cash contributions to unconsolidated partnerships
and the Management Company. . . . . . . . . . . . . . . . (5,244) (15,401)
Cash distributions from unconsolidated partnerships
and the Management Company. . . . . . . . . . . . . . . . 11,684 7,486
Decrease (increase) in restricted cash. . . . . . . . . . . 832 (2,530)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . -- (3)
---------- ----------
Net cash used in investing activities . . . . . . . (159,582) (20,773)
---------- ----------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs . . . 335,432 58,648
Proceeds from issuance of Common Stock under
option plan and unit incentive plan . . . . . . . . . . . 3,116 1,871
Proceeds from the issuance of perpetual preferred
partnership units . . . . . . . . . . . . . . . . . . . . 38,997 --
Repayment of debt . . . . . . . . . . . . . . . . . . . . . (229,088) (50,443)
Cash distributions to common unitholders. . . . . . . . . . (10,011) (9,220)
Cash distributions to preferred unitholders . . . . . . . . (980) (980)
Dividends paid. . . . . . . . . . . . . . . . . . . . . . . (23,855) (21,055)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . -- 57
---------- ----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . . . . . 113,611 (21,122)
---------- ----------
Net increase in cash and cash equivalents . . . . . . . . . . 1,815 (4)
Cash and cash equivalents at beginning of period. . . . . . . 294 1,143
----------- -----------
Cash and cash equivalents at end of period. . . . . . . . . . $ 2,109 $ 1,139
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest,
net of amounts capitalized. . . . . . . . . . . . . . . . $ 24,043 $ 20,846
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)
($000's omitted, except share amounts)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1998, which are
incorporated by reference in the Company's 1998 annual report on Form 10-K,
as certain disclosures which would substantially duplicate those contained
in such audited financial statements have been omitted from this report.
(1) ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
On May 27, 1999, in connection with the acquisition of Century City
Shopping Center, the Company issued $40,000 of Series C Cumulative
Redeemable Preferred Partnership Units (the "Preferred Units") in Urban
Shopping Centers, L.P. (the "Operating Partnership") at $50.00 per unit.
The Preferred Units are entitled to fully cumulative distributions at a
rate of 9.125% per annum. The Preferred Units, which may be called by the
Company at par on or after May 27, 2004 have no stated maturity or
mandatory redemption and are not convertible into any other securities of
the Operating Partnership. The holders of the Preferred Units may exchange
them at any time on or after May 27, 2009 for shares of a new series of
preferred stock of the Company with similar terms.
BASIS OF PRESENTATION
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included. The results for the
interim periods ended June 30, 1999 and 1998 are not necessarily indicative
of the results to be obtained for the full fiscal year.
The accompanying consolidated financial statements include the
accounts of the Company, the Operating Partnership and all controlled
affiliates. The effect of all significant intercompany balances and
transactions have been eliminated in the consolidated presentation.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Company's interest in
Water Tower Joint Venture ("Water Tower Place"), Coral-CS/LTD Associates
("Coral Square Mall"), West Dade County Associates ("Miami International
Mall"), S. F. Shopping Centre Associates, L.P. ("San Francisco Shopping
Centre"), Copley Place Associates, LLC ("Copley Place"), Valencia Town
Center Associates, L.P. ("Valencia Town Center"), Woodland Hills Mall, LLC
("Woodland Hills Mall") and Urban Retail Properties Co. (the "Management
Company").
For the six months ended June 30, 1999 and 1998, the common units,
convertible preferred units, convertible preferred stock, stock options and
incentive units are either antidilutive or do not have a significant effect
on the computation of earnings per share.
Development costs, including interest and real estate taxes incurred
in connection with construction or expansion of certain investment
properties, are capitalized as a cost of the investment property and
depreciated over the estimated useful life of the related asset. During
the six months ended June 30, 1999 and 1998, the Company incurred interest
of $28,600 and $23,094, respectively, and capitalized interest of $2,366
and $1,628, respectively.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(1) ORGANIZATION AND BASIS OF PRESENTATION (Continued)
Cash and cash equivalents (which aggregated $2,109 and $294 at
June 30, 1999 and December 31, 1998, respectively) include a treasury money
market fund which invests principally in U.S. Treasury notes and bills
($616 and none at June 30, 1999 and December 31, 1998, respectively).
Other short-term investments (generally with original maturities of one
year or less) are generally held to maturity and aggregated $128 at
June 30, 1999 and December 31, 1998. Cash equivalents and other short-term
investments are held at cost which approximates market.
On May 21, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue 98-9 "Accounting
for Contingent Rent in Interim Financial Periods." The Task Force
determined that a lessor should defer recognition of contingent rental
income (i.e., percentage/excess rent) in interim periods until the
specified target (i.e., breakpoint) that triggers the contingent rental
income is achieved. The Company implemented the consensus as of May 21,
1998. This consensus affects timing of revenue recognition for interim
financial periods and it is not expected to have any significant effect on
the Company's net income for the full calendar year 1999.
ACCOUNTING FOR DERIVATIVES
The Company uses interest rate swap agreements and treasury locks as
part of its interest rate risk management strategy. These off-balance
sheet derivatives are classified as synthetic alterations. The criteria
that must be satisfied by synthetic alteration accounting are as follows:
(i) the liability to be converted has exposure to interest rate risk and
(ii) the derivative is designated and effective as a synthetic alteration
of the liability.
Accrual accounting is applied for these derivatives treated as
synthetic alterations, and income and expense are recorded as adjustments
of interest expense. Fees, if any, related to these off-balance sheet
investment products are amortized on the interest method over the life of
the derivative. If the balance of the liability falls below that of the
derivative, the excess portion of the derivative is marked to market and
the resulting gain or loss included in income, as applicable. If a
derivative is terminated independent of the underlying debt, the gain or
loss is deferred and amortized over the remaining life of the derivative.
If a treasury lock is terminated, the gain or loss is deferred and
amortized over the life of the new debt.
Derivatives that do not satisfy the criteria above would be carried at
market value with changes in market value to be recognized as current
income or expense.
(2) ACQUISITION
On June 10, 1999, the Company acquired Century City Shopping Center &
Marketplace ("Century City") in Los Angeles, California. As consideration
for the shopping center and related assets, which the Company acquired
subject to existing nonrecourse indebtedness of $160,000, the Company paid
$108,000 in cash, net of prorations. In connection with the acquisition,
the Company issued $3,200 of partnership units in the Operating Partnership
and $40,000 of Series C Cumulative Redeemable Preferred Partnership Units
in the Operating Partnership. The existing nonrecourse indebtedness and
the issuance of partnership units have not been reflected in investing and
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
financing activities in the accompanying consolidated statement of cash
flows. Century City is a 770,000 square foot open-air regional mall
located in Los Angeles, California. It is currently anchored by
Bloomingdale's (222,000 square feet) and Macy's (135,000 square feet) and
features a 50,000 square foot AMC theater, a 37,000 square foot Gelson's
Market and more than 325,000 square feet of specialty shops and
restaurants.
(3) INVESTMENT PROPERTIES
At June 30, 1999, the Company recognized Service Merchandise Plaza as
an investment property held for sale. Service Merchandise Plaza in
Columbus, Ohio, is an approximate 193,000 square foot community center
anchored by Service Merchandise, Circuit City and Office Depot. The
Company is selling Service Merchandise Plaza at this time because it is a
non-core asset which is not integral to the Company's strategy of owning
and operating dominant high quality regional malls and adjacent retail
facilities. Revenues of $1,408 and $1,025, expenses of $728 and $652, and
net income of $680 and $373, for the six months ended June 30, 1999 and
1998, respectively, related to Service Merchandise Plaza are included in
the accompanying consolidated statements of operations.
(4) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
Summarized financial information for the unconsolidated partnerships
is presented below:
June 30, December 31,
1999 1998
------------- -------------
Assets:
Investment properties, net. . . . . $ 847,878 $ 860,634
Other assets. . . . . . . . . . . . 52,585 46,934
----------- -----------
900,463 907,568
Less liabilities:
Mortgage notes payable. . . . . . . 644,241 645,904
Other liabilities . . . . . . . . . 36,393 30,045
----------- -----------
Total capital. . . . . . . . . . 219,829 231,619
Less: Outside partners' capital . . . 133,018 139,460
----------- -----------
Total investments in
unconsolidated partnerships. . $ 86,811 $ 92,159
=========== ===========
Total investments in unconsolidated
partnerships are presented in the
accompanying consolidated balance
sheets as follows:
Assets - Investments in
unconsolidated partnerships . . $ 130,983 $ 135,052
Liabilities - Investments in
unconsolidated partnerships . . 44,172 42,893
----------- -----------
$ 86,811 $ 92,159
=========== ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (Continued)
Six Months Ended
June 30,
---------------------------
1999 1998
----------- -----------
Revenues:
Shopping centers. . . . . . . . . . $ 90,939 $ 79,581
Interest income . . . . . . . . . . 424 460
----------- ---------
91,363 80,041
----------- ---------
Expenses:
Shopping centers. . . . . . . . . . 41,660 36,185
Mortgage and other interest and
ground rent . . . . . . . . . . . 23,002 21,572
Depreciation and amortization . . . 13,814 11,380
----------- ----------
78,476 69,137
----------- ----------
Income before other gains . . . . 12,887 10,904
Other gains . . . . . . . . . . . . . -- 729
----------- ----------
Net income. . . . . . . . . . $ 12,887 $ 11,633
=========== ==========
Company's share of:
Mortgage and other interest and
ground rent . . . . . . . . . . . $ 10,510 $ 9,557
Depreciation and amortization . . . 6,078 4,908
Other gains . . . . . . . . . . . . -- 292
Net income. . . . . . . . . . . . . 5,409 4,680
=========== ==========
(5) INVESTMENT IN THE MANAGEMENT COMPANY
The Company's consolidated financial statements present its investment
in the Management Company under the equity method of accounting.
Summarized financial information for the Management Company is
presented below.
June 30, December 31,
1999 1998
------------- -------------
Assets:
Investments in land parcels . . . . $ 15,171 $ 15,171
Cash, cash equivalents and
short-term investments. . . . . . 4,596 4,324
Receivables and deferred expenses . 19,975 17,332
----------- -----------
$ 39,742 $ 36,827
=========== ===========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(5) INVESTMENT IN THE MANAGEMENT COMPANY (Continued)
June 30, December 31,
1999 1998
------------- -------------
Liabilities:
Notes payable . . . . . . . . . . . $ 20,000 $ 20,000
Accounts payable and
other liabilities . . . . . . . . 3,389 4,777
----------- -----------
23,389 24,777
Owners' equity. . . . . . . . . . . . 16,353 12,050
----------- -----------
$ 39,742 $ 36,827
=========== ===========
Six Months Ended
June 30,
---------------------------
1999 1998
----------- -----------
Revenues:
Management, leasing and
development services. . . . . . . $ 21,297 $ 18,828
Interest income . . . . . . . . . . 90 382
---------- ----------
21,387 19,210
---------- ----------
Expenses:
Management, leasing and
development services. . . . . . . 19,495 17,262
Mortgage and other interest . . . . 696 2,843
Land parcels. . . . . . . . . . . . 41 452
Depreciation and amortization . . . 743 710
---------- ----------
20,975 21,267
---------- ----------
Operating income (loss) . . . . 412 (2,057)
Income tax benefit (expense). . . . . (126) 548
---------- ----------
Income (loss) before
extraordinary items . . . . . 286 (1,509)
Extraordinary items (net of taxes). . (1,788) --
---------- ----------
Net loss. . . . . . . . . . . . $ (1,502) $ (1,509)
========== ==========
(6) MORTGAGE NOTES PAYABLE
On June 29, 1999, the Company signed an agreement with a lender for
$100,000 of indebtedness secured by Citrus Park Town Center. The loan
bears interest at 6.89% and matures on June 30, 2009. In connection with
the funding on the new loan, the Company repaid the $72,600 then
outstanding balance on the construction loan at Citrus Park Town Center.
In addition, during the second quarter of 1999, the Company terminated its
position in an $80,000 ten year treasury lock for a net gain of $3,200,
which will be amortized as an offset to interest expense on the new Citrus
loan over ten years.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
($000's omitted, except share amounts)
(7) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company defines
each of its regional malls and community centers as an individual operating
segment and has determined that all of the regional malls and community
centers exhibit substantially identical economic characteristics and meet
the other criteria specified by SFAS No. 131 which permits the malls to be
aggregated into one reportable segment. The Management Company is viewed
by management as a separate segment and does not meet the quantitative
measures required for separate disclosure.
The Company separately assesses and measures the operating results of
its regional malls based on net operating income ("NOI"). NOI is
calculated as shopping center revenues less shopping center expenses
adjusted for straight-line rent and non-real estate depreciation. NOI for
the Company's unconsolidated partnerships is measured at the Company's
ownership share.
The following table summarizes the revenues, NOI and assets for the
Company's reportable segment.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
REVENUES:
Shopping center revenues. . $ 78,411 $ 64,739 $147,977 $128,173
Company's share of
unconsolidated
partnerships. . . . . . . (20,403) (17,312) (40,258) (34,227)
Interest income . . . . . . 196 445 377 834
-------- -------- -------- --------
Consolidated revenue. . $ 58,204 $ 47,872 $108,096 $ 94,780
======== ======== ======== ========
NOI:
Shopping center NOI . . . . $ 47,398 $ 39,497 $ 89,044 $ 76,739
Unconsolidated
shopping center NOI . . . (10,814) (9,692) (21,558) (18,602)
Interest income . . . . . . 196 445 377 834
Straight-line rent
adjustments . . . . . . . 407 334 773 791
Real estate depreciation
and amortization. . . . . (11,617) (9,831) (22,009) (19,600)
Non-shopping center
expenses. . . . . . . . . (18,707) (13,412) (33,595) (27,299)
Income from unconsolidated
partnerships and the
Management Company. . . . 3,184 2,319 5,717 3,334
-------- -------- -------- --------
Consolidated
income before
minority interest
and extraordinary
items . . . . . . . . $ 10,047 $ 9,660 $ 18,749 $ 16,197
======== ======== ======== ========
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(UNAUDITED)
($000's omitted, except share amounts)
(7) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
- (Continued)
June 30, December 31,
1999 1998
---------- ------------
ASSETS:
Total shopping center assets. . . . . . . $1,669,825 $1,362,436
Investment in the Management Company. . . 51,597 48,552
Cash, cash equivalents and short-term
investments . . . . . . . . . . . . . . 2,237 422
---------- ----------
Consolidated assets . . . . . . . $1,723,659 $1,411,410
========== ==========
Information relative to the Company's expenditures for additions to
long-lived assets has been included in the investing activities reported in
the consolidated statements of cash flows.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION. Net cash flows from operating activities
increased $5.9 million in the six months ended June 30, 1999 from the six
months ended June 30, 1998. This increase was primarily attributable to an
increase in rental operations discussed below.
Net cash flows used in investing activities increased $138.8 million
in the six months ended June 30, 1999 from the six months ended June 30,
1998. This increase was primarily attributable to (i) the acquisition of
Century City Shopping Center & Marketplace ("Century City") on June 10,
1999, (ii) the acquisition of land in Durham, North Carolina in June 1999
for the development of The Mall at Southpoint, and (iii) an increase in
additions to investment properties at Citrus Park Town Center as a result
of the consolidation of this entity in 1999.
Net cash flows from financing activities increased $134.7 million in
the six months ended June 30, 1999 from the six months ended June 30, 1998.
This increase was primarily attributable to an increase in the proceeds
from (i) the issuance of a $100.0 million permanent loan at Citrus Park
Town Center in June 1999, (ii) the issuance of $40.0 million in perpetual
preferred partnership units of the Operating Partnership in May 1999, and
(iii) the issuance of $20.0 million of indebtedness for the construction of
The Plaza at Citrus Park in June 1999; partially offset by the repayment of
the construction loan at Citrus Park Town Center in June 1999.
At June 30, 1999, the Company had cash, cash equivalents and short-
term investments of $2.2 million.
On June 4, 1999, the Company paid $12.1 million to common and
preferred shareholders as a dividend of $.56 per share representing its
first quarter 1999 dividend. On June 3, 1999, the Operating Partnership
paid $5.0 million to its limited partners as a distribution of $.56 per
unit representing its first quarter 1999 distribution.
CAPITALIZATION. At June 30, 1999, the Company's debt (including the
Company's share of debt of unconsolidated partnerships and the Management
Company) totaled $1,323.6 million of which $1,166.3 million is fixed rate
debt and $157.3 million is floating rate debt. On June 29, 1999, the
Company signed an agreement with a lender for $100.0 million of
indebtedness secured by Citrus Park Town Center. The loan bears interest
at 6.89% and matures on June 30, 2009. In connection with the funding on
the new loan, the Company repaid the $72.6 million then outstanding balance
on the construction loan at Citrus Park Town Center. In addition, during
the second quarter of 1999, the Company terminated its position in an $80.0
million, ten year treasury lock for a net gain of $3.2 million, which will
be amortized as an offset to interest expense on the new Citrus loan over
ten years. Also on June 29, 1999, the Company secured a loan with a lender
for $30.0 million, of which the proceeds will be used for the construction
of The Plaza at Citrus Park. The loan matures on June 29, 2000; however it
may be extended for two six-month periods at the Company's option. The
loan bears interest at a floating rate of LIBOR + 1.40% (6.70% at June 30,
1999). As of June 30, 1999, $20.0 million was outstanding on this loan.
On June 10, 1999, the Company acquired Century City. A portion of the
acquisition was financed by a nine year, $160.0 million non-recourse loan.
As of August 5, 1999, the $160.0 million bears interest at a blended fixed
rate of 7.58%. On February 25, 1999, the Company secured $75.0 million in
<PAGE>
financing for Penn Square Mall. This loan bears interest at a fixed rate
of 7.03% and matures on March 1, 2009. Also on February 25, 1999, the
Management Company obtained a $20.0 million bank loan. This loan bears
interest at LIBOR + 1.20% (6.26% at June 30, 1999) and matures on
February 25, 2004. On March 1, 1999, Penn Square Mall and the Management
Company prepaid their indebtedness of $31.0 million and $20.0 million,
respectively. The indebtedness had a scheduled maturity date of August 1,
2001. The Management Company incurred a penalty of approximately $2.0
million due to this prepayment of debt. On November 6, 1996, the Company
entered into an agreement with a lender for a one year $5.0 million
unsecured revolving line of credit, which on January 30, 1998, was amended
to increase the line to $7.5 million and extend the maturity to January 29,
1999. On January 29, 1999, this line was further amended to increase the
line to $10.0 million, extend the maturity to January 28, 2000 and change
the interest rate to the Reference Rate - 1.5625%. As of June 30, 1999, no
amounts were outstanding on this line of credit. As of June 30, 1999,
$48.3 million was outstanding on the Company's $107.5 million secured,
revolving line of credit. On January 11, 1999, Water Tower Joint Venture
completed a one year extension of its $170.0 million of indebtedness. This
indebtedness is now scheduled to mature on February 1, 2000. In addition,
it may be further extended for one additional year. On January 14, 1999,
S.F. Shopping Centre Associates, L.P. extended the loan maturity on its
$53.5 million of indebtedness to July 1, 2003. In addition, it may be
further extended for two one-year periods.
Although there can be no assurances, the Company believes that
operating cash flows will be sufficient to service all Company debt and
anticipates repayment or refinancing when such amounts are due in the
ordinary course of its business. At June 30, 1999, the Company's ratio of
Company debt to total market capitalization (which includes the market
value of issued and outstanding shares of capital stock of the Company and
of partnership interests in the Operating Partnership not held by the
Company, plus Company debt) was approximately 56%, as illustrated by the
table at the end of the liquidity and capital resources section. The debt
to total market capitalization ratio is based upon the market value of the
common stock and indebtedness of the Company and, accordingly, will
fluctuate with changes in the value of the common stock (and the issuance
of additional shares of common stock, or other forms of capital, if any,
and the amount of outstanding indebtedness).
The Company believes that its cash generated from property operations
will provide the necessary funds on a short-term and long-term basis for
its operating expenses, interest expenses on outstanding indebtedness and
recurring capital expenditures and all dividends to the shareholders
necessary to satisfy the REIT requirements. Sources of capital for future
acquisitions, development and non-recurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled
principal payments, including balloon payments, on the outstanding
indebtedness are expected to be obtained from the following sources: (i)
excess funds available for distribution, (ii) working capital reserves,
(iii) additional Company or property financing, (iv) proceeds from the sale
of assets, including outparcels and (v) additional equity raised in the
public or private markets (including the issuance of additional units
and/or unit voting common stock). Accordingly, the Company expects that it
may incur additional indebtedness. In light of current economic
conditions, relative costs of debt and equity capital, market values of
properties, growth and acquisition opportunities and other factors, the
Company may consider an increase or decrease in its ratio of Company debt
to total market capitalization accordingly.
CAPITAL INVESTMENTS. On June 10, 1999, the Company acquired Century
City. As consideration for the shopping center and related assets, which
the Company acquired subject to existing nonrecourse indebtedness of $160.0
million, the Company paid $108.0 million in cash, net of prorations. In
connection with the acquisition, the Company issued $3.2 million of
partnership units in the Operating Partnership and $40.0 million of
Series C Cumulative Redeemable Preferred Partnership Units in the Operating
Partnership. Century City is a 770,000 square foot open-air regional mall
<PAGE>
located in Los Angeles, California. It is currently anchored by
Bloomingdale's (222,000 square feet) and Macy's (135,000 square feet) and
features a 50,000 square foot AMC theater, a 37,000 square foot Gelson's
Market and more than 325,000 square feet of specialty shops and
restaurants.
The Company's newest super-regional mall development, Citrus Park Town
Center in Tampa, Florida, opened 100% leased on March 3, 1999. The anchor
tenants are Burdines, Dillard's, JCPenney and Sears. Citrus Park Town
Center also contains more than 120 specialty shops and restaurants and an
approximate 90,000 square foot state-of-the-art movie theatre. In
addition, an approximate 350,000 square foot community center opposite the
regional mall, The Plaza at Citrus Park, is scheduled to open in phases
beginning in the fall of 1999.
The Company's latest development project is the 1.1 million square
foot Galleria at Roseville near Sacramento, California. Galleria at
Roseville already has four committed anchor tenants with JCPenney, Macy's,
Nordstrom and Sears. Galleria at Roseville remains on schedule to open on
August 25, 2000.
The Company's next scheduled development project is the two-level, 1.1
million square foot, The Mall at Southpoint in Durham, North Carolina.
Belk's, Hecht's, JCPenney, Nordstrom and Sears have all reached preliminary
agreements to be anchor department stores at The Mall at Southpoint. The
mall is scheduled to open in fall 2001.
At June 30, 1999, amounts spent on construction in progress and land
for development related to The Plaza at Citrus Park, Galleria at Roseville
and The Mall at Southpoint totaled $52.1 million.
At June 30, 1999, there are approximately twenty-three, nine and
twenty-four acres of outparcel land, respectively, at Brandon TownCenter,
Citrus Park Town Center and Wolfchase Galleria available for future sale or
development.
<PAGE>
<TABLE>
<CAPTION>
100% Pro Rata
Balance of Share of
($000's omitted, Annual Mortgage Mortgage
except share and Maturity Interest Notes Ownership Notes
per share amounts) Date Rate Payable Interest Payable
- ----------------------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Entities:
Old Orchard Center Dec. 2009 6.98% $165,385 100.0% $ 165,385
Oakbrook Center Oct. 2004 6.14% 140,000 100.0% 140,000
MainPlace Sept. 1999(1) 6.25% 80,000 100.0% 80,000
Wolfchase Galleria June 2007 7.80% 78,618 100.0% 78,618
Fox Valley Center Nov. 2006 6.75% 85,528 100.0% 85,528
Hawthorn Center Nov. 2008 6.75% 77,864 100.0% 77,864
Penn Square Mall Mar. 2009 7.03% 74,845 100.0% 74,845
Citrus Park Town Center (2) June 2009 6.89% 100,000 100.0% 100,000
Century City Shopping Center June 2008 7.58%(3) 160,000 100.0% 160,000
Operating Partnership Apr. 2000(4) (4) 48,300 100.0% 48,300
Operating Partnership (5) June 2000 6.70%(5) 20,000 100.0% 20,000
- -------------------------------------------------------------------------------------------------------------
1,030,540 1,030,540
Unconsolidated Entities: (6)
Water Tower Place Feb. 2000(7) (7) 170,000 55.0% 93,500
Coral Square Mall Dec. 2000 7.40% 53,300 50.0% 26,650
Miami International Mall Dec. 2003 6.91% 46,205 40.0% 18,482
San Francisco Shopping Centre July 2003(8) 6.90% 53,531 50.0% 26,766
Copley Place Aug. 2007 7.44% 191,559 33.3% 63,853
Woodland Hills Mall Jan. 2009 7.00% 89,644 50.0% 44,822
Management Company Feb. 2004 6.26%(9) 20,000 95.0% 19,000
- -------------------------------------------------------------------------------------------------------------
624,239 293,073
- -------------------------------------------------------------------------------------------------------------
Company debt $1,323,613
- -------------------------------------------------------------------------------------------------------------
Convertible preferred units
(convertible into 1,018,182
common units) $ 28,000
Convertible preferred stock
(convertible into 3,772,915
shares of common stock) $ 125,000
Perpetual preferred units $ 40,000
- -------------------------------------------------------------------------------------------------------------
<PAGE>
100% Pro Rata
Balance of Share of
($000's omitted, Annual Mortgage Mortgage
except share and Maturity Interest Notes Ownership Notes
per share amounts) Date Rate Payable Interest Payable
- ----------------------- ---------- ---------- ---------- ---------- -----------
Market value of equity interests
as of June 30, 1999, based upon
26,934,538 common shares, unit
voting common shares and common
units at $31.50 per share/unit $ 848,438
- -------------------------------------------------------------------------------------------------------------
Total market capitalization $ 2,365,051
- -------------------------------------------------------------------------------------------------------------
Company debt to total market
capitalization 56%
- -------------------------------------------------------------------------------------------------------------
<FN>
(1) The Company currently intends to refinance this indebtedness.
(2) The Company terminated its position in an $80.0 million treasury lock for a net gain of $3.2 million,
which will be amortized as an offset to interest expense over ten years.
(3) As of August 5, 1999, the aggregate $160.0 million was fixed at a blended interest rate of 7.58%.
(4) This line of credit, subject to lenders' approval, may be extended for an additional one or two-year
period and is currently subject to a floating rate of LIBOR + 0.85% (6.10% at June 30, 1999).
(5) Represents outstandings under a loan for $30.0 million, for which the fundings will be used on the
construction of The Plaza at Citrus Park. This loan may be extended for two six-month periods and currently bears
interest at LIBOR + 1.40% (6.70% at June 30, 1999).
(6) Excludes Valencia Town Center as the Company is a limited partner and is currently not entitled to any
cash distributions until the outside partner has received a return on and of its contributions to the Partnership.
(7) During the first quarter of 1999, the Company extended this loan maturity to February 1, 2000. It may
be further extended for one additional year. Of this total $170.0 million, $160.0 million bears interest at LIBOR
+ 1.125% and $10.0 million bears interest at LIBOR + 1.500% (6.06% and 6.43%, respectively, at June 30, 1999).
(8) On January 14, 1999, the Company extended this loan maturity to July 1, 2003; however, it may be further
extended for two one-year periods.
(9) This loan currently bears interest at a floating rate of LIBOR + 1.20% (6.26% at June 30, 1999).
</TABLE>
<PAGE>
<TABLE>
REVIEW OF OPERATIONS
FUNDS FROM OPERATIONS. Funds from operations should not be considered as an alternative to net income or any
other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flows
from operating, investing or financing activities as a measure of liquidity. The chart below shows the
calculation of diluted funds from operations:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income before minority interest
and extraordinary items . . . . . . . . . . . . . $ 10,047 $ 10,139 $ 18,749 $ 16,676
Plus depreciation and amortization. . . . . . . . . 11,617 9,831 22,009 19,600
Plus Company's share of depreciation
and amortization from unconsolidated
partnerships and the Management
Company. . . . . . . . . . . . . . . . . . . . . . 2,901 2,317 5,792 4,611
Plus incentive unit dividends . . . . . . . . . . . 139 109 278 218
Less perpetual preferred unit distribution. . . . . (345) -- (345) --
---------- ---------- ---------- ----------
Diluted funds from operations . . . . . . . . . . . $ 24,359 $ 22,396 $ 46,483 $ 41,105
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
FUNDS AVAILABLE FOR DISTRIBUTION. The chart below shows the calculation of diluted funds available for
distribution:
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Diluted funds from operations . . . . . . . . . . . $ 24,359 $ 22,396 $ 46,483 $ 41,105
Plus non-cash effect of Oakbrook Center
straight-lined ground rent and
related interest. . . . . . . . . . . . . . . . . 862 820 1,716 1,633
Plus (less) adjustment to reflect actual
cash received from the Management
Company . . . . . . . . . . . . . . . . . . . . . (379) 482 (422) 1,291
Plus write-off of assets (a). . . . . . . . . . . . 1,492 32 1,492 113
Less straight-line rent adjustments (b) . . . . . . (597) (420) (1,169) (971)
---------- ---------- ---------- ----------
Diluted funds available for distribution
including other gains . . . . . . . . . . . . . . 25,737 23,310 48,100 43,171
Less other gains (b). . . . . . . . . . . . . . . . -- (771) -- (771)
---------- ---------- ---------- ----------
Diluted funds available for distribution
excluding other gains . . . . . . . . . . . . . . $ 25,737 $ 22,539 $ 48,100 $ 42,400
========== ========== ========== ==========
<FN>
(a) Includes the Company's share of unconsolidated partnerships and the Management Company.
(b) Includes the Company's share of unconsolidated partnerships.
</TABLE>
<PAGE>
Weighted-average diluted shares and units outstanding, including
preferred units, preferred stock and outstanding stock options and
incentive units, were 32,071,673 and 30,913,029 for the three months ended
June 30, 1999 and 1998, respectively, and 32,036,620 and 30,909,908,
respectively, for the six months ended June 30, 1999 and 1998.
SALES. Aggregate sales volume at the Company's regional malls for
those mall shops and anchors that report sales (excluding Citrus Park Town
Center and Century City and including the December 1998 acquisition of
Woodland Hills Mall as if it had been in the portfolio for the entire
period) increased 3.6% to $633.6 million in the three months ended June 30,
1999 from $611.8 million in the three months ended June 30, 1998. Mall
tenant sales (excluding anchors and movie theaters) (excluding Citrus Park
Town Center and Century City and including the December 1998 acquisition of
Woodland Hills Mall as if it had been in the portfolio for the entire
period) increased 6.5% to $460.9 million in the three months ended June 30,
1999 from $432.9 million in the same period for 1998. Comparable reported
mall tenant sales increased 4.3% in the six months ended June 30, 1999
compared to the same period for 1998. Sales per square foot for the
rolling twelve months ended June 30, 1999 were $380 compared to $366 for
the twelve months ended June 30, 1998. The 1998 sales per square foot
figure excludes Woodland Hills Mall, which was acquired in December 1998.
All sales per square foot figures exclude Citrus Park Town Center which
opened on March 3, 1999 and Century City which was acquired on June 10,
1999.
OCCUPANCY. The mall GLA was 90.9% occupied at June 30, 1999 as
compared to 93.3% at December 31, 1998 and 90.6% at June 30, 1998. The
mall GLA was 92.8% leased at June 30, 1999.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1998
Shopping center revenues increased $13.8 million to $107.7 million in
the six months ended June 30, 1999 from $93.9 million in the six months
ended June 30, 1998. This increase was primarily a result of (i) the
opening of Citrus Park Town Center on March 3, 1999, (ii) the acquisition
of Century City on June 10, 1999, and (iii) increases in shopping center
revenues at Brandon TownCenter, Oakbrook Center, Old Orchard Center and
Wolfchase Galleria.
Shopping center expenses, including depreciation and amortization,
increased $6.8 million to $62.3 million in the six months ended June 30,
1999 from $55.5 million in the same period for 1998. This increase was
primarily a result of (i) the opening of Citrus Park Town Center on
March 3, 1999 and (ii) the acquisition of Century City Shopping Center on
June 10, 1999.
Mortgage and other interest increased $4.7 million to $26.2 million in
the six months ended June 30, 1999 from $21.5 million in the same period
for 1998. This increase was primarily the result of (i) fundings on the
loans at Citrus Park Town Center, (ii) the acquisition of Century City on
June 10, 1999, and (iii) the new mortgage obtained by the Company at Penn
Square Mall.
Income from unconsolidated partnerships increased $.7 million to $5.4
million in the six months ended June 30, 1999 from $4.7 million in the same
period for 1998. This increase was primarily attributable to the Company's
acquisition of a 50% equity interest in Woodland Hills Mall on December 21,
1998 and increases from Water Tower Place and San Francisco Shopping
Centre. The increase at Water Tower Place was primarily due to a decrease
in mortgage interest as a result of a decrease in the floating interest
rate. The increase at San Francisco Shopping Centre was due to increased
minimum rents as a result of the re-merchandising of tenants.
<PAGE>
Income from the Management Company increased $1.6 million to $.3
million from a $1.3 million loss in the six months ended June 30, 1998.
This increase was primarily attributable to a decrease in mortgage interest
as a result of the restructuring of debt at the Management Company.
The extraordinary items (net of taxes and minority interest) of $1.6
million in 1999 resulted from the prepayment penalty and the write-off of
deferred expenses related to the repayment of debt at the Management
Company and the write-off of deferred expenses related to the repayment of
the construction loan at Citrus Park Town Center.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1998
Shopping center revenues increased $10.6 million to $58.0 million in
the three months ended June 30, 1999 from $47.4 million in the three months
ended June 30, 1998. This increase was primarily a result of (i) the
opening of Citrus Park Town Center on March 3, 1999, (ii) the acquisition
of Century City on June 10, 1999, and (iii) increases in shopping center
revenues at Brandon TownCenter, Oakbrook Center, Old Orchard Center and
Wolfchase Galleria.
Shopping center expenses, including depreciation and amortization,
increased $5.5 million to $33.1 million in the three months ended June 30,
1999 from $27.6 million in the same period for 1998. This increase was
primarily a result of (i) the opening of Citrus Park Town Center on
March 3, 1999 and (ii) the acquisition of Century City on June 10, 1999.
Mortgage and other interest increased $3.7 million to $14.3 million in
the three months ended June 30, 1999 from $10.6 million in the same period
for 1998. This increase was primarily the result of (i) fundings on the
loans at Citrus Park Town Center, (ii) the acquisition of Century City on
June 10, 1999, and (iii) the new mortgage obtained by the Company at Penn
Square Mall.
Income from the Management Company increased $.8 million to $.3
million in the three months ended June 30, 1999 from a $.5 million loss in
the same period for 1998. This increase was primarily attributable to a
decrease in mortgage interest as a result of the restructuring of debt at
the Management Company.
The extraordinary items (net of taxes and minority interest) of $.5
million in the second quarter 1999 resulted from the write-off of deferred
expenses related to the repayment of the construction loan at Citrus Park
Town Center.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("Statement 133"), was
issued by the FASB in June 1998. Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133" ("Statement 137"), was issued in June
1999. Statement 137 defers the effective date of Statement 133 for one
year. Statement 133, as amended, is now effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The effective date of
this statement for the Company is January 1, 2001. Statement 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the standard,
entities will be required to carry all derivative instruments in the
balance sheet at fair value. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument depends on whether it
has been designated and qualifies as part of a hedging relationship and, if
so, on the reason for holding it. The Company uses interest rate swap
agreements and treasury locks as part of its interest rate risk management
strategy. These derivatives are used to hedge cash flow exposure and under
Statement 133 the effective portion of the gain or loss on the derivative
instrument will be reported initially as a component of other comprehensive
<PAGE>
income (outside earnings) and subsequently reclassified into earnings when
the hedged transaction affects earnings. Any amounts excluded from the
assessment of hedge effectiveness as well as the ineffective portion of the
gain or loss will be reported in earnings immediately.
The Company does not anticipate early adoption of Statement 133, as
amended; however, it is estimated that adoption of Statement 133, as
amended, will result in the Company recording a derivative instrument asset
of $.9 million and transition adjustment income of $.9 million in other
comprehensive income at January 1, 2001.
The Company expects that the adoption of Statement 133 will increase
the volatility of reported earnings and other comprehensive income. In
general, the amount of volatility will vary with the level of derivative
activities during any period.
YEAR 2000
The Company uses a significant number of information technology ("IT")
and non-IT computer systems in its operations. The IT systems include the
Company's corporate operating and accounting systems, central lease entry
and property management systems, desktop and communications systems and
other corporate systems. The non-IT systems include embedded
microprocessors that control building systems, such as lighting, security,
fire, elevators, heating, ventilating and air conditioning systems.
In 1997, the Company began to address the year 2000 problem (that is,
the fact that some systems may fail or produce inaccurate results using
dates in or around the year 2000). The Company has replaced all of its
mission-critical IT systems, including its central lease entry and property
management software, key communications and desktop software and the
related computer hardware. The Company believes, based on statements by
vendors and on its own testing, that all of the replacements for mission-
critical IT systems are year 2000 ready. The Company also is continuing to
replace other IT systems which are not mission critical with year 2000
ready systems to the extent that it is cost-effective to do so.
The Company's property management staff has conducted an inventory and
assessment of the non-IT systems at its properties and is seeking
confirmation from the relevant vendors that these non-IT systems are year
2000 ready. The Company has begun, and is continuing, to replace critical
non-IT systems that the Company believes may not be year 2000 ready. The
Company believes that its properties currently are substantially year 2000
ready and that systems which are not yet year 2000 ready will be ready by
September 1999. However, the Company does not have the technical capacity
to test all of the non-IT systems at its properties.
The Company relies on a variety of outside suppliers to provide
critical services to its properties. Of particular concern are the local
utility providers. Electric utilities, for example, use numerous embedded
systems in producing, measuring, controlling, and dispensing electricity.
Without electricity, almost none of the systems at any property will
function and the property may be unable to operate. The Company does not
control these outside suppliers and for some suppliers, such as the
utilities, there may be no feasible alternative supplier available. The
failure of a utility or other supplier could have a material adverse effect
on the operations of the affected property, and a widespread failure of
utilities or other suppliers could have a material adverse effect on the
Company.
<PAGE>
The Company has developed and will continue to refine contingency
plans to address the risk created by the year 2000 problem. These plans
generally include having property management personnel on-site at the
properties during the year change to handle year 2000 problems as they
arise by using the methods that the Company's property management staff
customarily uses to address failures of systems and suppliers. The
contingency plans also include procuring alternative suppliers, when
available, where the Company is able to conclude, on the basis of its
inventory and assessment, that an existing supplier will not be year 2000
ready.
The Company's historical costs for remediation have not been material
and the Company does not anticipate that its future remediation will be
material. Although the cost of replacing the Company's IT mission-critical
systems was substantial, those replacements were made to improve
operational efficiency and were not accelerated due to the year 2000
problem. The Company has not delayed any material projects as a result of
the year 2000 problem.
The foregoing discussion is equally applicable to the Management
Company, except that at third party-owned properties managed by the
Management Company both the historical and any necessary future remediation
costs are the obligation of the property owner and the replacement of any
non-IT systems located upon such properties are at the discretion of the
property owner.
FORWARD LOOKING STATEMENTS
Certain statements set forth herein contain forward-looking
statements, including, without limitation, statements relating to the
timing and anticipated capital expenditures of the Company's development
programs and acquisitions. Although the Company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, the actual results may differ materially from that
set forth in the forward-looking statements. Certain factors that might
cause such differences include general economic conditions, local real
estate conditions, construction delays due to the unavailability of
construction materials, weather conditions or other delays beyond the
control of the Company. Consequently, such forward-looking statements
should be regarded solely as reflections of the Company's current operating
and development and acquisition plans and estimates. These plans and
estimates are subject to revision from time to time as additional
information becomes available, and actual results may differ from those
indicated in the referenced statements.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 5, 1999, at the Company's annual meeting of shareholders,
actions were taken on the election of directors and the ratification of
independent auditors. The results of these actions are presented below.
ELECTION OF DIRECTORS:
For Withheld
---------- ----------
Neil G. Bluhm 23,798,092 575,640
James B. Digney 23,857,469 516,263
Matthew S. Dominski 23,873,684 500,048
Susan Getzendanner 23,851,774 521,958
Judd D. Malkin 23,870,182 503,550
John E. Neal 23,854,769 518,963
Philip B. Rooney 23,858,335 515,397
John G. Schreiber 23,874,424 499,308
Henry T. Segerstrom 23,847,944 525,788
Messrs. Bluhm, Malkin and Dominski have been directors since
inception. Messrs. Digney, Rooney, Segerstrom and Ms. Getzendanner have
held such positions since October 18, 1993. Messrs. Neal and Schreiber
have been directors since February 13, 1995.
Each of the above directors will serve until the Company's next annual
meeting of shareholders and until their respective successors have been
elected and qualified, or until their resignation, death, termination or
removal.
RATIFICATION OF APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR
1999:
For Against Abstain
---------- ------- -------
24,327,235 34,821 11,676
APPROVAL OF THE COMPANY'S INCENTIVE STOCK PROGRAM:
For Against Abstain
---------- --------- -------
17,545,844 6,652,373 175,515
APPROVAL OF THE COMPANY'S ISSUANCE OF SECURITIES:
For Against Abstain Non-Vote
--------- --------- -------- ---------
17,943,087 3,863,697 38,353 2,528,595
No other matters were submitted to a vote of security holders during
the meeting or during the period covered by this report.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Stock Certificate is hereby incorporated by reference to
Exhibit 4.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
4.2 Credit Agreement among Urban Shopping Centers, L.P., Union
Bank of Switzerland (New York Branch), Morgan Guaranty Trust Company of New
York and the several Lenders is hereby incorporated by reference to Exhibit
4.11 to the Registrant's Form 10-Q (File No. 1-12278) filed on November 9,
1995
4.3 Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing dated as of February 10, 1997 made by LaSalle National
Trust, N.A. and Water Tower Joint Venture to and with Lehman Brothers
Holdings Inc. is hereby incorporated by reference to Exhibit 4.8 to the
Registrant's Form 10-Q (File No. 1-12278) filed on May 13, 1997
4.4 Promissory Note A dated as of February 10, 1997 by and
between Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.9 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997
4.5 Promissory Note B dated as of February 10, 1997 by and
between Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby incorporated by reference to Exhibit 4.10 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997
4.6 Mortgage, Security Agreement and Assignment of Rents dated as
of November 3, 1997 made by LaSalle National Bank and Oak Brook Urban
Venture, L.P. to and with USC Oakbrook, Inc., Goldman Sachs Mitsui Marine
Derivative Products, L.P. and Teachers' Retirement System of the State of
Illinois is hereby incorporated by reference to Exhibit 4.6 to the
Registrant's Form 10-K (File no. 1-12278) filed on March 31, 1998
4.7 Fifth Amendment to Loan Agreement dated December 11, 1997 by
and among The Prudential Insurance Company of America, Old Orchard Urban
Limited Partnership and American National Bank and Trust Company of Chicago
is hereby incorporated by reference to Exhibit 4.7 to the Registrant's Form
10-K (File No. 1-12278) filed on March 31, 1998
10.1 Second Amended and Restated Agreement of Limited Partnership
of Urban Shopping Centers, L.P. is hereby incorporated by reference to
Exhibit 10.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.2 Corporate Services Agreement among the Registrant, Urban
Shopping Centers, L.P. and JMB Retail Properties Co. (now Urban Retail
Properties Co.) is hereby incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.3 JMB Realty Corporation Employee Savings Plan is hereby
incorporated by reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)
<PAGE>
10.4 Retirement Plan for Employees of Amfac, Inc. and Subsidiaries
is hereby incorporated by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-11 (No. 33-64488)
10.5 Urban Shopping Centers 1993 Option Plan is hereby
incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-Q
(File No. 1-12278) filed on November 19, 1993
10.6 Non-Competition Agreement between JMB Realty Corporation and
the Registrant is hereby incorporated by reference to Exhibit 10.7 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.7 Non-Competition Agreement between JMB Institutional Realty
Corporation and the Registrant is hereby incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.8 Non-Competition Agreement between Neil G. Bluhm and the
Registrant is hereby incorporated by reference to Exhibit 10.9 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.9 Non-Competition Agreement between Judd D. Malkin and the
Registrant is hereby incorporated by reference to Exhibit 10.10 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.10 Omnibus Agreement among Urban Shopping Centers, L.P., JMB
Properties Company, JMB Retail Properties Co. (now Urban Retail Properties
Co.) and the Registrant is hereby incorporated by reference to Exhibit
10.12 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.11 Indemnification Agreement between the Registrant and its
Directors and Officers is hereby incorporated by reference to Exhibit 10.13
to the Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.12 Registration Rights and Lock-Up Agreement between the
Registrant and certain Investors is hereby incorporated by reference to
Exhibit 10.14 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.13 Stockholders Agreement between Center Partners, Ltd., Urban
Investment & Development Co., Urban-Water Tower Associates, JMB/Miami
Investors, L.P., Island Holidays, Ltd., Celtic Funding Corporation and the
Registrant is hereby incorporated by reference to Exhibit 10.15 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November 19, 1993
10.14 Lease Agreement, dated December 31, 1990, by and between
Teachers' Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, as amended by the First
Amendment to Lease Agreement and to Restated and Amended Memorandum of
Lease is hereby incorporated by reference to Exhibit 10.16 to the
Registrant's Registration Statement on Form S-11 (No. 33-64488)
10.15 Second Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National Trust,
N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby incorporated by
reference to Exhibit 10.17 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
<PAGE>
10.16 Net Ground Rental Lease Agreement with respect to Penn Square
Mall, as amended by Amendment of Net Ground Rental Lease and as further
amended by Second Amendment of Net Ground Rental Lease is hereby
incorporated by reference to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)
10.17 Ground Lease by and between The Newhall Land and Farming
Company and Valencia Town Center Associates is hereby incorporated by
reference to Exhibit 10.19 to the Registrant's Registration Statement on
Form S-11 (No. 33-64488)
10.18 Restated Employment Agreement between Matthew S. Dominski and
the Registrant is hereby incorporated by reference to Exhibit 10.19 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 25, 1994
10.19 Third Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National Trust,
N.A., as Trustee for Oakbrook Urban Venture, L.P. is hereby incorporated by
reference to Exhibit 10.20 to the Registrant's Form 10-K (File No. 1-12278)
filed on March 25, 1994
10.20 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.21 to the Registrant's Form 10-Q (File No. 1-
12278) filed on August 9, 1995
10.21 First and Second Amendments to Urban Shopping Centers 1993
Option Plan are hereby incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-Q (File No. 1-12278) filed on August 9, 1995
10.22 Urban Shopping Centers 1996 Incentive Unit Program is hereby
incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K
filed on November 25, 1996
10.23 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.23 to the Registrant's Form 10-K (File No. 1-
12278) filed on March 31, 1997
10.24 Agreement for Purchase and Sale of Partnership Interest by
and between ZML-00 Associates Limited Partnership, Urban Shopping Centers,
L.P., USC Old Orchard, Inc., and H. Rigel Barber, Gary A. Nickele and
Jeffery A. Gluskin, as owner trustees of the Old Orchard Trust, is hereby
incorporated by reference to Exhibit 10.24 to the Registrant's Form 10-K
(File No. 1-12278) filed on March 31, 1997
10.25 Amended and Restated Agreement of Limited Partnership of Old
Orchard Urban Limited Partnership by and between USC Old Orchard, Inc. and
Urban Shopping Centers, L.P. is hereby incorporated by reference to Exhibit
10.25 to the Registrant's Form 10-K (File No. 1-12278) filed on March 31,
1997
10.26 Third Amendment to Urban Shopping Centers 1993 Option Plan is
hereby incorporated by reference to Exhibit 10.26 to the Registrant's Form
10-Q (File No. 1-12278) filed on May 13, 1997
<PAGE>
10.27 Hawthorn, L.P. Agreement of Purchase and Sale of Partnership
Interest dated November 14, 1997 is hereby incorporated by reference to
Exhibit 10.1 to the Registrant's Form 8-K/A filed on December 22, 1997
10.28 Fox Valley Mall LLC Agreement of Purchase and Sale of
Membership Interest dated November 14, 1997 is hereby incorporated by
reference to Exhibit 10.2 to the Registrant's Form 8-K/A filed on December
22, 1997
10.29 Third Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.7 to the Registrant's Form 8-K/A filed on
December 22, 1997
10.30 Urban Shopping Centers Deferred Cash Compensation Plan dated
August 1, 1998 is hereby incorporated by reference to Exhibit 10.30 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 29, 1999
10.31 Fourth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby incorporated
by reference to Exhibit 10.31 to the Registrant's Form 10-K (File No. 1-
12278) filed on March 29, 1999
10.32 Contribution Agreement dated June 10, 1999 among KPLP,
Century City Mall, LLC, a Delaware limited liability company, Urban LP, and
Chicago Deferred Exchange Corporation is hereby incorporated by reference
to Exhibit 10.1 to the Registrant's Form 8-K filed on June 16, 1999
10.33 Agreement of Purchase and Sale dated June 10, 1999 between
RREEF and USC Century, Inc. is hereby incorporated by reference to Exhibit
10.2 to the Registrant's Form 8-K filed on June 16, 1999
10.34 Registration Rights Agreement dated June 10, 1999 among KPLP,
Urban and Urban LP is hereby incorporated by reference to Exhibit 10.3 to
the Registrant's Form 8-K filed on June 16, 1999
10.35 Fifth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban LP dated May 27, 1999 is hereby incorporated
by reference to Exhibit 10.4 to the Registrant's Form 8-K filed on June 16,
1999
10.36 Registration Rights Agreement dated May 27, 1999 between
Urban and the unit holder named therein is hereby incorporated by reference
to Exhibit 10.5 to the Registrant's Form 8-K filed on June 16, 1999
27.1 Financial Data Schedule
--------------------
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commission upon request.
(b) Form 8-K dated May 27, 1999 was filed during the second
quarter of 1999.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result
of its indebtedness. The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows
and to lower its overall borrowing costs. To achieve its objective, the
Company may enter into derivative financial instruments such as interest
rate swaps, caps and treasury locks in order to mitigate its interest rate
risk on a related financial instrument. Because of the Company's
objectives discussed above, the Company limits its exposure to increases in
interest rates; however, the Company also does not benefit fully from
decreases in interest rates. Furthermore, as interest rates increase and
decrease, the implicit value of the derivative instrument rises and falls,
respectively. This rise and fall in the implicit value of an interest rate
swap agreement does not impact the fixed payment agreed to under the swap
agreement. The Company does not enter into derivative or interest rate
transactions for speculative purposes.
The Company manages its exposure to changes in floating interest rates
by limiting exposure to floating rate changes in any one year. The Company
manages liquidity risk by staggering the maturities of its indebtedness.
The Company increases its financial flexibility through the use of variable
rate debt and derivatives versus fixed rate debt. The Company manages its
exposure to counterparties by diversifying its exposure to counterparties
and entering into swap agreements and treasury locks only with certain
parties which have a specified credit rating.
The Company's interest rate risk is monitored using a variety of
techniques. Fixed rate debt matures and bears average interest rates as
follows: 2000 - $26,650 at 7.40%; 2003 - $18,482 at 6.91%; and thereafter
- - $770,915 at 7.08%. Variable rate debt matures and bears average interest
rates (based on the June 30, 1999 LIBOR rate) as follows: 1999 - $80,000
at 5.60%; 2000 - $161,800 at 6.14%; 2003 - $26,766 at 5.67%; and thereafter
- - $239,000 at 5.70%.
The Company utilizes principally variable-to-fixed interest rate swaps
to mitigate its interest rate risk on the above variable rate debt.
Notional amounts of outstanding interest rate swaps have the following
maturities and provide for the following average fixed payment rates to
hedge the indicated underlying variable rates: 2000 - $20,000 at 6.18% and
6.81%; 2002 - $63,500 at 6.21% and 7.37%; 2003 - $10,000 at 6.18% and
7.41%; and thereafter - $256,766 at 5.44% and 6.26%.
The above average balances include the Company's share of
unconsolidated partnership's debt and swaps. The fair value of fixed and
variable rate debt approximates its carrying value at June 30, 1999. The
fair value of interest rate swap agreements was $2,658 at June 30, 1999.
As the above information incorporates only those exposures that exist
as of June 30, 1999, it does not consider those exposure or positions,
which could arise after that date. Moreover, because firm commitments are
not presented, the information represented therein has limited predictive
value. As a result, the Company's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that
arise during the period, the Company's hedging strategies at the time and
interest rates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
URBAN SHOPPING CENTERS, INC.
By: ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: August 12, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: August 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH
REPORT.
</LEGEND>
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