<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1996
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
--------------------------
Commission file number 1-12630
CENTERPOINT PROPERTIES CORPORATION
Maryland 36-3910279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 North Michigan Ave., Chicago, Illinois 60611
(312) 346-5600
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
-------- --------
Number of shares of Common Stock outstanding as of July 31, 1996; 14,183,327
----------
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets:
Investment in real estate:
Land $58,682,695 $49,413,885
Buildings 243,544,014 219,911,526
Building improvements 39,738,259 39,054,302
Furniture, fixtures, and equipment 9,808,242 9,080,444
Construction in progress 8,206,535
------------ ------------
359,979,745 317,460,157
Less accumulated depreciation 25,101,561 21,576,209
------------ ------------
Net investment in real estate 334,878,184 295,883,948
Cash and cash equivalents 2,877,760
Restricted cash and cash equivalents 5,907,970 1,301,362
Tenant accounts receivable, net 10,568,650 8,743,344
Mortgage notes receivable 10,342,646 8,750,000
Investment in and advances to affiliate 763,590 5,356,526
Prepaid expenses and other assets 9,313,448 5,679,610
Deferred expenses, net 4,764,068 6,273,583
------------ ------------
$376,538,556 $334,866,133
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $163,208,571 $121,970,756
Convertible subordinated debentures payable 16,700,000 23,244,000
Notes payable 56,660
Distributions payable 5,294,043 4,952,274
Cash overdraft 1,421,308
Accounts payable 675,434 1,781,433
Accrued expenses 16,072,350 11,837,810
Rents received in advance and security deposits 3,009,417 2,703,253
------------ ------------
206,381,123 166,546,186
------------ ------------
Stockholders' equity:
Series A preferred stock, $.001 par value, 2,272,727 million shares
authorized; 0 and 2,272,727 issued and outstanding, respectively 2,273
Common stock, $.001 par value, 47,727,273 million shares authorized;
10,733,327 and 10,358,958 issued and outstanding, respectively 10,733 10,359
Class B common stock, $.001 par value, 2,272,727 million shares
authorized; 2,272,727 and 0 issued and outstanding, respectively 2,273
Additional paid-in-capital 193,895,412 187,160,773
Retained earnings (deficit) (23,368,258) (18,602,473)
Unearned compensation - restricted stock (382,727) (250,985)
------------ ------------
Total stockholders' equity 170,157,433 168,319,947
------------ ------------
$376,538,556 $334,866,133
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Minimum rents $9,779,112 $8,291,434 $19,246,757 $16,281,019
Straight-line rents 382,503 287,928 769,362 586,768
Expense reimbursements 2,934,089 1,791,578 5,629,866 3,709,781
Miscellaneous tenant income 42,305 98,832 69,823 150,436
Mortgage interest income 246,367 499,990
Real estate fee income 399,204 957,417 1,532,150 1,102,806
Equity in net income of affiliate 670,010 631,973
----------- ----------- ----------- -----------
Total revenue 14,453,590 11,427,189 28,379,921 21,830,810
----------- ----------- ----------- -----------
Expenses:
Real estate taxes 2,796,353 1,745,149 5,286,686 3,362,886
Repair and maintenance 334,918 327,999 691,252 648,807
Insurance 117,493 111,395 227,511 201,612
Utilities 287,891 297,696 620,673 592,156
Property operating and leasing 1,137,821 1,099,346 2,174,565 2,011,719
General and administrative 532,018 460,516 1,235,325 920,164
Depreciation and amortization 2,504,760 1,950,206 4,912,411 3,976,784
Interest expense:
Interest incurred, net 2,653,289 3,083,865 5,186,737 6,110,738
Amortization of deferred financing costs 295,805 504,761 598,944 655,743
----------- ----------- ----------- -----------
Total expenses 10,660,348 9,580,933 20,934,104 18,480,609
----------- ----------- ----------- -----------
Operating income 3,793,242 1,846,256 7,445,817 3,350,201
Other expense (179,971) (35,472) (205,241) (56,076)
----------- ----------- ----------- -----------
Income before extraordinary item 3,613,271 1,810,784 7,240,576 3,294,125
Extraordinary item, early extinguishment of debt (1,429,866) (1,429,866)
----------- ----------- ----------- -----------
Net income $2,183,405 $1,810,784 $5,810,710 $3,294,125
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income before extraordinary item per share $0.28 $0.56
Extraordinary item per share (0.11) (0.11)
----------- -----------
Net income per share $0.17 $0.20 $0.45 $0.38
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Distributions per share $0.405 $0.390 $0.810 $0.780
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $5,810,710 $3,294,125
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary item-early extinguishment of debt 1,429,866
Depreciation 4,756,770 3,858,038
Amortization of deferred financing costs 598,944 655,743
Other amortization 155,641 118,746
Incentive stock awards 54,784
Interest on converted debentures 60,826 4,392
Equity in net income of affiliate (631,973)
Net changes in:
Tenant accounts receivable (1,211,079) (555,280)
Prepaid expenses and other assets (1,078,724) (158,646)
Rents received in advance and security deposits 198,127 605,350
Accounts payable and accrued expenses 1,094,204 (816,411)
---------- ----------
Net cash provided by operating activities 11,238,096 7,006,057
---------- ----------
Cash flows from investing activities:
Change in restricted cash and cash equivalents (4,606,608) (34,218)
Acquisition of real estate (35,377,606) (30,417,532)
Improvements and additions to properties (10,417,039) (2,806,017)
Disposition of real estate 13,807,351
Change in deposits on acquisitions (2,346,052) (789,874)
Issuance of mortgage notes receivable (657,646)
Investment in and advances to affiliate 5,224,909 (1,005,000)
Receivable from affiliates and employees (141,438) 237,952
Addition to deferred expenses (878,865) (682,419)
---------- ----------
Net cash used in investing activities (35,392,994) (35,497,108)
---------- ----------
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 147,863 47,221,875
Offering costs paid (3,935,511)
Proceeds from issuance of mortgage notes payable 53,370,117 32,163,948
Repayments of mortgage notes payable (23,370,491) (40,898,688)
Repayments of notes payable (56,660) (41,617)
Distributions (10,234,711) (6,166,666)
Conversion of convertible subordinated debentures payable (288) (149)
---------- ----------
Net cash provided by financing activities 19,855,830 28,343,192
---------- ----------
Net change in cash and cash equivalents (4,299,068) (147,859)
Cash and cash equivalents, beginning of the year 2,877,760 419,667
---------- ----------
Cash and cash equivalents, end of period ($1,421,308) $271,808
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION:
These unaudited Consolidated Financial Statements of CenterPoint Properties
Corporation, a Maryland Corporation (the "Company"), have been prepared pursuant
to the Securities and Exchange Commission ("SEC") rules and regulations and
should be read in conjunction with the December 31, 1995, Financial Statements
and Notes thereto included in the Company's Form 10-K. The following Notes to
Consolidated Financial Statements highlight significant changes to the Notes
included in the December 31, 1995, Audited Financial Statements and present
interim disclosures as required by the SEC. The accompanying Consolidated
Financial Statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature. The consolidated balance
sheet as of December 31, 1995, has been derived from the Company's Audited
Financial Statements.
The consolidated statements of operations and statements of cash flows for prior
periods have been reclassified to conform with current classifications with no
effect on results of operations or cash flows.
1. PREFERRED STOCK, COMMON STOCK AND RELATED TRANSACTIONS
Under the terms of the Company's 1995 Director Stock Plan, adopted in 1995,
certain directors were granted 2,516 unrestricted shares of the Company's
common stock in March, 1996. Shares were awarded in the name of each of
the participants, who have all the rights of other common stockholders.
Under the terms of the Company's 1995 Restricted Stock Incentive Plan,
adopted in 1995, certain key employees were granted 8,290 restricted shares
of the Company's common stock in March, 1996. Shares were awarded in the
name of each of the participants, who have all the rights of other common
stockholders, subject to certain restrictions and forfeiture provisions.
Restrictions on the shares expire no more than eight years after the date
of award, or earlier if certain performance targets are met.
Unearned compensation was recorded at the date of award based on the market
value of the shares. Unearned compensation, which is shown as a separate
component of stockholders' equity, is being amortized to expense over the
eight year vesting period.
Under the terms of Company's 1993 Stock Option Plan, options for 104,428
shares of common stock were issued in March, 1996. The options were
granted at $22.50 per share and are exercisable per the plan.
<PAGE>
At the Annual Meeting of Stockholders on May 14, 1996, the stockholders
approved, among other things, an amendment to the Articles of Incorporation
of the Company to authorize the issuance of 2,272,727 shares of new non-
voting Class B Common Stock. The issued and outstanding shares of Series A
Preferred Stock were automatically converted, on a one for one basis, into
shares of Class B Common Stock upon the stockholders' approval of the
amendment to the Articles of Incorporation.
On June 12, 1996, the Company commenced trading its shares on the New York
Stock Exchange. The Company's stock was previously traded on the American
Stock Exchange.
Income per share amounts are based on the weighted average of common and
common equivalent (stock options and convertible preferred stock) shares
outstanding of 13,151,237 and 9,078,846 for the three months ended June 30,
1996 and 1995, respectively, and 13,033,295 and 8,713,896 for the six
months ended June 30, 1996 and 1995, respectively. The assumed conversion
of convertible subordinated debentures into common shares for purposes of
computing fully diluted earnings per share would be anti-dilutive.
2. LONG-TERM DEBT AND LINES OF CREDIT
In April, 1996, the Company refunded its outstanding 1991 and 1993 tax
exempt and related taxable bonds by issuing new tax exempt and taxable
bonds in the aggregate principal amount of $22.22 million. The City of
Gary, Indiana, was the nominal issuer of both the refunded and the
refunding bonds.
The new bonds were issued under a flexible "multi-modal" facility
permitting the issuance of indebtedness in maturities up to five years,
with the interest rate resetting to market on the maturity date selected.
The new issuance facility is guaranteed by The Royal Bank of Scotland,
which also guaranteed the refunded debt.
The refunding bonds were issued in a tax exempt tranche of $20.54 million
and a $1.68 million taxable tranche. Both tranches have a nominal maturity
of March 1, 2031. The refunded bonds were issued in two series, 1991
($15.5 million) and 1993 ($7.5 million), which were divided into tax exempt
and taxable tranches aggregating $20.54 million and $2.46 million,
respectively. The balance of the bonds ($0.78 million) not refunded
through the reissuance of new bonds was refunded with cash on hand.
In May, 1996, a mortgage note payable, with a balance of $2,076,673 at
December 31, 1995, was assumed by the purchaser of the collateralized
property located in Hodgkins, Illinois.
<PAGE>
In June, 1996, a mortgage note payable for $5,704,677 was assumed with the
acquisition of a property in Itasca, Illinois and a $6,000,000 mortgage
was assumed with the acquisition of a property in Franklin Park, Illinois
In July, 1996 $5,500,000 was repaid on the mortgage for the Franklin Park,
Illinois property leaving a balance of $500,000.
3. ACQUISITION AND DISPOSITION OF REAL ESTATE
In April, 1996, the Company acquired an industrial property located in
Hodgkins, Illinois for approximately $13.2 million, which was funded with
an advance on the Company's lines of credit and sold a retail property in
Chicago, Illinois for approximately $0.9 million.
In May, 1996, the Company acquired an industrial property located in
Milwaukee, Wisconsin for approximately $5.1 million and one located in Elk
Grove Village, Illinois for approximately $1.2 million. Both were funded
with advances on the Company's lines of credit.
Also, in May, 1996, the Company acquired a 27.14 acre site in Elk Grove
Village, Illinois for approximately $3.8 million. The site will be
utilized for a warehouse and distribution development project.
Four industrial properties were sold in May, 1996 utilizing the tax free
exchange structure permitted under the Internal Revenue Service code. The
four properties which were located in Hodgkins, Illinois, Naperville,
Illinois, and two in Itasca, Illinois were sold for approximately $14.8
million. The proceeds are held by a third party and must be used to
purchase properties within 180 days of the sale.
One other property, located in Elk Grove Village, Illinois, was sold in
May, 1996 for approximately $1.1 million through a purchase option
exercised by the tenant of the property.
In June, 1996, two industrial properties were purchased utilizing the
proceeds from the exchange properties sold in May, 1996, The two
industrial properties, located in Elk Grove Village, Illinois and Itasca,
Illinois and were purchased for approximately $2.9 million and $10.0
million, respectively.
Two other industrial properties were purchased in June, 1996 with advances
on the Company's lines of credit. A property in Franklin Park, Illinois
was purchased for approximately $9.3 million and one in Elk Grove Village,
Illinois was purchased for $5.2 million.
One industrial property, located in Alsip, Illinois, was sold in June, 1996
for approximately $0.5 million.
<PAGE>
4. INVESTMENT IN AND ADVANCES TO AFFILIATE
CenterPoint Realty Services Corporation ("CRS"), an unconsolidated taxable
subsidiary, enables the Company to derive income from business activities
in excessive amounts permitted to be derived by a REIT from these
activities under current tax regulations. The Company is entitled to
approximately 99% of the economic interests in CRS.
As of June 30, 1996, CRS had repaid all advances to the Company from
proceeds in conjunction with the assignment of its' rights in a development
project in which CRS controlled a 50% interest and a development property
in Kinston, North Carolina which had been held for development and sale.
5. STOCK-BASED-COMPENSATION
In 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). Under the
provisions of SFAS 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS 123 requires that companies electing to
continue using the intrinsic value method must make pro forma disclosures
of net income and earnings per share as if the fair-value-based method of
accounting had been applied.
The Company has elected to continue to account for stock-based compensation
using the intrinsic value method. As such, SFAS 123 did not have an impact
on the Company's reported results of operations or financial position. The
pro-forma information required by SFAS 123 will be included in the
footnotes to the Company's 1996 year end consolidated financial statements.
<PAGE>
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information for six months ended June
30, 1996 and 1995:
1996 1995
------------ -------------
Interest paid $5,552,381 $ 6,299,497
Interest capitalized 81,813 20,386
In conjunction with the acquisition of real estate, the Company acquired
the following asset and assumed the following liability amounts:
Purchase of real estate $50,793,623 $31,241,671
Accounts receivable 614,227 44,953
Prepaid expenses and other assets 67,624
Mortgage notes payable (13,307,681)
Accrued expenses (2,790,187) (869,092)
------------ ------------
Acquisition of real estate $35,377,606 $30,417,532
------------ ------------
------------ ------------
In conjunction with the disposition of real estate, the Company disposed of
the following asset and disposed of the following liability amounts:
Disposal of real estate $17,421,093
Mortgage notes receivable (935,000)
Mortgage notes payable (2,069,492)
Accrued expenses (609,250)
------------
Disposition of real estate $13,807,351
------------
------------
Conversion of convertible subordinated debentures payable:
Convertible subordinated
debentures converted $ 6,544,000 $ 308,000
358,563 and 16,869 shares of common
stock issued at $18.25 per share,
respectively 6,543,712 307,851
------------ ------------
Cash disbursed for fractional shares $ 288 $ 149
------------ ------------
------------ ------------
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position of the
Company.
In May, 1996, the Company acquired an existing 60-year land lease for 50
acres inside Chicago's O'Hare International Airport. Under the terms of
the lease, base rent is $0.30 per square foot, escalating by $0.009 per
square foot per year. Base rent
<PAGE>
is also increased in relation to the development of the premises. An
additional amount for percentage rent is due under the lease in an amount
equal to 3.13% of net cash flow, net financing proceeds and net residual
receipts. O'Hare Express Center, being developed on the land, will be a
$60 million air freight forwarding and warehouse complex. The 825,000
square foot complex is anticipated to be constructed in three phases over a
three year period. Two buildings consisting of 138,000 square feet for
Burlington Air Express and 129,000 square feet for a yet unnamed tenant are
already under construction or development.
The Company has entered into other contracts for the acquisition of
properties. Each acquisition is subject to satisfactory completion of due
diligence and, in the case of development projects, completion and
occupancy of the project.
At June 30, 1996, twelve of the properties owned are subject to purchase
options held by certain tenants. The purchase options are exercisable at
various intervals through 2006, each for an amount greater than the net
book value of the asset.
8. RELATED PARTY TRANSACTIONS
In June, 1996, the Company acquired three properties in which the Company's
Chief Operations Officer and Executive Vice President of Acquisitions had,
or will continue to own, a minority interest. The properties were
purchased for an aggregate amount of approximately $24.6 million in
transactions meeting the Company's investment criteria and approved by the
Company's independent directors.
9. SUBSEQUENT EVENTS
On July 2, 1996, the Company completed a public offering of 3,450,000
shares of common stock at $23.75 per share under a shelf registration
statement declared effective by the Securities and Exchange Commission in
January, 1996. Net proceeds from the offering after the underwriting
discounts were approximately $80.2 million. The proceeds of the offering
were used to refund approximately $55.3 million outstanding under the
Company's lines of credit with the balance of $24.9 million to fund
investments expected to close in the near term.
Since June 30, 1996, an additional $155,000 of convertible subordinated
debentures have been converted to 8,491 shares of common stock. The
current principal amount of convertible subordinated debentures outstanding
is $16,545,000.
<PAGE>
10. PRO FORMA FINANCIAL INFORMATION
Due to the effect of the January, 1995 public offering, the September, 1995
private offering and the subsequent acquisitions and dispositions of
properties, the historical results are not indicative of the future results
of operations. The following unaudited pro forma information for the six
months ended June 30, 1996 and 1995 is presented as if the 1995
acquisitions of properties, the 1996 acquisitions and dispositions of
properties, the January, 1995 public offering, the September, 1995 private
offering and the corresponding repayment of certain debt had all occurred
on January 1, 1995 (or on the date the property first commenced operations
with a third party tenant, if later). The pro forma information is based
upon historical information and does not purport to present what actual
results would have been had the offering and related transactions, in fact,
occurred at January 1, 1995, or to project results for any future period.
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1996 1995
---- ----
(in thousands, except for per share data)
---------------------------------------
<S> <C> <C>
Revenues $30,192 $25,455
------- -------
Expenses:
Operating expenses 9,678 7,979
General and administrative 1,235 920
Depreciation and amortization 5,243 4,691
Interest expense, net 6,008 5,877
Amortization of financing costs 599 656
Other expense 205 56
------- -------
Total expenses 22,968 20,179
------- -------
Net income $ 7,224 $ 5,276
------- -------
------- -------
Net income per common share $ 0.55 $ 0.47
------- -------
------- -------
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
RESULTS OF OPERATIONS - 1996 COMPARED WITH 1995:
GENERAL BACKGROUND
The following is a discussion of the historical operating results of the
Company. The discussion should be read in conjunction with the Form 10-K
filed for the fiscal year ended December 31, 1995.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30,
1995.
Total revenues in the first six months of 1996 increased by $6.5 million or
30.0% over the same period last year. The revenues of the Company are
derived primarily from base rents and additional rents from expense
reimbursements, pursuant to the terms of tenant leases for occupied space
at the warehouse/industrial properties. These properties represent
approximately 96% of the gross leasable area of the Company's portfolio as
of June 30, 1996.
Rental revenues increased by $5.0 million in 1996 primarily because of full
period income from 16 properties acquired in 1995 and acquisitions in 1996
net of disposals. In addition, mortgage interest income, which was
non-existent in 1995 contributed $0.5 million to revenue, real estate fee
income primarily consisting of fees earned by the Company in connection
with its build-to-suit and development activities and third party
management fees increased by $0.4 million and equity in net income of
affiliate was $0.6 million. The Company's unconsolidated subsidiary began
operations during the third quarter of 1995 and, therefore, was not
included in 1995 results for the first half of the year.
In addition, on a "same-store" basis (comparing the results of operations,
on a cash basis, of the properties owned at June 30, 1995, with the results
of operations of the same properties at June 30, 1996), the Company
recognized a 5.4 % increase in revenues primarily due to rental increases
on renewed leases and contractual increases in minimum rent under leases in
place.
Total operating expenses, excluding general and administrative, interest,
depreciation and amortization, increased by $2.2 million, from $6.8 million
in 1995 to $9.0 million in 1996. $1.9 million of the increase is due to
real estate taxes. The majority, $1.4 million resulted from 1995 and 1996
acquisitions and the balance, $0.5 million from tax increases throughout
the portfolio with the largest increase in Cook County, Illinois.
Insurance, utilities and property operating and leasing expenses, all
components of operating expenses, increased at levels comparable to the
level of acquisitions.
<PAGE>
Depreciation and other amortization increased by $0.9 million, from $4.0
million in 1995 to $4.9 million in 1996. The increase is due to full
period depreciation on acquisitions completed during 1995 and 1996.
General and administrative expenses increased by $0.3 million, from $0.9
million in 1995 to $1.2 million in 1996, due primarily to the growth of the
Company.
Interest incurred decreased by $0.9 million over the same period last year
due to primarily to the conversion to common stock of $6.5 million of
convertible subordinated debentures to date in 1996 and $20.7 million in
1995.
Other expenses, generally non-operating items, increased by $0.1 million
from the same period last year due to the loss on disposition of three
properties totaling $155,000.
As a result of the factors described above, net income, before
extraordinary item, increased by $3.9 million from $3.3 million for the
first six months of 1995 to $7.2 million for the first six months of 1996,
an increase of 119.8%. Earnings before interest, income taxes,
depreciation and amortization for the six months increased by $3.9 million,
from $14.0 million in 1995 to $17.9 million in 1996.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 TO THREE MONTHS ENDED JUNE
30, 1995,
Total revenues for the three months ended June 30, 1996 increased by $3.0
million or 26.5% over the same period last year. Rental revenues increased
by $2.6 million in 1996 primarily because of full period income from 16
properties acquired in 1995 and acquisitions in 1996 net of disposals. In
addition, mortgage interest income, which was non-existent in 1995
contributed $0.2 million to revenue, real estate fee income primarily
consisting of fees earned by the Company in connection with its
build-to-suit and development activities and third party management fees
decreased by $0.6 million and equity in net income of affiliate was $0.7
million.
On a "same-store" basis (comparing the results of operations, on a cash
basis, of the properties owned at June 30, 1995, with the results of
operations of the same properties at June 30, 1996), the Company recognized
a 5.2 % increase in revenues primarily due to rental increases on renewed
leases and contractual increases in minimum rent under leases in place.
Total operating expenses, excluding general and administrative, interest,
depreciation and amortization, increased by $1.1 million, from $3.6 million
in 1995 to $4.7 million in 1996. The entire increase is due to real estate
taxes. The majority, $0.8 million resulted from 1995 and 1996 acquisitions
and the balance, $0.3 million from tax increases throughout the portfolio
with the largest increase in Cook County, Illinois.
Depreciation and other amortization increased by $0.6 million, from $1.9
million in 1995 to $2.5 million in 1996. The increase is due to full
period depreciation on acquisitions completed during 1995 and 1996.
<PAGE>
General and administrative expenses increased by $0.1 million, from $0.4
million in 1995 to $0.5 million in 1996, due primarily to the growth of the
Company.
Interest incurred decreased by $0.4 million over the same period last year
due to primarily to the conversion to common stock of $6.5 million of
convertible subordinated debentures to date in 1996 and $20.7 million in
1995.
Other expenses, generally non-operating items, increased by $0.1 million
from the same period last year due to the loss on disposition of three
properties totaling $155,000.
As a result of the factors described above, net income, before
extraordinary item, increased by $1.8 million from $1.8 million for the
three months of 1995 to $3.6 million for the three months of 1996, an
increase of 99.5%. Earnings before interest, income taxes, depreciation
and amortization for the three months increased by $1.7 million, from $7.4
million in 1995 to $9.1 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from Company operations has historically been utilized
for working capital purposes and making distributions, while proceeds from
financings and capital raises have been used to fund acquisitions and other
capital costs. For the six months ended June 30, 1996, cash flow from
operations was $11.2 million. Cash flow during that period was used to pay
$10.2 million of distributions.
Acquisitions and improvements and additions to properties of approximately
$45.8 million for the six months were funded with an increase on the
Company's lines of credit totaling $30.0 million, proceeds from the
disposition of real estate of $8.7 million, repayment of advances to
affiliate of $5.2 million and the balance, $1.9 million from working
capital. The remaining proceeds from disposition of real estate, $5.1
million is invested in a restricted cash account to be applied to
acquisitions closing in the near term.
At June 30, 1996, the Company's debt constitutes approximately 43% of its
fully diluted market capitalization. At that date, the Company's fully
diluted equity market capitalization is approximately $329 million, and its
fully diluted total market capitalization is approximately $491 million.
The Company's leverage ratios benefited in the first six months of 1996
from the conversion of approximately $6.5 million of its 8.22% Convertible
Subordinated Debentures, due 2004, to 358,563 shares of common stock.
At June 30, 1996, the Company had outstanding borrowings of approximately
$46.8 million under its revolving lines of credit (approximately 9.5% of
the Company's fully diluted market capitalization) with current remaining
availability of approximately $45 million. The Company has two lines of
credit, a $52 million credit facility with an affiliate of Lehman Brothers,
Inc. and a $40 million facility with ABN/LaSalle.
<PAGE>
On July 2, 1996, the Company completed a public offering of 3,450,000
shares of common stock at $23.75 per share. Net proceeds from the
offering, after the underwriting discounts, was approximately $80.2
million. The proceeds of the offering were used to refund approximately
$55.3 million then outstanding under the Company's lines of credit and to
fund future investments. The Company's leverage ratios benefited
dramatically from the public offering which left the entire amount on the
Company's lines of credit available.
As of June 30, 1996, the Company had a cash overdraft of $1.4 million as a
consequence of its' cash management policy. In addition, the Company had
$5.9 million in restricted cash, most of which was held for reinvestment in
future acquisitions as part of the Company's tax free exchange of four
properties in May, 1996. The Company believes that its liquidity is
adequate for operations and that positive cash flow from operations,
supplemented by proceeds of borrowings under its lines of credit and other
financings, will be adequate to fund the Company's acquisition activities
and allow distributions to the Company's stockholders in accordance with
the requirements for qualification as a REIT.
In the first six months of 1996, the Company declared distributions of
$10.6 million, representing an annualized distribution rate of
approximately $1.62 per share. The following factors, among others, will
affect the future availability of funds for distribution: (i) scheduled
increases in base rents under existing leases and (ii) changes in minimum
base rents attributable to replacement of existing leases with new or
replacement leases.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Registrant held its annual meeting of stockholders on May 14, 1996.
The voting results of the annual meeting were as follows:
1. 8,890,006 shares were voted in the election of directors and the
following persons received the number of votes set opposite their
respective names:
FOR DIRECTORS VOTED IN FAVOR VOTE WITHHELD
------------- -------------- -------------
Nicholas C. Babson 8,856,022 33,984
Martin Barber 8,857,028 32,978
Alan D. Feld 8,856,012 33,994
John S. Gates, Jr. 8,857,038 32,968
John J. Kinsella 8,474,709 415,297
Thomas E. Robinson 8,856,012 33,994
Robert L. Stovall 8,845,415 44,591
2. In addition to the election of directors, the following matters were
approved by the vote of the stockholders at the annual meeting:
* Ratification of the appointment of Coopers & Lybrand as the
Company's independent auditors for the year ended December 31, 1996:
VOTED IN FAVOR VOTED AGAINST ABSTAINED
-------------- ------------- ---------
8,870,549 14,687 4,770
* Approval of charter amendment creating non-voting Class B Common
Stock:
VOTED IN FAVOR VOTED AGAINST ABSTAINED NON-VOTE
-------------- ------------- --------- --------
7,774,914 232,815 18,662 863,615
* Approval of charter amendment changing the quorum requirement for
routine annual meetings:
VOTED IN FAVOR VOTED AGAINST ABSTAINED NON-VOTE
-------------- ------------- --------- --------
7,928,089 84,127 14,175 863,615
<PAGE>
* Approval of Second Amendment to the CenterPoint Properties Corporation
1993 Stock Option Plan increasing the number of shares authorized
under the Stock Option Plan:
VOTED IN FAVOR VOTED AGAINST ABSTAINED NON-VOTE
-------------- ------------- --------- --------
6,256,229 1,746,783 23,379 863,615
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following document is filed as part of this report:
(1) Exhibit 11 - Computation of Earnings per Share.
(b) During the first six months of 1996, ending June 30, 1996, the
Company filed no current reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTERPOINT PROPERTIES CORPORATION
a Maryland corporation
By: /s/ Paul S. Fisher
-------------------------------------
Paul S. Fisher
Executive Vice President and
Chief Financial Officer
August 12, 1996 (Principal Accounting Officer)
<PAGE>
EXHIBIT 11
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (A) $2,183,405 $1,810,784 $5,810,710 $3,294,125
Interest expense-debentures 343,729 910,445 769,610 1,801,107
---------- ---------- ---------- ----------
Adjusted net income (B) $2,527,134 $2,721,229 $6,580,320 $5,095,232
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares of common stock outstanding 12,929,116 9,019,528 11,214,259 8,655,603
Additional number of common equivalent shares outstanding:
Stock options - net (1) 148,195 59,318 145,710 58,293
Convertible preferred stock (2) 1,073,926 1,673,326
---------- ---------- ---------- ----------
Weighted average common and common equivalent shares
outstanding (C) 13,151,237 9,078,846 13,033,295 8,713,896
Additional weighted average shares outstanding assuming
debentures converted at issue price 916,520 2,394,698 1,026,044 2,401,235
---------- ---------- ---------- ----------
Weighted average shares outstanding for fully-diluted (D) 14,067,757 11,473,544 14,059,339 11,115,131
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share:
Primary (A/C) $0.17 $0.20 $0.45 $0.38
Fully -diluted (3) (B/D) $0.18 $0.24 $0.47 $0.46
</TABLE>
- --------------------------------------------------------
Notes:
(1) Represents stock options using the treasury stock method.
(2) Represents convertible preferred stock as if converted on a share for
share basis; prorated for the days the convertible preferred stock was
outstanding. The convertible preferred stock is considered a common
stock equivalent as it participates in dividends with common stock and
was converted into common stock with shareholder approval.
(3) Conversion of debentures is anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,908
<SECURITIES> 0
<RECEIVABLES> 21,308
<ALLOWANCES> (397)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 359,979
<DEPRECIATION> (25,101)
<TOTAL-ASSETS> 376,539
<CURRENT-LIABILITIES> 0
<BONDS> 179,909
0
0
<COMMON> 13
<OTHER-SE> 170,144
<TOTAL-LIABILITY-AND-EQUITY> 376,539
<SALES> 0
<TOTAL-REVENUES> 28,380
<CGS> 0
<TOTAL-COSTS> 20,934
<OTHER-EXPENSES> 205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,786
<INCOME-PRETAX> 7,241
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,430)
<CHANGES> 0
<NET-INCOME> 5,811
<EPS-PRIMARY> .45
<EPS-DILUTED> .47
</TABLE>
