SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2001 Commission file number 0-3576 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339-5683 TELEPHONE: 770-955-2200 Registrant 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 has been subject to such filing requirements for the past 90 days. At April 30, 2001, 49,501,909 shares of common stock of the Registrant were outstanding.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share amounts) March 31, December 31, 2001 2000 ---------- ------------ (Unaudited) ASSETS PROPERTIES: Operating properties, net of accumulated depreciation of $73,759 as of March 31, 2001 and $70,032 as of December 31, 2000 $ 733,378 $ 772,359 Land held for investment or future development 28,088 15,218 Projects under construction 117,440 93,870 Residential lots under development 2,187 3,001 ---------- ---------- Total properties 881,093 884,448 ---------- ---------- CASH AND CASH EQUIVALENTS, at cost which approximates market 6,192 1,696 NOTES AND OTHER RECEIVABLES 40,732 40,640 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 169,517 175,471 OTHER ASSETS 30,642 13,497 ---------- ---------- TOTAL ASSETS $1,128,176 $1,115,752 ========== ========== LIABILITIES AND STOCKHOLDERS' INVESTMENT NOTES PAYABLE $ 485,627 $ 485,085 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 31,087 31,185 DEPOSITS AND DEFERRED INCOME 2,438 2,538 ---------- ---------- TOTAL LIABILITIES 519,152 518,808 ---------- ---------- DEFERRED GAIN 110,791 111,858 ---------- ---------- MINORITY INTERESTS 25,473 30,619 ---------- ---------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 150,000,000 shares; issued 49,501,909 shares at March 31, 2001 and 49,364,477 shares at December 31, 2000 49,502 49,364 Additional paid-in capital 262,763 259,659 Treasury stock at cost, 153,600 shares in 2001 and 2000 (4,990) (4,990) Unearned compensation (4,274) (4,690) Cumulative undistributed net income 169,759 155,124 ---------- ---------- TOTAL STOCKHOLDERS' INVESTMENT 472,760 454,467 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $1,128,176 $1,115,752 ========== ========== The accompanying notes are an integral part of these consolidated balance sheets.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) (In thousands, except per share amounts) 2001 2000 ------- ------- REVENUES: Rental property revenues $35,656 $22,718 Development income 1,626 1,164 Management fees 1,471 1,214 Leasing and other fees 621 321 Residential lot and outparcel sales 2,388 1,978 Interest and other 1,595 1,258 ------- ------- 43,357 28,653 ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 5,505 3,877 ------- ------- COSTS AND EXPENSES: Rental property operating expenses 10,614 6,646 General and administrative expenses 6,101 4,544 Depreciation and amortization 10,583 6,432 Stock appreciation right expense (credit) (258) 237 Residential lot and outparcel cost of sales 1,999 1,554 Interest expense 7,171 497 Property taxes on undeveloped land 168 (268) Other 402 246 ------- ------- 36,780 19,888 ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 12,082 12,642 (BENEFIT) PROVISION FOR INCOME TAXES FROM OPERATIONS (940) (7) ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 13,022 12,649 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 18,345 8,292 ------- ------- NET INCOME $31,367 $20,941 ======= ======= WEIGHTED AVERAGE SHARES 49,100 48,358 ======= ======= BASIC NET INCOME PER SHARE $ .64 $ .43 ======= ======= DILUTED WEIGHTED AVERAGE SHARES 50,228 49,397 ======= ======= DILUTED NET INCOME PER SHARE $ .62 $ .42 ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .34 $ .30 ======= ======= The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) ($ in thousands) 2001 2000 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $13,022 $12,649 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 10,487 6,139 Amortization of unearned compensation 325 -- Stock appreciation right expense (credit) (258) 237 Cash charges to expense accrual for stock appreciation rights (3) (201) Effect of recognizing rental revenues on a straight-line basis (1,246) (1,068) Income from unconsolidated joint ventures (5,505) (3,877) Operating distributions from unconsolidated joint ventures 7,889 7,687 Residential lot and outparcel cost of sales 1,700 1,377 Changes in other operating assets and liabilities: Change in other receivables 1,542 (948) Change in accounts payable and accrued liabilities (6,346) (8,094) ------- ------- Net cash provided by operating activities 21,607 13,901 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 18,345 8,292 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 35,674 17,419 Deferred income recognized (1,031) (1,028) Non-cash gain on disposition of leasehold interests (236) -- Property acquisition and development expenditures (44,357) (38,414) Investment in unconsolidated joint ventures, including interest capitalized to equity investments (8,217) (5,728) Collection of notes receivable, net 485 275 Net cash paid in acquisition of business (2,126) -- Change in other assets, net (2,791) (1,713) ------- ------- Net cash used in investing activities (4,254) (20,897) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility 83,777 69,796 Repayment of credit facility (81,874) (25,099) Dividends paid (16,732) (14,480) Common stock sold, net of expenses 3,333 4,408 Repayment of other notes payable (1,361) (1,316) ------- ------- Net cash (used in) provided by financing activities (12,857) 33,309 ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 4,496 26,313 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,696 1,473 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,192 $27,786 ======= ======= The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 1. BASIS OF PRESENTATION --------------------- The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins"), its majority owned partnerships and wholly owned subsidiaries, Cousins Real Estate Corporation ("CREC") and its subsidiaries and CREC II Inc. ("CREC II") and its subsidiaries. All of the entities included in the Consolidated Financial Statements are hereinafter referred to collectively as the "Company." Cousins has elected to be taxed as a real estate investment trust ("REIT"), and intends to distribute 100% of its federal taxable income to stockholders, thereby eliminating any liability for future corporate federal income taxes. Therefore, the results included herein do not include a federal income tax provision for Cousins. However, CREC and its subsidiaries and CREC II and its subsidiaries are taxed separately from Cousins as regular corporations. Accordingly, the Consolidated Statements of Income include a benefit for CREC and CREC II's income taxes. The Consolidated Financial Statements were prepared by the Company without audit, but in the opinion of management reflect all adjustments necessary for the fair presentation of the Company's financial position as of March 31, 2001 and results of operations for the three month periods ended March 31, 2001 and 2000. Results of operations for the interim 2001 period are not necessarily indicative of results expected for the full year. While certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K. On October 2, 2000, a 3-for-2 stock split effected in the form of a 50% stock dividend was awarded to stockholders of record on September 15, 2000. All prior period shares outstanding and per share amounts have been restated for the effect of the stock dividend. Certain 2000 amounts have been reclassified to conform with the 2001 presentation. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS ---------------------------------------------- Interest (net of $2,314,000 and $5,883,000 capitalized in 2001 and 2000, respectively) and income taxes paid were as follows for the three months ended March 31, 2001 and 2000 ($ in thousands): 2001 2000 ------ ---- Interest paid $7,095 $ 495 Income taxes paid $ - $1,719 3. NOTES PAYABLE AND INTEREST EXPENSE ---------------------------------- At March 31, 2001 and December 31, 2000, notes payable included the following ($ in thousands): <TABLE> <CAPTION> March 31, 2001 December 31, 2000 ---------------------------------- ------------------------------------ Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- <S> <C> <C> <C> <C> <C> <C> Floating Rate Lines of Credit and Construction Loans $176,199 $ 75,043 $251,242 $174,296 $ 70,309 $244,605 Other Debt (primarily non-recourse fixed rate mortgages) 309,428 184,846 494,274 310,789 185,983 496,772 -------- -------- -------- -------- -------- -------- $485,627 $259,889 $745,516 $485,085 $256,292 $741,377 ======== ======== ======== ======== ======== ======== </TABLE> For the three months ended March 31, 2001, interest expense was recorded as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ------- Interest Expensed $7,171 $4,282 $11,453 Interest Capitalized 2,314 488 2,802 ------ ------ ------- $9,485 $4,770 $14,255 ====== ====== ======= During the first quarter of 2001, interest was capitalized related to the Company's and the Company's share of unconsolidated joint venture projects under construction which had an average balance of approximately $252 million. 4. EARNINGS PER SHARE DATA ----------------------- Weighted average shares and diluted weighted average shares are as follows (in thousands): March 31, March 31, 2001 2000 --------- --------- Weighted average shares 49,100 48,358 Dilutive potential common shares 1,128 1,039 ------ ------ Diluted weighted average shares 50,228 49,397 ====== ====== Anti-dilutive options not included 1,121 36 ====== ====== 5. REPORTABLE SEGMENTS ------------------- The Company has three reportable segments: Office Division, Retail Division and Land Division. The Office Division and Retail Division develop, lease and manage office buildings and retail centers, respectively. The Land Division owns various tracts of strategically located land which are being held for future development. The Land Division also develops single-family residential communities which are parceled into lots and sold to various home builders. The management of the Company evaluates performance of its reportable segments based on Funds From Operations ("FFO"). The Company calculates its FFO using the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO adjusted to (i) eliminate the recognition of rental revenues on a straight-line basis, (ii) reflect stock appreciation right expense on a cash basis and (iii) recognize certain fee income as cash is received rather than when recognized in the financial statements. The Company believes its FFO presentation more properly reflects its operating results. The Company's reportable segments are broken down based on what type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The notations (100%) and (JV) used in the following tables indicate wholly owned and unconsolidated joint ventures, respectively, and all amounts are in thousands. <TABLE> <CAPTION> Three Months Ended Office Retail Land Unallocated March 31, 2001 Division Division Division and Other Total - ------------------ -------- -------- -------- --------- ----- <S> <C> <C> <C> <C> <C> Rental property revenues (100%) $ 25,546 $ 8,789 $ - $ 75 $ 34,410 Rental property revenues (JV) 18,884 598 - - 19,482 Development income, management fees and leasing and other fees (100%) 3,196 456 66 - 3,718 Development income, management fees and leasing and other fees (JV) 1,050 - - - 1,050 Other income (100%) - - 2,388 1,595 3,983 Other income (JV) - - 268 25 293 ---------------------------------------------------------- Total revenues 48,676 9,843 2,722 1,695 62,936 ---------------------------------------------------------- Rental property operating expenses (100%) 8,321 2,294 - 1 10,616 Rental property operating expenses (JV) 5,609 156 - - 5,765 Other expenses (100%) 1,451 1,539 2,399 9,959 15,348 Other expenses (JV) 5,622 75 23 21 5,741 ---------------------------------------------------------- Total expenses 21,003 4,064 2,422 9,981 37,470 ---------------------------------------------------------- Consolidated funds from operations 27,673 5,779 300 (8,286) 25,466 ---------------------------------------------------------- Depreciation and amortization (100%) (7,706) (2,430) - (1) (10,137) Depreciation and amortization (JV) (3,884) (210) - - (4,094) Effect of the recognition of rental revenues on a straight-line basis (100%) 1,246 - - - 1,246 Effect of the recognition of rental revenues on a straight-line basis (JV) 280 - - - 280 Adjustment to reflect stock appreciation right expense on an accrual basis - - - 261 261 Gain on sale of investment properties, net of applicable income tax provision 710 17,635 - - 18,345 ---------------------------------------------------------- Net income 18,319 20,774 300 (8,026) 31,367 ---------------------------------------------------------- Benefit for income taxes from operations - - - (940) (940) ---------------------------------------------------------- Income from operations before taxes $ 18,319 $ 20,774 $ 300 $(8,966) $ 30,427 ========================================================== Total assets $789,585 $257,365 $10,961 $70,265 $1,128,176 ========================================================== Investment in unconsolidated joint ventures $144,068 $ 16,888 $ 8,561 $ - $ 169,517 ========================================================== </TABLE> <TABLE> <CAPTION> Three Months Ended Office Retail Land Unallocated March 31, 2000 Division Division Division and Other Total - ------------------ -------- -------- -------- --------- ----- <S> <C> <C> <C> <C> <C> Rental property revenues (100%) $ 15,751 $ 5,875 $ -- $ 24 $ 21,650 Rental property revenues (JV) 15,803 559 -- -- 16,362 Development income, management fees and leasing and other fees (100%) 2,565 99 35 -- 2,699 Development income, management fees and leasing and other fees (JV) 411 -- -- -- 411 Other income (100%) -- 650 1,328 1,258 3,236 Other income (JV) -- -- 43 27 70 ---------------------------------------------------------- Total revenues 34,530 7,183 1,406 1,309 44,428 ---------------------------------------------------------- Rental property operating expenses (100%) 5,548 1,338 -- (7) 6,879 Rental property operating expenses (JV) 4,288 133 -- -- 4,421 Other expenses (100%) 3,051 1,786 1,085 1,166 7,088 Other expenses (JV) 294 -- 11 4,047 4,352 ---------------------------------------------------------- Total expenses 13,181 3,257 1,096 5,206 22,740 ---------------------------------------------------------- Gain on sale of undepreciated investment properties -- -- 22 -- 22 ---------------------------------------------------------- Consolidated funds from operations 21,349 3,926 332 (3,897) 21,710 ---------------------------------------------------------- Depreciation and amortization (100%) (4,516) (1,361) -- (1) (5,878) Depreciation and amortization (JV) (3,752) (191) -- -- (3,943) Effect of the recognition of rental revenues on a straight-line basis (100%) 1,068 -- -- -- 1,068 Effect of the recognition of rental revenues on a straight-line basis (JV) (250) -- -- -- (250) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- (36) (36) Gain on sale of investment properties, net of applicable income tax provision 473 7,797 -- -- 8,270 ---------------------------------------------------------- Net income 14,372 10,171 332 (3,934) 20,941 ---------------------------------------------------------- Benefit for income taxes from operations -- -- -- (7) (7) ---------------------------------------------------------- Income from operations before taxes $ 14,372 $ 10,171 $ 332 $(3,941) $ 20,934 ========================================================== Total assets $636,792 $253,541 $11,711 $73,315 $ 975,359 ========================================================== Investment in unconsolidated joint ventures $129,852 $ 17,036 $ 6,765 $ 2 $ 153,655 ========================================================== </TABLE> Reconciliation to Consolidated Revenues - --------------------------------------- Three Months Ended ----------------------- March 31, March 31, 2001 2000 --------- --------- Rental property revenues (100%) $34,410 $21,650 Effect of the recognition of rental revenues on a straight-line basis (100%) 1,246 1,068 Development income, management fees and leasing and other fees 3,718 2,699 Residential lot and outparcel sales 2,388 1,978 Interest and other 1,595 1,258 --------------------- Total consolidated revenues $43,357 $28,653 ===================== 6. SALE OF COLONIAL PLAZA MARKETCENTER ----------------------------------- In February 2001, the Company sold Colonial Plaza MarketCenter, an approximately 480,000 square foot power center in Orlando, Florida, for $54.0 million which was approximately $10.8 million over the cost of the center. Including depreciation recapture of approximately $6.2 million, the net gain on the sale was approximately $17.0 million.
PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 2001 and 2000 Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues increased approximately $12,938,000 in 2001. Rental property revenues from the Company's office portfolio increased approximately $9,973,000. The December 2000 acquisitions of One Georgia Center and The Points at Waterview increased rental property revenues by approximately $1,773,000 and $1,099,000, respectively, in 2001. Four office buildings, 101 Second Street, 1900 Duke Street, 555 North Point Center East and 600 University Park, which becme partially operational in April 2000, October 2000, February 2000 and June 2000, respectively, contributed approximately $4,272,000, $578,000, $577,000 and $548,000, respectively, to the increase. Additionally, rental property revenues from 615 Peachtree Street increased approximately $156,000 in 2001 as the average economic occupancy increased from 80% in 2000 to 93% in 2001 and rental property revenues from Northside/Alpharetta II increased approximately $166,000 in 2001 as the average economic occupancy increased from 55% in 2000 to 66% in 2001. Rental property revenues from the Company's retail portfolio increased approximately $2,914,000 in 2001. Rental property revenues increased $1,774,000 and $1,719,000 from Mira Mesa MarketCenter and The Avenue of the Peninsula, respectively, both of which became partially operational for financial reporting purposes in May 2000. Rental property revenues also increased approximately $269,000 and $184,000 from The Avenue East Cobb and Salem Road Station, respectively, which became partially operational for financial reporting purposes in September 1999 and October 2000, respectively. Rental property revenues also increased $165,000 from Presidential MarketCenter as an additional phase of the center became partially operational in October 2000, and as the average economic occupancy of the original center increased from 85% in 2000 to 89% in 2001. The increase in rental property revenues was partially offset by the sales of Colonial Plaza MarketCenter in February 2001 and Laguna Niguel Promenade in March 2000, which decreased rental property revenues by approximately $626,000 and $595,000, respectively. Rental property operating expenses increased approximately $3,968,000 due to the aforementioned office buildings and retail centers becoming partially operational for financial reporting purposes and the aforementioned acquisitions of One Georgia Center and The Points at Waterview. Development Income. Development income increased approximately $462,000 in 2001. Development income increased approximately $327,000 from the third party development of the Turner Tower and approximately $117,000 from the third party development of the Arboretum. Additionally, development income increased approximately $152,000 from Cousins Stone LP. Effective March 1, 2001, the Company purchased the remaining 25% interest in Cousins Stone LP, at which point the Company consolidated the operations of Cousins Stone LP, which had previously been accounted for using the equity method of accounting and therefore recognized as joint venture income. Tenant construction fees of approximately $150,000 from the Crawford Long joint venture medical office building recognized in the first quarter of 2001 also contributed to the increase in development income. The increase was partially offset by a decrease in development income of approximately $210,000 from Charlotte Gateway Village, LLC, as construction of Gateway Village has been substantially completed, and a decrease of approximately $156,000 from 285 Venture, LLC, as construction of 1155 Perimeter Center West has been substantially completed. Management Fees. Management fees increased approximately $257,000 in 2001. The increase in management fees is mainly due to the aforementioned consolidation of Cousins Stone LP, which contributed approximately $304,000 to the increase. The increase was partially offset by a decrease in management fees recognized of approximately $165,000 due to the disposition of the medical office third party management division in October 2000. Leasing and Other Fees. Leasing and other fees increased approximately $300,000 in 2001. Leasing and other fees increased approximately $221,000 due to the aforementioned consolidation of Cousins Stone LP and approximately $122,000 from CSC Associates, L.P. due to subleasing of Bank of America Plaza. The increase was partially offset by a decrease of approximately $157,000 in leasing fees from Wildwood Associates. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased approximately $410,000 in 2001. The increase was partially due to an increase in residential lots sold from 29 lots in 2000 to 45 lots in 2001, which increased residential lot sales recognized by approximately $1,060,000. Partially offsetting the increase was an outparcel sale recognized by a subsidiary of CREC in 2000 totaling approximately $650,000, as compared to no outparcel sales in 2001. Residential lot and outparcel cost of sales increased approximately $445,000 in 2001. Residential lot cost of sales increased approximately $845,000 due to the aforementioned increase in the number of lots sold. The increase in cost of sales was less than the corresponding increase in sales due to an increase in 2001 of the gross profit percentages used to calculate the cost of sales on residential lot sales in certain of the residential developments. The increase in residential lot and outparcel cost of sales was partially offset by a decrease in outparcel cost of sales in 2001 of approximately $400,000 due to the aforementioned outparcel sale in 2000. Interest and Other Income. Interest and other income increased approximately $337,000 in 2001, mainly due to interest income recognized in 2001 from the additional interest income on the 650 Massachusetts Avenue mortgage notes (see Note 3 of "Notes to Consolidated Financial Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2000). Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $1,628,000 in 2001. Income from Wildwood Associates increased approximately $385,000 in 2001. Income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building increased approximately $178,000 in 2001. Income from 285 Venture, LLC increased approximately $522,000 in 2001 as the average economic occupancy at 1155 Perimeter Center West increased from 18% in 2000 to 86% in 2001. Income from Cousins LORET, L.L.C. increased approximately $168,000 in 2001. The increase is mainly due to an increase in average economic occupancy at The Pinnacle from 88% in 2000 to 98% in 2001. Income from Temco Associates increased approximately $213,000 in 2001 due to profits recognized from 49 lot sales at the Bentwater residential development. The first quarter of 2001 was the first period in which profits from lot sales were recognized. Income from CP Venture LLC increased approximately $122,000 in 2001 as amortization expense at certain properties owned by CP Venture Two LLC decreased in 2001. Income from CSC Associates, L.P. increased approximately $109,000 in 2001. The increase in joint venture income is mainly due to an increase in average economic occupancy at Bank of America Plaza from 97% in 2000 to 100% in 2001. General and Administrative Expenses. General and administrative expenses increased approximately $1,557,000 in 2001. The increase was primarily attributable to the aforementioned consolidation of Cousins Stone LP. Additionally, costs capitalized to projects under development decreased due to a lower level of projects under development. Depreciation and Amortization. Depreciation and amortization increased approximately $4,151,000 in 2001 due to the aforementioned office buildings and retail centers becoming partially operational for financial reporting purposes and the aforementioned acquisitions of One Georgia Center and The Points at Waterview. Stock Appreciation Right Expense (Credit). Stock appreciation right expense decreased approximately $495,000 from an expense of $237,000 in 2000 to a credit of $258,000 in 2001. This non-cash item is primarily related to the Company's stock price, which was $27.9375 and $25.01 at December 31, 2000 and March 31, 2001, respectively; and $22.625 and $24.5417 at December 31, 1999 and March 31, 2000, respectively. Interest Expense. Interest expense increased approximately $6,674,000 in 2001. Interest expense before capitalization increased approximately $3,105,000 to $9,485,000 in 2001 from $6,380,000 in 2000 due to higher average debt levels. Also contributing to this increase was a decrease of approximately $3,569,000 in interest capitalized to projects under development (a reduction of interest expense) to $2,314,000 in 2001 from $5,883,000 in 2000 due to a lower level of projects under development in 2001. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased approximately $436,000 in 2001 due to the reversal in 2000 of estimated amounts accrued for anticipated reassessments of the Company's North Point and Wildwood land holdings. The final reassessments, after appeal, were lower than the anticipated reassessments and the accrual was reduced. Gain on Sale of Investment Properties. Gain on sale of investment properties increased approximately $10,053,000 in 2001. The 2001 gain included the following: ___ the February 2001 sale of Colonial Plaza MarketCenter ($17.0 million), the February 2001 disposition of leasehold interests in Summit Green ($.2 million) and the amortization of deferred gain from CP Venture LLC ($1.0 million). The 2000 gain included the following: the March 2000 sale of Laguna Niguel Promenade ($7.2 million) and the amortization of deferred gain from CP Venture LLC ($1.0 million). Liquidity and Capital Resources: - -------------------------------- Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was 35% of total market capitalization at March 31, 2001. Adjusted debt is defined as the Company's debt and the Company's pro rata share of unconsolidated joint venture debt as disclosed in Note 4 of "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended December 31, 2000, excluding the Charlotte Gateway Village, LLC debt as it is fully exculpated debt which is supported by a long-term lease to Bank of America Corporation. The Company temporarily increased its $150 million credit facility to $225 million, which increase expires June 30, 2001. The Company had $176.2 million drawn on this credit facility as of March 31, 2001. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects, as well as the completion of projects currently under construction, using its existing credit facility (increasing the credit facility as required), long-term non-recourse financing on the Company's unleveraged projects, joint ventures, project sales and other financings as market conditions warrant. In September 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") for the offering from time to time of up to $200 million of common stock, warrants to purchase common stock and debt securities, of which approximately $132 million remains available at March 31, 2001. The Company from time to time evaluates opportunities and strategic alternatives, including but not limited to joint ventures, mergers and acquisitions and new private or publicly-owned entities created to hold existing assets and acquire new assets. These alternatives may also include sales of single or multiple assets when the Company perceives opportunities to capture value and redeploy proceeds or distribute proceeds to stockholders. The Company's consideration of these alternatives is part of its ongoing strategic planning process. There can be no assurance that any such alternative, if undertaken and consummated, would not materially adversely affect the Company or the market price of Cousins' common stock. Cash Flows. Net cash provided by operating activities increased approximately $7.7 million in 2001. Changes in other operating assets and liabilities increased approximately $4.2 million which contributed to the increase. Depreciation and amortization increased $4.3 million due to the aforementioned office buildings and retail centers becoming operational, as well as the acquisitions of One Georgia Center and The Points at Waterview, which also contributed to the increase in net cash provided by operating activities. Income from unconsolidated joint ventures increased approximately $1.6 million, which partially offset the increase in net cash provided by operating activities. Net cash used in investing activities decreased approximately $16.6 million in 2001. Net cash provided by sales activities increased approximately $28.1 million, which contributed to the decrease in net cash used in investing activities, due primarily to the sale of Colonial Plaza MarketCenter in February 2001. The decrease in net cash used in investing activities was partially offset by an increase of approximately $5.9 million in property acquisition and development expenditures, as a result of the Company having a higher level of expenditures in the first quarter of 2001 for projects under development. Investment in unconsolidated joint ventures increased approximately $2.5 million, which also partially offset the decrease in net cash used in investing activities. Contributions to CPI/FSP I, L.P. increased approximately $5.2 million and contributions to Crawford Long - CPI, LLC increased approximately $1.1 million in 2001. The increase in investment in unconsolidated joint ventures in 2001 was partially offset by a decrease in contributions to 285 Venture, LLC of approximately $3.6 million. Change in other assets, net, also decreased approximately $1.1 million, which further offset the aforementioned decreases in net cash used in investing activities. Net cash paid in acquisition of business, which resulted from the acquisition of the remaining 25% interest in Cousins Stone LP, further offset the decrease in net cash used in investing activities by $2.1 million. Net cash provided by financing activities decreased approximately $46.2 million in 2001 to net cash used in financing activities, which was primarily attributable to a decrease of approximately $42.8 million in the net amount drawn on the Company's credit facility. An increase in the dividends paid per share to $.34 in 2001 from $.30 in 2000 and an increase in the number of shares outstanding also contributed to the decrease as dividends paid increased approximately $2.3 million. Common stock sold, net of expenses, decreased by approximately $1.1 million, which further contributed to the decrease. Quantitative and Qualitative Disclosure About Market Risk: - ---------------------------------------------------------- There have been no significant changes in the Company's market risk related to its notes payable and notes receivable from that disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2000.
Supplemental Financial Information: - ----------------------------------- Depreciation and amortization expense included the following components for the three months ended March 31, 2001 ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ------- Furniture, fixtures and equipment $ 350 $ 48 $ 398 Deferred financing costs -- -- -- Goodwill and related business acquisition costs 111 -- 111 Real estate related: Building (including tenant first generation) 9,222 3,841 13,063 Tenant second generation 868 189 1,057 ------- ------ ------- $10,551 $4,078 $14,629 ======= ====== ======= Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three months ended March 31, 2001, including its share of unconsolidated joint ventures ($ in thousands): Office Retail Total ------ ------ ----- Second generation related costs $456 $138 $594 Building improvements 227 -- 227 ---- ---- ---- $683 $138 $821 ==== ==== ====
PART II. OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Company's Annual Meeting of Stockholders was held on May 1, 2001. (b) Not applicable. (c) The following proposals were adopted by the stockholders of the Company: (i) The election of ten Directors. The vote on the above was: For Against Abstained ---------- ------- --------- Thomas D. Bell, Jr. 43,063,492 -- 133,882 Richard W. Courts, II 43,093,132 -- 104,242 Thomas G. Cousins 42,678,561 -- 518,813 Lillian C. Giornelli 42,673,059 -- 524,315 Terence C. Golden 43,060,492 -- 136,882 Boone A. Knox 43,093,331 -- 104,043 John J. Mack 43,092,927 -- 104,447 Hugh L. McColl, Jr. 43,081,466 -- 115,908 William Porter Payne 43,046,726 -- 150,648 R. Dary Stone 43,060,193 -- 137,181 (ii) A proposal to approve an amendment to the 1999 Incentive Stock Plan to increase the number of shares of common stock available under the 1999 Incentive Stock Plan by 1.1 million shares. The vote on the above was: For 40,116,741 Against 2,924,193 Abstained 156,440 Item 6. Reports on Form 8-K ------------------- (b) Reports on Form 8-K ------------------- On March 9, 2001, the Company filed a Form 8-K detailing certain risk factors relating to the Company and its business.
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. COUSINS PROPERTIES INCORPORATED Registrant /s/ Kelly H. Barrett ------------------------------------------------- Kelly H. Barrett Senior Vice President and Chief Financial Officer (Authorized Officer) (Principal Accounting Officer) May 11, 2001