-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PECIMJx87iVYg4/eG68hrKLagvVd5wtCGgJyglH+BCnjkAfYv7fP45ojawhQtqtE jJT5vtjV7LEw0SjuK023cw== 0000025232-02-000009.txt : 20020513 0000025232-02-000009.hdr.sgml : 20020513 ACCESSION NUMBER: 0000025232-02-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUSINS PROPERTIES INC CENTRAL INDEX KEY: 0000025232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 580869052 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03576 FILM NUMBER: 02643925 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-Q 1 fo10q302.txt 3/31/02 FORM 10-Q 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, 2002 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, 2002, 49,668,522 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, 2002 2001 ----------- ------------ (Unaudited) ASSETS - ------ PROPERTIES: Operating properties, net of accumulated depreciation of $117,954 as of March 31, 2002 and $106,039 as of December 31, 2001 $ 791,007 $ 771,119 Land held for investment or future development 16,981 15,294 Projects under construction 130,937 140,833 Residential lots under development 11,843 12,520 ---------- ---------- Total properties 950,768 939,766 CASH AND CASH EQUIVALENTS, at cost which approximates market 4,791 10,556 NOTES AND OTHER RECEIVABLES 40,727 39,920 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 182,805 185,397 OTHER ASSETS 39,157 36,377 ---------- ---------- TOTAL ASSETS $1,218,248 $1,212,016 ========== ========== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $ 597,304 $ 585,275 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 25,147 27,149 DEPOSITS AND DEFERRED INCOME 3,500 2,422 ---------- ---------- TOTAL LIABILITIES 625,951 614,846 ---------- ---------- DEFERRED GAIN 106,614 107,676 ---------- ---------- MINORITY INTERESTS 27,024 26,821 ---------- ---------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' INVESTMENT: Common stock, $1 par value, authorized 150,000,000 shares; issued 50,341,720 shares at March 31, 2002 and 50,106,100 shares at December 31, 2001 50,342 50,106 Additional paid-in capital 280,893 276,268 Treasury stock at cost, 681,000 shares in 2002 and 2001 (17,465) (17,465) Unearned compensation (3,400) (3,580) Cumulative undistributed net income 148,289 157,344 ---------- ---------- TOTAL STOCKHOLDERS' INVESTMENT 458,659 462,673 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $1,218,248 $1,212,016 ========== ========== 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, 2002 AND 2001 (UNAUDITED) (In thousands, except per share amounts) 2002 2001 ------- ------- REVENUES: Rental property revenues $39,401 $35,656 Development income 1,186 1,626 Management fees 2,354 1,471 Leasing and other fees 1,157 621 Residential lot and outparcel sales 4,035 2,388 Interest and other 1,135 1,595 ------- ------- 49,268 43,357 ------- ------- INCOME FROM UNCONSOLIDATED JOINT VENTURES 7,030 5,505 ------- ------- COSTS AND EXPENSES: Rental property operating expenses 11,509 10,614 General and administrative expenses 7,295 6,101 Depreciation and amortization 12,020 10,583 Stock appreciation right expense (credit) 41 (258) Residential lot and outparcel cost of sales 2,970 1,999 Interest expense 8,532 7,171 Property taxes on undeveloped land 176 168 Other 987 402 ------- ------- 43,530 36,780 ------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES, GAIN ON SALE OF INVESTMENT PROPERTIES AND EXTRAORDINARY LOSS 12,768 12,082 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS 1,022 (940) ------- ------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES AND EXTRAORDINARY LOSS 11,746 13,022 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 1,029 18,345 ------- ------- INCOME BEFORE EXTRAORDINARY LOSS 12,775 31,367 EXTRAORDINARY LOSS (NOTE 6) 3,501 - ------- ------- NET INCOME $ 9,274 $31,367 ======= ======= WEIGHTED AVERAGE SHARES 49,367 49,100 ======= ======= BASIC NET INCOME PER SHARE: Income before extraordinary loss $ .26 $ .64 Extraordinary loss .07 - ------- ------- Basic net income per share $ .19 $ .64 ======= ======= DILUTED WEIGHTED AVERAGE SHARES 50,406 50,228 ======= ======= DILUTED NET INCOME PER SHARE: Income before extraordinary loss $ .25 $ .62 Extraordinary loss .07 - ------- ------- Diluted net income per share $ .18 $ .62 ======= ======= CASH DIVIDENDS DECLARED PER SHARE $ .37 $ .34 ======= ======= 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, 2002 AND 2001 (UNAUDITED) ($ in thousands) 2002 2001 -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties and extraordinary loss $ 11,746 $13,022 Adjustments to reconcile income before gain on sale of investment properties and extraordinary loss to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 12,020 10,487 Amortization of unearned compensation 180 325 Stock appreciation right expense (credit) 41 (258) Cash charges to expense accrual for stock appreciation rights (56) (3) Effect of recognizing rental revenues on a straight-line basis (909) (1,246) Income from unconsolidated joint ventures (7,030) (5,505) Operating distributions from unconsolidated joint ventures 12,115 7,889 Residential lot and outparcel cost of sales 2,663 1,700 Changes in other operating assets and liabilities: Change in other receivables 430 1,542 Change in accounts payable and accrued liabilities (3,040) (6,346) -------- ------- Net cash provided by operating activities 28,160 21,607 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 1,029 18,345 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales - 35,674 Deferred income recognized (1,031) (1,031) Non-cash gain on disposition of leasehold interests - (236) Property acquisition and development expenditures (22,867) (44,357) Investment in unconsolidated joint ventures, including interest capitalized to equity investments (2,493) (8,217) Investment in notes receivable (328) (328) Collection of notes receivable - 813 Net cash paid in acquisition of business - (2,126) Change in other assets, net (3,295) (2,791) -------- ------- Net cash used in investing activities (28,985) (4,254) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility 79,335 83,777 Repayment of credit facility (149,223) (81,874) Dividends paid (18,329) (16,732) Common stock sold, net of expenses 4,861 3,333 Proceeds from other notes payable 150,000 - Repayment of other notes payable (68,083) (1,361) Extraordinary loss (3,501) - -------- ------- Net cash used in financing activities (4,940) (12,857) -------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,765) 4,496 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,556 1,696 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,791 $ 6,192 ======== ======= The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 (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 provision (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 (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of March 31, 2002 and results of operations for the three month periods ended March 31, 2002 and 2001. Results of operations for the interim 2002 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, 2001. The accounting policies employed are the same as those shown in Note 1 to the Consolidated Financial Statements included in such Form 10-K. 2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS - --------------------------------------------------- Interest (net of $1,897,000 and $2,314,000 capitalized in 2002 and 2001, respectively) and income taxes refunded were as follows for the three months ended March 31, 2002 and 2001 ($ in thousands): 2002 2001 ------ ---- Interest paid $7,443 $7,095 Income taxes refunded $ 12 $ -
3. NOTES PAYABLE AND INTEREST EXPENSE - --------------------------------------- At March 31, 2002 and December 31, 2001, notes payable included the following ($ in thousands): March 31, 2002 December 31, 2001 Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total ------- -------------- ----- ------- -------------- ----- Floating Rate Credit Facility and Floating Rate Debt $ 83,928 $ 7,369 $ 91,297 $153,816 $ 7,614 $161,430 Other Debt (primarily non-recourse fixed rate mortgages) 513,376 266,023 779,399 431,459 268,299 699,758 -------- -------- -------- -------- -------- -------- $597,304 $273,392 $870,696 $585,275 $275,913 $861,188 ======== ======== ======== ======== ======== ========
For the three months ended March 31, 2002, interest expense was recorded as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ----- Interest Expensed $ 8,532 $4,871 $13,403 Interest Capitalized 1,897 - 1,897 ------- ------ ------- $10,429 $4,871 $15,300 ======= ====== ======= During the first quarter of 2002, 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 $106 million. 4. EARNINGS PER SHARE DATA - --------------------------- Weighted average shares and diluted weighted average shares are as follows (in thousands): March 31, March 31, 2002 2001 --------- --------- Weighted average shares 49,367 49,100 Dilutive potential common shares 1,039 1,128 ------ ------ Diluted weighted average shares 50,406 50,228 ====== ====== Anti-dilutive options not included 908 1,121 ====== ====== 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 and (ii) reflect stock appreciation right expense on a cash basis. 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.
Three Months Ended Office Retail Land Unallocated March 31, 2002 Division Division Division and Other Total - -------------- -------- -------- -------- --------- ----- Rental property revenues (100%) $ 29,927 $ 8,537 $ - $ 28 $ 38,492 Rental property revenues (JV) 18,896 629 - - 19,525 Development income, management fees and leasing and other fees (100%) 4,147 379 171 - 4,697 Other income (100%) - - 4,035 1,135 5,170 Other income (JV) - - 1,044 - 1,044 ---------------------------------------------------------- Total revenues 52,970 9,545 5,250 1,163 68,928 ---------------------------------------------------------- Rental property operating expenses (100%) 9,610 2,095 - 4 11,709 Rental property operating expenses (JV) 5,747 171 - - 5,918 Other expenses (100%) 4,719 1,571 3,476 11,594 21,360 Other expenses (JV) - - 14 3,349 3,363 ---------------------------------------------------------- Total expenses 20,076 3,837 3,490 14,947 42,350 ---------------------------------------------------------- Consolidated funds from operations 32,894 5,708 1,760 (13,784) 26,578 Depreciation and amortization (100%) (8,631) (2,866) - (1) (11,498) ---------------------------------------------------------- Depreciation and amortization (JV) (4,032) (243) - - (4,275) Effect of the recognition of rental revenues on a straight-line basis (100%) 909 - - - 909 Effect of the recognition of rental revenues on a straight-line basis (JV) 17 - - - 17 Adjustment to reflect stock appreciation right expense on an accrual basis - - - 15 15 Gain on sale of investment properties, net of applicable income tax provision 473 556 - - 1,029 Extraordinary loss - - - (3,501) (3,501) ---------------------------------------------------------- Net income 21,630 3,155 1,760 (17,271) 9,274 ---------------------------------------------------------- Provision for income taxes from operations - - - 1,022 1,022 ---------------------------------------------------------- Income from operations before taxes $ 21,630 $ 3,155 $ 1,760 $(16,249) $ 10,296 ========================================================== Total assets $856,040 $265,522 $23,573 $73,113 $1,218,248 ========================================================== Investment in unconsolidated joint ventures $154,651 $ 16,690 $11,464 $ - $ 182,805 ==========================================================
Three Months Ended Office Retail Land Unallocated March 31, 2001 Division Division Division and Other Total - -------------- -------- -------- -------- --------- ----- 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 ==========================================================
Reconciliation to Consolidated Revenues - --------------------------------------- Three Months Ended ---------------------- March 31, March 31, 2002 2001 --------- --------- Rental property revenues (100%) $38,492 $34,410 Effect of the recognition of rental revenues on a straight-line basis (100%) 909 1,246 Development income, management fees and leasing and other fees 4,697 3,718 Residential lot and outparcel sales 4,035 2,388 Interest and other 1,135 1,595 -------------------- Total consolidated revenues $49,268 $43,357 ==================== 6. REFINANCING OF BANK OF AMERICA PLAZA - ----------------------------------------- On February 22, 2002, CSC Associates, L.P. ("CSC") completed a $150 million non-recourse mortgage note payable with an interest rate of 6.9575% and a maturity of March 1, 2012. This non-recourse mortgage note payable is secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $150 million proceeds of the non-recourse mortgage note payable to the Company under a non-recourse loan (the "Cousins Loan") secured by the Company's interest in CSC under the same payment terms as those of the non-recourse mortgage note payable. The Company paid all costs of issuing the non-recourse mortgage note payable and the Cousins Loan, including a $750,000 fee to an affiliate of Bank of America Corporation. On March 15, 2002, $65,873,925 of the proceeds from this financing was used to pay off in full the existing collateralized non-recourse mortgage notes ("existing mortgage notes"). The $65,873,925 included $65,525,710 for the payoff of the principal balance as of February 15, 2002 (the last payment date of the existing mortgage notes) and $348,215 for accrued interest from February 15, 2002 through March 14, 2002. The existing non-recourse loan to CSC, which is secured by the Company's interest in CSC under the same payment terms as those of the existing mortgage notes, was also repaid in full. In connection with the prepayment in full of the existing mortgage notes, the Company paid a prepayment premium in the amount of $2,871,925. This prepayment premium of $2,871,295, along with the unamortized balance of closing costs paid by the Company related to the existing mortgage notes in the amount of $629,278, were expensed as an Extraordinary Item in the accompanying Consolidated Statements of Income. 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, 2002 and 2001 Results of Operations: - ---------------------- Rental Property Revenues and Operating Expenses. Rental property revenues increased approximately $3,745,000 in 2002. Rental property revenues from the Company's office portfolio increased approximately $4,044,000. Two office buildings, Cerritos Corporate Center-Phase II and 55 Second Street, which became partially operational for financial reporting purposes in June 2001 and February 2002, respectively, contributed approximately $2,604,000 and $910,000, respectively, to the increase. Additionally, rental property revenues from 1900 Duke Street, which became partially operational for financial reporting purposes in October 2000, increased approximately $281,000 in 2002. Rental property revenues also increased approximately $146,000 from AT&T Wireless Services Headquarters. The increase in rental property revenues was partially offset by a decrease of approximately $591,000 in 2002 from The Points at Waterview as the average economic occupancy decreased from 94% in 2001 to 50% in 2002. Rental property revenues from the Company's retail portfolio decreased approximately $252,000 in 2002. Rental property revenues decreased approximately $1,064,000 in 2002 from the February 2001 sale of Colonial Plaza MarketCenter. The decrease in rental property revenues was partially offset by an increase of approximately $770,000 from The Avenue Peachtree City which became partially operational for financial reporting purposes in March 2001. Rental property operating expenses increased approximately $895,000 due to the aforementioned office buildings and retail center becoming partially operational for financial reporting purposes. The increase in rental property operating expenses in 2002 was partially offset by a decrease of operating expenses of approximately $313,000 from the aforementioned sale of Colonial Plaza MarketCenter. Development Income. Development income decreased approximately $440,000 in 2002. Development income decreased approximately $327,000 from the third party development of the Turner Tower. Additionally development income decreased approximately $145,000 from 285 Venture, LLC, as construction of 1155 Perimeter Center West was completed, and $72,000 from CPI/FSP I, L.P., as construction of Austin Research Park Buildings III and IV was completed. The decrease in development income was partially offset by an increase of approximately $150,000 from the third party development of The Arboretum. Management Fees. Management fees increased approximately $883,000 in 2002. Management fees increased approximately $772,000 from Cousins Properties Services LP ("CPS"). Effective March 1, 2001, CREC II purchased the remaining 25% interest in CPS at which point the operations of CPS were consolidated, whereas the operations had been previously accounted for using the equity method of accounting and therefore recognized as joint venture income. Approximately $311,000 of the increase in CPS was from the Concourse Corporate Center in Atlanta, Georgia, of which CPS commenced management in October 2001. Management fees increased by approximately $52,000 from CPI/FSP I, L.P., as Austin Research Park Buildings III and IV became partially operational for financial reporting purposes in June 2001 and September 2001, respectively. Leasing and Other Fees. Leasing and other fees increased approximately $536,000 in 2002. Leasing and other fees increased approximately $622,000 due to the aforementioned consolidation of CPS, of which approximately $385,000 of the CPS increase related to the aforementioned Concourse Corporate Center. The increase in leasing and other fees was partially offset by a decrease of approximately $132,000 in 2002 from CSC Associates, L.P., which owns Bank of America Plaza. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased approximately $1,647,000 in 2002 due to an increase in residential lots sold from 45 lots in 2001 to 91 lots in 2002. Residential lot and outparcel cost of sales increased approximately $971,000 in 2002 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 2002 of the gross profit percentages used to calculate the cost of sales on residential lot sales in certain of the residential developments. Interest and Other Income. Interest and other income decreased approximately $460,000 in 2002, primarily due to interest income recognized in 2001 from the $18.6 million note receivable from Charlotte Gateway Village, LLC ("Gateway") that was repaid in full in November 2001. Income from Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased approximately $1,525,000 in 2002. Income from Wildwood Associates increased approximately $256,000 in 2002 mainly due to a decrease in depreciation and amortization expense of approximately $167,000 due to certain tenant assets becoming fully amortized during 2001. Income from Temco Associates increased approximately $785,000 in 2002 partially due to an increase in the number of lots sold from 49 lots in 2001 to 101 lots in 2002 at the Bentwater residential development. Additionally, during 2002, approximately 559 acres of the option related to the fee simple interest was exercised and simultaneously sold. CREC's share of the gain was approximately $371,000. There were no sales in 2001. Income from CPI/FSP I, L.P. increased approximately $426,000 in 2002 as Austin Research Park Buildings III and IV became partially operational for financial reporting purposes in June 2001 and September 2001, respectively. Income from Gateway increased approximately $211,000 in 2002. The Company recognizes an 11.46% current preferred return on its equity in Gateway, which increased from $3,200,000 to $10,556,000 in November 2001. Income from Crawford Long - CPI, LLC increased approximately $107,000 in 2002 as the Emory Crawford Long Medical Office Tower became partially operational for financial reporting purposes in February 2002. Income from Ten Peachtree Place Associates decreased approximately $301,000 in 2002 as the average economic occupancy decreased from 100% in 2001 to 16% in 2002. General and Administrative Expenses. General and administrative expenses increased approximately $1,194,000 in 2002. The increase was primarily attributable to the aforementioned consolidation of CPS. Additionally, costs capitalized to projects under development decreased due to a lower level of projects under development in 2002. Depreciation and Amortization. Depreciation and amortization increased approximately $1,437,000 in 2002 due to the aforementioned office buildings and retail center becoming partially operational for financial reporting purposes, which increase was partially offset by the February 2001 sale of Colonial Plaza MarketCenter. Stock Appreciation Right Expense (Credit). Stock appreciation right expense increased approximately $299,000 from a credit of $258,000 in 2001 to an expense of $41,000 in 2002. This non-cash item is primarily related to the number of stock appreciation rights outstanding and the Company's stock price, which was $24.36 and $26.05 at December 31, 2001 and March 31, 2002, respectively; and $27.9375 and $25.01 at December 31, 2000 and March 31, 2001, respectively. Interest Expense. Interest expense increased approximately $1,361,000 in 2002. Interest expense before capitalization increased approximately $944,000 to $10,429,000 in 2002 from $9,485,000 in 2001 due to higher average debt levels. Also contributing to this increase was a decrease of approximately $417,000 in interest capitalized to projects under development (a reduction of interest expense) to $1,897,000 in 2002 from $2,314,000 in 2001 due to a lower level of projects under development in 2002. Other Expense. Other expenses increased approximately $585,000 in 2002. Predevelopment expense increased approximately $301,000 in 2002. Minority interest expense increased approximately $284,000 due primarily to an increase in minority interest expense from 101 Second Street, as average economic occupancy increased from 91% in 2001 to 98% in 2002, and an increase in minority interest expense from 55 Second Street, which became partially operational for financial reporting purposes in February 2002. Gain on Sale of Investment Properties. Gain on sale of investment properties decreased approximately $17,316,000 in 2002. The 2002 gain included the amortization of deferred gain from CP Venture LLC ($1.0 million) (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2001). The 2001 gain included the following: the February 2001 sale of Colonial Plaza MarketCenter ($17.1 million), the February 2001 disposition of leasehold interests in Summit Green ($.2 million) and the amortization of deferred gain from CP Venture LLC ($1.0 million) (see Note 5 of "Notes to Consolidated Financial Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2001). Extraordinary Loss. The Company recognized an extraordinary loss of approximately $3,501,000 in 2002 due to the repayment of the CSC Associates, L.P. non-recourse mortgage note payable (see Note 6). Liquidity and Capital Resources: - -------------------------------- Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was 37.5% of total market capitalization at March 31, 2002. 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, 2001, excluding the Gateway debt as it is fully exculpated debt which is supported by a long-term lease to Bank of America Corporation. 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. The Company had $83.9 million drawn on its $275 million revolving credit facility as of March 31, 2002. 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, 2002. 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 $6.6 million in 2002. Operating distributions from unconsolidated joint ventures increased approximately $4.2 million in 2002, which contributed to the increase in net cash provided by operating activities. The increase in operating distributions from unconsolidated joint ventures is mainly due to increases in operating distributions of approximately $5.0 million from Wildwood Associates and $.9 million from CPI/FSP I, L.P. Partially offsetting the increase in operating distributions was a decrease in operating distributions from CSC Associates, L.P. of approximately $1.6 million. Changes in other operating assets and liabilities increased approximately $2.2 million and residential lot and outparcel sales increased approximately $1.0 million, both of which contributed to the increase in net cash provided by operating activities. Depreciation and amortization and income from unconsolidated joint ventures each increased approximately $1.5 million, which contributed to the increase in net cash provided by operating activities. Income before gain on sale of investment properties and extraordinary loss decreased approximately $1.3 million, which partially offset the increase in net cash provided by operating activities. Net cash used in investing activities increased approximately $24.7 million in 2002. Net cash provided by sales activities decreased approximately $52.8 million due primarily to the sale of Colonial Plaza MarketCenter in February 2001, which contributed to the increase in net cash used in investing activities. The increase in net cash used in investing activities was partially offset by a decrease of approximately $21.5 million in property acquisition and development expenditures, as a result of the Company having a lower level of projects under development in the first quarter of 2002. Investment in unconsolidated joint ventures decreased approximately $5.7 million, primarily due to a decrease in contributions of approximately $5.0 million to CPI/FSP I, L.P. in 2002, which also partially offset the decrease in net cash used in investing activities. The decrease in net cash paid in acquisition of business, which resulted from the acquisition of the remaining 25% interest in CPS in the first quarter of 2001, further offset the increase in net cash used in investing activities by approximately $2.1 million. Net cash used in financing activities decreased approximately $7.9 million in 2002. The decrease in net cash used in financing activities was primarily attributable to an increase in proceeds from other notes payable of $150.0 million due to the refinancing of Bank of America Plaza (see Note 6). Common stock sold, net of expenses, increased approximately $1.5 million, which also contributed to the decrease in net cash used in financing activities. Partially offsetting the decrease in net cash used in financing activities was an increase of approximately $66.7 million in repayment of other notes payable and an increase in extraordinary loss of approximately $3.5 million, both also due to the refinancing of Bank of America Plaza (see Note 6). Also partially offsetting the decrease in net cash used in financing activities was a decrease in net amounts drawn on the credit facility of approximately $71.8 million. An increase in the dividends paid per share to $.37 in 2002 from $.34 in 2001 and an increase in the number of shares outstanding also partially offset the decrease in net cash used in financing activities as dividends paid increased approximately $1.6 million. Quantitative and Qualitative Disclosure About Market Risk: - ---------------------------------------------------------- There has been no material change in the Company's market risk related to its notes payable and notes receivable from that disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Supplemental Financial Information: - ----------------------------------- Depreciation and amortization expense included the following components for the three months ended March 31, 2002 ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------- -------------- ----- Furniture, fixtures and equipment $ 522 $ 3 $ 525 Goodwill and related business acquisition costs 6 - 6 Real estate related: Building (including tenant first generation) 10,819 3,998 14,817 Tenant second generation 760 190 950 ------- ------ ------- $12,107 $4,191 $16,298 ======= ====== ======= Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures during the three months ended March 31, 2002, including its share of unconsolidated joint ventures ($ in thousands): Office Retail Total Second generation related costs $290 $13 $303 Building improvements 286 47 333 ---- --- ---- $576 $60 $636 ==== === ==== 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 7, 2002. (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. 40,905,303 - 191,241 Richard W. Courts, II 40,900,803 - 195,741 Thomas G. Cousins 40,903,906 - 192,638 Lillian C. Giornelli 40,900,881 - 195,663 Terence C. Golden 40,901,771 - 194,773 Boone A. Knox 40,902,103 - 194,441 John J. Mack 40,905,983 - 190,561 Hugh L. McColl, Jr. 40,811,976 - 284,568 William Porter Payne 40,899,648 - 196,896 R. Dary Stone 40,876,597 - 219,947 (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 37,434,131 Against 3,425,354 Abstained 237,059 (iii) A proposal to approve an amendment to the 1999 Incentive Stock Plan to increase the number of shares of common stock for which options or stock appreciation rights can be awarded to any one individual in a calendar year from 450,000 to 750,000. The vote on the above was: For 37,538,867 Against 3,331,328 Abstained 226,349 Item 6. Reports on Form 8-K ------------------- (b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed during the first quarter of 2002. 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 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----