Securities Exchange Act of 1934 -- Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report:
April 28, 2004
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CBL & ASSOCIATES PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12494 62-1545718
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
2030 Hamilton Place Boulevard, Chattanooga, TN 37421
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(Address of principal executive offices)
Registrant's telephone number, including area code:
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(423) 855-0001
1
ITEM 7. Exhibits
Exhibit
Number Description
99.1 Earnings Release First Quarter Ended March 31, 2004
99.2 Analyst Conference Call Script - First Quarter Ended March 31, 2004
99.3 Supplemental Information - First Quarter Ended March 31, 2004
ITEM 12. Results of Operations and Finanical Condition
On April 27, 2004, CBL & Associates Properties, Inc. (the "Company")
reported its results for the first quarter ended March 31, 2004. The Company's
earnings release for the first quarter ended March 31, 2004 is attached as
Exhibit 99.1. On April 28, 2004, the Company held a conference call to discuss
the first quarter results. The transcript of the conference call is attached as
Exhibit 99.2. The Company has posted to its website certain supplemental
financial and operating information related to the first quarter of 2004, which
is attached as Exhibit 99.3.
The information in this Form 8-K and the Exhibits attached hereto shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall it be deemed incorporated by reference in any filing under the
Securities Act 1933, except as shall be expressly set forth by specific
reference in such filing.
SIGNATURE
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.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
----------------------------------------------
John N. Foy
Vice Chairman,
Chief Financial Officer and Treasurer
(Authorized Officer of the Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: April 28, 2004
99.1 Earnings Release - First Quarter Ended March 31, 2004
[Letterhead of CBL & Associates Properties, Inc.]
Contact: John N. Foy
Vice Chairman and CFO
(423) 855-0001
CBL REPORTS FIRST QUARTER RESULTS
* Net income per share increases 29.7% * FFO per share increases 3.4% to $1.23
per share * Same store sales increase 7.5% * Grand Opening held at Coastal Grand
- Myrtle Beach, South Carolina * Acquires three regional malls for $309 million
in March and April
CHATTANOOGA, Tenn. (April 27, 2004) CBL & Associates Properties, Inc. (NYSE:CBL)
announced results for the first quarter ended March 31, 2004. A description of
each non-GAAP financial measure and the related reconciliation to the comparable
GAAP measure is located at the end of this release.
Net income available to common shareholders increased 32.5% in the first
quarter of 2004 to $30,189,000 from $22,776,000 in the prior-year period. On a
diluted per share basis, net income available to common shareholders for the
first quarter of 2004 increased 29.7% to $0.96 compared with $0.74 in the
prior-year period. The increase in the net income includes the gain from the
sale of community centers to the Galileo America REIT joint venture. The total
gain was $18,289,000 and after adjusting for minority interest in the operating
partnership the gain was $9,998,000 or $0.32 per share.
Funds from operations (FFO) increased 3.5% to $69,660,000 for the first
quarter of 2004 from $67,297,000 for the first quarter of 2003. FFO per share on
a diluted, fully converted basis increased 3.4% to $1.23 for the first quarter
of 2004 from $1.19 in the prior-year period. Gains on sales of outparcels for
the first quarter of 2004 were $0.02 per diluted, fully converted share compared
with $0.02 for the first quarter one year ago. The gain from the Galileo
transaction did not impact FFO as gains from the sale of operating properties
are excluded from FFO.
HIGHLIGHTS
|X| Revenues increased 5.7% in the first quarter of 2004 to
$172,973,000 from $163,590,000 in the prior-year period. Revenues
for the first quarter of 2004 include $1,143,000 in lease
termination fees received from tenants compared with $399,000
received during the same period one year ago.
|X| As a result of the application of Statement of Financial
Accounting Standards ("SFAS") Nos. 141 and 142, the Company's FFO
includes $638,000 of revenues related to the amortization of the
market value of leases of acquired properties, compared to $50,000
in the first quarter of 2003. Interest expense in the first
quarter includes a reduction of $973,000 related to the
amortization of debt premiums associated with above market-rate
debt assumed for acquired properties, compared with none for the
prior-year period.
|X| Same center net operating income for the portfolio improved in the
first quarter of 2004 by 1.7% compared with a 5.0% increase for
the prior-year period.
|X| Same-store sales for mall tenants of 10,000 square feet or less
for stabilized malls increased 7.5% for the quarter for those
tenants who have reported sales compared with a decrease of 3.0%
for the first quarter of 2003.
|X| The debt-to-total-market capitalization ratio as of March 31,
2004, was 44.5% based on the common stock closing price of $61.34
and a fully converted common stock share count of 55,808,000 as of
the same date. The debt-to-total-market capitalization ratio as of
March 31, 2003, was 50.7% based on the common stock closing price
of $40.59.
|X| Variable rate debt of $544,952,000 represents 8.3% of the total
market capitalization for the Company and represents 18.7% of the
Company's total consolidated and unconsolidated debt.
CBL's chairman and chief executive officer, Charles B. Lebovitz, said
"The first quarter was an important period for us in terms of continuing the
sales and leasing momentum from the busy holiday season as well as setting the
right tone and course for 2004. We met each of these objectives this quarter.
Building on the positive sales trends we experienced in the second half of last
year, we posted a 7.5% increase in same store sales during the first quarter. We
improved occupancy in our malls and community centers and same center NOI in the
total portfolio increased by 1.7%. Although we still expect some additional
store closings from recent bankruptcies, we will continue to aggressively pursue
exciting and more productive tenants to take their place.
"We are encouraged by recent news that the economy is improving and that
retailers in general are experiencing better sales and healthier margins. We
anticipated that interest rates would rise as the economy started to improve.
Our financial structure is very sound as we have consistently placed long-term,
non-recourse fixed rate debt on our stabilized properties. Over the last two
years we have placed approximately $800 million in fixed-rate, long-term
financing. As a result, our variable rate debt is only 8.3% of our total market
capitalization which positions us to focus more on benefiting from the
improvement in the economy rather than being concerned with interest rate risks.
"With the successful grand opening in March of the 900,000-square-foot
Coastal Grand which is 90% leased and committed, the acquisition in March of
Volusia Mall and Honey Creek Mall for $202 million and the acquisition in April
of Greenbrier Mall for $107 million, our active program of new developments and
acquisitions is off to a strong start. The addition of these quality regional
malls coupled with our program of keeping our properties up to date through
renovations and expansions will keep our portfolio at the top of retailers'
expansion plans."
PORTFOLIO OCCUPANCY AND SALES*
March 31,
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2004 2003
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Portfolio occupancy: 90.8% 90.5%
Mall portfolio 91.0% 90.4%
Stabilized malls (60) 91.5% 91.0%
Non-stabilized malls (3) 81.5% 78.4%
Associated centers (24) 88.7% 90.9%
Community centers (14) 91.6% 90.2%
*Figures do not include the community centers that were included in Phases I &
II of the Galileo joint venture transaction.
ACQUISITIONS
During the first quarter the Company acquired two regional malls from
entities advised by Faison & Associates, LLC for a total consideration of $202
million and an average yield of 7.75% on income in place. The acquisitions
included the 1,065,000 square-foot Volusia Mall in Daytona Beach, Florida, with
average mall shop sales of $368 in 2003 and the 681,000 square-foot Honey Creek
Mall in Terre Haute, Indiana, with average mall shop sales of $335 during 2003.
In April, the Company acquired the 890,000 square-foot Greenbrier Mall located
in Chesapeake, Virginia, with average mall shop sales per square foot of $330 in
2003. The Company paid $102.5 million for Greenbrier Mall at a yield of 8% based
on income in place. Additionally, the Company paid $4.5 million to prepay the
existing debt that the Company did not assume.
PROPERTY SALES
CBL has now completed Phases I and II of the joint venture with Galileo
America REIT, originally announced in September 2003. In January 2004, CBL
completed the sale of six community centers and has now sold interests in a
total of 47 community centers to the venture. The third and final phase will be
completed in January 2005.
OUTLOOK AND GUIDANCE
Based on today's outlook and the Company's first quarter results,
management projects that Funds From Operations (FFO) will be in the range of
$4.80 to $4.85 for the year. The Company expects to update its annual guidance
after each quarter's results.
Low High
2004 FFO guidance previously provided - February 3, 2004 $4.60 $4.65
Acquisitions of Honey Creek Mall, Volusia Mall
and Greenbrier Mall (for the year 2004) 0.18 0.18
First quarter 2004 lease termination fees 0.02 0.02
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Revised FFO guidance for 2004 $4.80 $4.85
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Low High
Expected diluted earnings per common share $1.38 $1.41
Add: real estate depreciation and amortization 2.23 2.23
Add: depreciation and amortization from unconsolidated
affiliates 0.08 0.08
Add: minority interest in earnings of Operating Partnership 1.11 1.13
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Expected FFO per diluted common share $4.80 $4.85
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INVESTOR CONFERENCE CALL AND SIMULCAST
CBL & Associates Properties, Inc. will conduct a conference call at 10:00
am EDT on April 28, 2004, to discuss the first quarter results. The number to
call for this interactive teleconference is 913-981-5558. A five-day replay of
the conference call will be available by dialing 719-457-0820 and entering the
passcode 452232. A transcript of the Company's prepared remarks will be filed as
a Form 8-K following the conference call.
To receive the CBL & Associates Properties, Inc. first quarter earnings
release and supplemental information please visit our website at
www.cblproperties.com or contact Investor Relations at 423-490-8292.
The Company will also provide an online Web simulcast and rebroadcast of
its 2004 first quarter earnings release conference call. The live broadcast of
CBL's quarterly conference call will be available online at the Company's Web
site at www.cblproperties.com, as well as www.streetevents.com and
www.fulldisclosure.com on April 28, 2004, beginning at 10:00 a.m. EDT. The
online replay will follow shortly after the call and continue through May 13,
2004.
NON-GAAP FINANCIAL MEASURES
Funds From Operations
FFO is a widely used measure of the operating performance of real estate
companies that supplements net income determined in accordance with generally
accepted accounting principles ("GAAP"). The National Association of Real Estate
Investment Trusts defines FFO as net income (computed in accordance with GAAP)
excluding gains or losses on sales of operating properties, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that FFO provides an additional indicator
of the operating performance of the Company's properties without giving effect
to real estate depreciation and amortization, which assumes the value of real
estate assets declines predictably over time. Since values of well-maintained
real estate assets have historically risen or fallen with market conditions, the
Company believes that FFO enhances investors' understanding of the Company's
operating performance.
FFO does not represent cash flow from operations as defined by accounting
principles generally accepted in the United States, is not necessarily
indicative of cash available to fund all cash flow needs and should not be
considered as an alternative to net income for purposes of evaluating the
Company's operating performance or to cash flow as a measure of liquidity.
Same-Center Net Operating Income
Net operating income ("NOI") is a supplemental measure of the operating
performance of the Company's shopping centers. The Company defines NOI as
operating revenues (rental revenues, tenant reimbursements and other income)
less property operating expenses (property operating, real estate taxes and
maintenance and repairs). Similar to FFO, the Company computes NOI based on its
pro rata share of both consolidated and unconsolidated properties. The Company's
definition of NOI may be different than that used by other companies and,
accordingly, the Company's NOI may not be comparable to that of other companies.
A reconciliation of same-center NOI to net income is located at the end of this
earnings release.
Since NOI includes only those revenues and expenses related to the
continuing operations of its shopping center properties, the Company believes
that same-center NOI provides a measure that reflects trends in occupancy rates,
rental rates and operating costs and the impact of those trends on the Company's
results of operations.
Pro Rata Share of Debt
The Company presents debt based on its pro rata ownership share
(including the Company's pro rata share of unconsolidated affiliates and
excluding minority investors' share of consolidated properties) because it
believes this provides investors a clearer understanding of the Company's total
debt obligations which affects the Company's liquidity. A reconciliation of the
Company's pro rata share of debt to the amount of debt on the Company's
consolidated balance sheet is located at the end of this earnings release.
CBL & Associates Properties, Inc. is one of the top five owners of
shopping centers in North America and the largest owner of malls and shopping
centers in the Southeast, ranked by GLA. CBL owns or holds interests and manages
165 properties, including 64 enclosed regional malls. The properties are located
in 27 states and total 66.5 million-square-feet including 2.0
million-square-feet of non-owned shopping centers managed for third parties. CBL
has five projects under construction totaling approximately 1.4
million-square-feet including one regional mall - Imperial Valley Mall in the
Imperial Valley region of California, one community center and three expansions.
In addition to its office in Chattanooga, TN, CBL has a regional office in
Boston (Waltham), MA. Additional information can be found at
www.cblproperties.com.
Information included herein contains "forward-looking statements" within
the meaning of the federal securities laws. Such statements are inherently
subject to risks and uncertainties, many of which cannot be predicted with
accuracy and some of which might not even be anticipated. Future events and
actual events, financial and otherwise, may differ materially from the events
and results discussed in the forward-looking statements. The reader is directed
to the Company's various filings with the Securities and Exchange Commission,
including without limitation the Company's Annual Report on Form 10-K and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference therein, for a discussion of such risks
and uncertainties.
CBL Reports First Quarter Results
Page 5
April 27, 2004
CBL & Associates Properties, Inc.
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended
March 31,
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2004 2003
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REVENUES:
Minimum rents $ 109,051 $ 102,719
Percentage rents 6,696 6,327
Other rents 2,786 2,029
Tenant reimbursements 48,198 47,851
Management, development and leasing fees 1,795 1,319
Other 4,447 3,345
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Total revenues 172,973 163,590
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EXPENSES:
Property operating 27,746 26,197
Depreciation and amortization 32,745 26,225
Real estate taxes 13,193 13,949
Maintenance and repairs 10,285 10,527
General and administrative 8,233 6,353
Other 3,032 2,341
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Total expenses 95,234 85,592
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Income from operations 77,739 77,998
Interest income 880 579
Interest expense (40,445) (36,956)
Gain on sales of real estate assets 19,825 1,104
Equity in earnings of unconsolidated affiliates 2,864 1,757
Minority interest in earnings:
Operating partnership (25,034) (20,637)
Shopping center properties (1,248) (540)
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Income before discontinued operations 34,581 23,305
Operating income of discontinued operations 29 228
(Loss) gain on discontinued operations (5) 2,935
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Net income 34,605 26,468
Preferred dividends (4,416) (3,692)
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Net income available to common shareholders $ 30,189 $ 22,776
========== ==========
Basic per share data:
Income before discontinued operations, net of
preferred dividends $ 1.00 $ 0.66
Discontinued operations - 0.11
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Net income available to common shareholders $ 1.00 $ 0.77
========== ==========
Weighted average common shares outstanding 30,324 29,726
Diluted per share data:
Income before discontinued operations, net of
preferred dividend $ 0.96 $ 0.64
Discontinued operations - 0.10
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Net income available to common shareholders $ 0.96 $ 0.74
========== ==========
Weighted average common and potential dilutive
common shares outstanding 31,567 30,803
CBL Reports First Quarter Results
Page 6
April 27, 2004
CBL & Associates Properties, Inc.
The Company's calculation of FFO is as follows (in thousands):
Three Months Ended
March 31,
-------------------------
2004 2003
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Net income available to common shareholders $ 30,189 $ 22,776
Add:
Depreciation and amortization from consolidated properties 32,745 26,225
Depreciation and amortization from unconsolidated affiliates 1,196 896
Depreciation and amortization from discontinued operations - 97
Minority interest in earnings of operating partnership 25,034 20,637
Less:
Gain on disposal of operating real estate assets (19,081) -
Minority investors' share of depreciation and amortization (293) (266)
(Gain) loss on disposal of discontinued operations 5 (2,935)
Depreciation and amortization of non-real estate assets (135) (133)
---------- ----------
Funds from operations $ 69,660 $ 67,297
========== ==========
Funds from operations applicable to Company shareholders $ 38,082 $ 36,104
========= =========
Basic per share data:
Funds from operations $ 1.26 $ 1.21
========= =========
Weighted average common shares outstanding with operating
partnership units fully converted 55,471 55,409
Diluted per share data:
Funds from operations $ 1.23 $ 1.19
========= =========
Weighted average common and potential dilutive common shares
outstanding with operating partnership units fully converted 56,713 56,486
SUPPLEMENTAL FFO INFORMATION:
Straight-line rental income $ 650 $ 970
Straight-line rental income per share $ 0.01 $ 0.02
Gains on outparcel sales $ 1,339 $ 1,102
Gains on outparcel sales per share $ 0.02 $ 0.02
Rental revenue recognized under SFAS Nos. 141 and 142 $ 638 $ 50
Rental revenue recognized under SFAS Nos. 141 and 142
per share $ 0.01 $ -
Amortization of debt premiums $ 973 $ -
Amortization of debt premiums per share $ 0.02 $ -
Lease termination fees $ 1,143 $ 399
Lease termination fees per share $ 0.02 $ 0.01
CBL Reports First Quarter Results
Page 7
April 27, 2004
Same-Center Net Operating Income
(Dollars in thousands)
Three Months Ended
March 31,
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2004 2003
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Net income $ 34,605 $ 26,468
Adjustments:
Depreciation and amortization 32,745 26,225
Depreciation and amortization from unconsolidated affiliates 1,196 896
Depreciation and amortization from discontinued operations - 97
Minority investors' share of depreciation and amortization in
shopping center properties (293) (266)
Interest expense 40,445 36,956
Interest expense from unconsolidated affiliates 1,417 2,096
Minority investors' share of interest expense in
shopping center properties (415) (414)
Abandoned projects expense 441 8
Gain on sales of real estate assets (19,825) (1,104)
Gain on sales of real estate assets from unconsolidated
affiliates (592) -
Minority interest in earnings - Operating Partnership 25,034 20,637
Gain on discontinued operations 5 (2,935)
Operating Partnership share of total NOI 114,763 108,664
General and administrative expenses 8,233 6,353
Management fees and non-property level revenues (5,383) (1,742)
Operating Partnership's share of property NOI 117,613 113,275
NOI of non-comparable centers (12,876) (10,244)
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Same center NOI $104,737 $103,031
========== ==========
Malls NOI $ 94,734 $ 95,479
Associated centers NOI 5,525 4,102
Community centers NOI 1,691 1,579
Other NOI 2,787 1,871
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$104,737 $103,031
========== ==========
Percentage Change:
Malls NOI -0.8%
Associated centers NOI 34.7%
Community centers NOI 7.1%
Other NOI 49.0%
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Total same center NOI 1.7%
========== ==========
CBL Reports First Quarter Results
Page 8
April 27, 2004
Company's Share of Consolidated and Unconsolidated Debt
(Dollars in thousands)
March 31, 2004
--------------------------------------------
Fixed Rate Variable Rate Total
--------------------------------------------
Consolidated debt $ 2,369,807 $ 446,075 $ 2,815,882
Minority investors' share of consolidated debt (53,683) - (53,683)
Company's share of unconsolidated affiliates' debt 59,311 98,877 158,188
--------------------------------------------
Company's share of consolidated and unconsolidated debt $ 2,375,435 $ 544,952 $ 2,920,387
===============-==============--=============
Weighted average interest rate 6.56% 2.46% 5.80%
===============-==============--=============
March 31, 2003
--------------------------------------------
Fixed Rate Variable Rate Total
--------------------------------------------
Consolidated debt $ 1,943,722 $ 499,760 $ 2,443,482
Minority investors' share of consolidated debt (19,992) - (19,992)
Company's share of unconsolidated affiliates' debt 38,033 28,229 66,262
--------------------------------------------
Company's share of consolidated and unconsolidated debt $ 1,961,763 $ 527,989 $ 2,489,752
===============-==============--=============
Weighted average interest rate 7.09% 3.23% 6.27%
===============-==============--=============
Debt-To-Total-Market Capitalization Ratio as of March 31, 2004
(In thousands, except stock price) Shares
Outstanding Stock Price (1) Value
--------------------------------------------
Common stock and operating partnership units 55,808 $ 61.34 $ 3,423,263
8.75% Series B Cumulative Redeemable Preferred Stock 2,000 $ 50.00 100,000
7.75% Series C Cumulative Redeemable Preferred Stock 460 $ 250.00 115,000
------------
Total market equity 3,638,263
Company's share of total debt 2,920,387
------------
Total market capitalization 6,558,650
=============
Debt-to-total-market capitalization ratio 44.5%
=============
(1) Stock price for common stock and operating partnership units equals the
closing price of the common stock on March 31, 2004. The stock price for the
preferred stock represents the face value of each respective series of preferred
stock.
Reconciliation of Shares and Operating Partnership Units Outstanding
(In thousands)
Three Months Ended
March 31,
------------------------------
Basic Diluted
------------- ---------------
2004:
Weighted average shares - EPS 30,324 31,567
Weighted average operating partnership units 25,147 25,146
------------- ---------------
Weighted average shares- FFO 55,471 56,713
============= ===============
2003:
Weighted average shares - EPS 29,726 30,803
Weighted average operating partnership units 25,683 25,683
------------- ---------------
Weighted average shares- FFO 55,409 56,486
============= ===============
Dividend Payout Ratio Three Months Ended
March 31,
------------------------------
2004 2003
------------- ---------------
Dividend per share $ 0.725 $ 0.655
FFO per diluted, fully converted share $ 1.23 $ 1.19
------------- ---------------
Dividend payout ratio 58.9% 55.0%
============= ===============
CBL Reports First Quarter Results
Page 9
April 27, 2004
Consolidated Balance Sheets
(Preliminary and unaudited, in thousands)
March 31, December 31,
2004 2003
----------- -----------
ASSETS
Real estate assets:
Land $ 583,053 $ 578,310
Buildings and improvements 3,890,836 3,678,074
----------- -----------
4,473,889 4,256,384
Less: accumulated depreciation (494,725) (467,614)
----------- -----------
3,979,164 3,788,770
Real estate assets held for sale 60,500 64,354
Developments in progress 51,879 59,096
----------- -----------
Net investment in real estate 4,091,543 3,912,220
Cash, restricted cash and cash equivalents 35,789 20,332
Cash in escrow - 78,476
Receivables:
Tenant, net of allowance 40,037 42,165
Other 11,438 3,033
Mortgage notes receivable 27,506 36,169
Investment in unconsolidated affiliates 84,895 96,450
Other assets 77,296 75,465
----------- -----------
$4,368,504 $ 4,264,310
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable $ 2,813,356 $ 2,709,348
Mortgage notes payable on real estate assets held
for sale 2,526 28,754
Accounts payable and accrued liabilities 160,289 161,478
----------- -----------
Total liabilities 2,976,171 2,899,580
----------- -----------
Commitments and contingencies
Minority interests 540,483 526,993
----------- -----------
Shareholders' equity:
Preferred Stock, $.01 par value 25 25
Common Stock, $.01 par value 307 303
Additional paid-in capital 824,106 818,051
Deferred compensation (1,511) (1,607)
Retained earnings 28,923 20,965
----------- -----------
Total shareholders' equity 851,850 837,737
----------- -----------
$4,368,504 $4,264,310
=========== ===========
The March 31, 2004 balance sheet is preliminary as of the date of this report.
Please refer to the Company's Quarterly Report on Form 10-Q when filed for the
final balance sheet as of March 31, 2004.
99.2 Analyst Conference Call Script - First Quarter Ended March 31, 2004
CBL & ASSOCIATES PROPERTIES, INC.
Conference Call, First Quarter 2004
April 28, 2004 @ 10:00 AM EDT
Thank you and good morning. We appreciate your participation in today's
conference call to discuss our 2004 first quarter results. With me today is
Stephen Lebovitz, the Company's President, and Kelly Sargent, Director of
Investor Relations, who will first read our Safe Harbor disclosure.
This conference call contains "forward-looking" statements within the meaning of
the federal securities laws. Such statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, may differ materially from the events and results discussed in the
forward-looking statements. During our discussion today, references made to per
share are based upon a fully diluted converted share. Also, references made to
community centers are only those that are wholly owned by CBL & Associates
Properties, Inc. We direct you to the Company's various filings with the
Securities and Exchange Commission including, without limitation, the Company's
Annual Report on Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included therein for a discussion
of such risks and uncertainties.
I would like to note that a transcript of today's comments including the
earnings release and additional supplemental schedules, will be furnished to the
SEC as a Form 8-K and will be available on our website. Last night we posted the
supplement schedules on our website which can be found in the investor relations
section, under financial reports. This call is also available for replay on the
Internet through a link on our website at cblproperties.com. This conference
call is the property of CBL & Associates Properties, Inc. Any redistribution,
retransmission or rebroadcast of this call without the express written consent
of CBL is strictly prohibited.
During this conference call, the Company may discuss non-GAAP financial measures
as defined by SEC Regulation G. A description of each non-GAAP financial measure
and a reconciliation of each non-GAAP financial measure to the comparable GAAP
financial measure was included in the earnings release that will be in the Form
8-K.
Thank you, Kelly.
Notwithstanding the volatility that the REIT sector has been experiencing during
the last few weeks, we have good news to report as it relates to the economy and
to CBL's performance. The most recent issue of Business Week's commentary states
"It's beginning to look like the US economy is on a tear. Business confidence
soared to a 20 year high in the first quarter, and surveys of both industrial
and service-sector companies show that business activity is at unusually high
levels. Perhaps most important, jobs are coming back, maybe even faster than
anyone had expected. And on top of that, the latest retail sales data shows that
consumers are stepping up to the cash register in droves."
The article goes on to point out that there are now concerns about inflation and
that the Fed will be raising rates. While no one welcomes higher interest rates,
our strategy has consistently been to fix interest rates with long term,
non-recourse debt on our stabilized properties. Accordingly, the general concern
of rising interest rates does not impact us in the medium term in any
significant way. Over the last two years we have placed over $800 million of
fixed rate long-term debt. We have only $190 million of loan maturities, or only
7% of our total debt, maturing over the next twenty-four months. Our debt
maturity schedule reflects our strategy of minimizing interest rate risk.
Retail sales continue to improve and retailer margins are improving as well.
These are indicators that retailers will continue to add new stores in regional
malls.
The first call FFO mean for CBL for the first quarter was $1.16 per share. Let
us spend a few minutes and explain why we exceeded the mean by $0.07 per share.
1. We had estimated that we would generate $0.04 per share in 2004 from
the sale of outparcels. Due to timing, in the first quarter we reported
$0.02 per share of outparcel sales, exceeding our projections by $0.01
per share. We maintain our guidance of $0.04 per share of outparcel
sales for the full year of 2004.
2. The two regional mall acquisitions that closed during the first quarter
added $0.01 per share in the first quarter. For the year 2004, the
total accretion for these two malls and the one acquired in April is
$0.18 per share, based on the date of the acquisitions. This guidance
is consistent with our earnings guidance in yesterday's release and
includes $0.04 per share for SFAS 141 and 142.
3. We received $0.02 per share of lease termination fees. As we have
stated, we do not budget for lease termination fees.
4. $0.03 per share primarily as a result of better than anticipated income
in our taxable REIT subsidiary that is non-recurring.
Financial Review
During the first quarter, operating performance improved, resulting in FFO per
share growth of 3.4% or $0.04 per share. Of this increase, 83% was represented
by external growth. The external growth resulted from the new developments and
acquisitions completed in 2003 and the first quarter of 2004. The internal
growth resulted primarily from the 1.7% same center NOI growth.
It is worthy of noting that on a comparable basis, excluding the community
centers sold to the Galileo joint venture and other third parties, our FFO
growth per share would have increased by 14%. The Galileo joint venture
transaction resulted in reducing our debt to total market capitalization by 350
basis points. We are more convinced than ever that this joint venture
transaction is favorable for both CBL and Galileo. We have redeployed all of the
funds raised into our recently announced acquisitions and we are now even more
involved in the community center business by pursuing acquisitions as well as
continuing our development program.
A few additional comments on the first quarter results:
1. Specialty leasing revenues increased 23% or by $1.8 million over the first
quarter last year.
2. Sponsorship and branding income increased 55% or by $380,000 compared to
the same quarter one year ago.
3. G&A in the first quarter reflected a 30% increase, or approximately $1.9
million compared to the first quarter last year. This increase included
additional personnel, salary adjustments and bonuses of nearly $1.3 million
in connection with the new developments and acquisitions we completed. We
also increased the state tax reserves by $430,000. We estimate annual G&A
in the range of $34 million for the year.
As we stated in our earnings release, the first quarter same-center NOI growth
was 1.7% for the total portfolio, driven by steady occupancy levels and
specialty leasing. The breakdown for the quarter by property type is as follows:
1. Same center mall NOI decreased 0.8%, or $745,0000, primarily due to the
loss of income from bankrupt tenants. Because of these bankruptcies and
other mall tenants, our bad debt expense and charges against revenues
increased $4.4 million over the prior year period. Excluding these charges
the same center mall NOI growth would have been 4.1%. Same center NOI for
the portfolio would have been 6.2%. In addition, we also sustained the
temporary loss of income while adding big boxes and fresh new retail
concepts to our malls.
2. Associated centers experienced an increase of 34.8% or $1.4 million of
which $700,000 resulted from the collection of lease termination fees.
3. NOI for community centers which we wholly own increased 7.1% or $112,000.
Our cost recovery ratio was 94.1% for the quarter compared with 94.4% in the
first quarter of 2003. We expect that our cost recovery ratio for the balance of
the year will be in the mid 90% range.
Our total debt to market capitalization at the end of the first quarter was
44.5%, compared to 50.7% a year ago, continuing to give us financial
flexibility. In addition, our floating rate debt accounts for 18.7% of our total
debt and represents 8.3% of our total market capitalization. The variable rate
debt includes construction loans, lines of credit and short-term loans on
operating properties. The dividend payout ratio was 59% at quarter-end,
providing us the ability to continue to utilize retained FFO for opportunities
that may arise.
Our financial coverage ratios remain strong with EBITDA coverage ratio of 2.81
for the first quarter of 2004 compared to 2.85 for the same period in 2003. The
slight change was a result of the increase in interest expense due to certain
loans converted from floating rate to fixed rate debt.
Now, I will hand over the call to Stephen Lebovitz to discuss new developments,
leasing, retail sales and acquisitions.
Thank you John and good morning.
During the first quarter of 2004 we accomplished several significant objectives
for our portfolio:
1. In March, we held the Grand Opening of Coastal Grand-Myrtle Beach - which
opened at 90% leased and committed, and introduced over 300,000 square feet
of new retailers to the market. New retailers include Dillard's, Ann Taylor
Loft, Cache, Brookstone, Dick's Sporting Goods, Abercrombie & Fitch,
Hollister and many more.
2. In March, we acquired two malls for a total investment of $202 million with
an average cap rate of 7.75% on income in place.
3. In January we contributed six community centers to the Galileo joint
venture generating $63 million.
4. In April we acquired Greenbrier Mall for $107 million that included a
prepayment fee of $4.5 million for debt that CBL did not assume. This
prepayment is part of the purchase price and not a charge against FFO.
Including the debt prepayment of $4.5 million, the cap rate would have been
7.8% compared to 8% excluding the fee.
5. A fourth mall is under contract that we anticipate closing on by the end of
the second quarter. Total investment on this acquisition will be
approximately $80 million.
Developments
On Wednesday, March 17, we opened Coastal Grand-Myrtle Beach with our 50/50
joint venture partner Burroughs & Chapin. It is an outstanding shopping
destination, offering both locals and tourists an exceptional place to shop,
dine and have a great experience. The architecture of the mall is unique to any
other property in the Myrtle Beach area featuring palm tree lined streets,
creative designs and lighted fountains in the many ponds located on the
property. Coastal Grand has received rave reviews from the community and the
retailers and is off to a terrific start.
The enormous amount of traffic at the successful grand opening has continued.
The anchors at Coastal Grand include Belk, Dillard's and Sears as well as Dick's
Sporting Goods, Bed Bath & Beyond and a 14-screen Cinemark theater. This summer
Gap and Gap Kids will open in the mall and are two of only eight new Gap stores
opening in 2004.
As far as other new projects, in January we held the groundbreaking ceremony at
Imperial Valley Mall in California, which is on schedule to open in March 2005.
This 741,000-square-foot mall is a 60/40 joint venture with the MG Herring
Group. Four department stores including Sears, Robinsons-May, JC Penney and
Dillard's, as well as a 14-screen UltraStar Cinema, will anchor the new
development. The leasing response has been very positive and we will feature
this project at the upcoming ICSC Annual Convention. The mall is currently 55%
leased and committed.
Also during the quarter we opened The Shoppes at Panama City, an associated
center located adjacent to Panama City Mall. At Wilkes Barre Township
Marketplace in Pennsylvania, we opened Wal-Mart, A.C. Moore Arts & Crafts and a
number of shops and outparcels. This project is 99% leased and committed.
Other projects under construction include the 312,000-square-foot Charter Oak
Marketplace in Hartford, CT, anchored by Wal-Mart and Marshall's and a
26,000-square-foot expansion at Garden City Plaza in Garden City, KS. These two
development projects, plus the previously mentioned Wilkes Barre Township
project, will be sold in January 2005 to Galileo.
Three mall expansions are in progress including East Towne and West Towne Malls
in Madison, WI. Both projects include a new Dick's Sporting Goods as well as
additional mall shop space and are scheduled to open this November. At Arbor
Place Mall construction is well under way on the new 140,000-square-foot
Rich's-Macy's scheduled to open this fall.
Expanding and adding anchor stores to our malls continues to be a priority for
us. Dillard's at Northwoods Mall in Charleston, SC, completed their
30,000-square-foot expansion and is in the process of a store renovation to be
completed later this year in conjunction with our overall renovation of the
mall.
This year we will complete three mall renovations, Panama City Mall, Cherryvale
Mall and Northwoods Mall, at an estimated cost of $22.5 million. By the end of
this year, we will have completed all but two of the scheduled renovations
associated with the 21-mall portfolio we acquired in 2001.
Leasing & Occupancy
We accomplished 673,000 square feet of leasing for our existing portfolio during
the quarter, compared with 583,000 square feet in 2003, which excludes community
centers sold to Galileo. During the quarter we entered into approximately
247,000 square feet of new leases and renewed approximately 426,000 square feet
of existing tenants for small shops.
Year to date bankruptcies resulted in 64 stores closing, containing 213,000
square feet and representing $6.5 million in annual gross rentals. The
bankruptcies and store closings we have experienced this year have already
exceeded all of the bankruptcy-related store closings in 2003, clearly a
challenge for our industry.
At the end of the first quarter, total portfolio occupancy was 90.8% an increase
of 30 basis points over last year. We anticipate occupancy to trend down in the
second quarter as additional stores close as a result of the bankruptcies that
occurred early in the first quarter. On the positive side, this provides us an
opportunity to strengthen the tenant mix in our properties.
Occupancy for the associated centers was 88.7% at the end of the quarter. The
occupancy was negatively impacted by the loss of a 36,000-square-foot Just For
Feet store at the Village at Rivergate in Nashville, TN, and a
46,000-square-foot Appliance Factory Warehouse at Hamilton Corner in
Chattanooga, TN. These two associated centers are under redevelopment with
replacement prospects that should open in 2005.
In the mall portfolio, average annual base rents for spaces leased increased by
23.5% compared to the average base rents vacated. For associated centers and the
community centers, the comparable increase was 0.5% and 18.5% respectively. As
mentioned earlier, the results for the community center portfolio excludes those
centers already contributed to the venture with Galileo.
Retail Sales
We are pleased to report strong retail sales in our portfolio. For mall stores
of 10,000 square feet and less, first quarter same store sales increased 7.5%
for those tenants that have reported. Also during the first quarter percentage
rents increased 5.8%, representing 3.9% of total revenues for the quarter.
Additionally during the quarter occupancy costs as a percentage of sales at our
malls was 14.1% compared with 14.9% the same period one year ago.
Acquisitions
We have now completed Phases I and II of the Galileo joint venture that included
the sale of 47 community centers and raised $318 million in cash proceeds. All
of the cash from the Galileo transaction has now been redeployed. We are pleased
with the results of this venture, and the contributed community center portfolio
continues to perform well. Our expectation for future growth of this venture is
one of the primary reasons we entered into this transaction. The nine remaining
community centers currently held in the CBL portfolio will be sold as the
opportunity to realize value occurs.
During the quarter we acquired two malls that were managed by Faison
Enterprises, Volusia Mall in Daytona Beach, FL, and Honey Creek Mall in Terre
Haute, IN. Both of these malls fit our middle market strategy and have strong
competitive positions in each respective market.
In April we acquired Greenbrier Mall in Chesapeake, Virginia. This mall recently
had a significant renovation, including Dillard's consolidating their two stores
into one. Yesterday Dillard's opened their new 160,000-square-foot store. In the
spring of 2005, JCPenney will open in the 105,000-square foot former Dillard's
store.
Last week we acquired Fashion Square Shopping Center located in Orange Park,
Florida, part of the Jacksonville MSA for $4 million. This property is a
10.1-acre site that we plan to redevelop into a new community center.
Conclusion
Before we open the call for Q&A, I would like to share our outlook:
1. We are focused on enhancing the strength of our existing mall portfolio. We
are continuing to add a number of boxes at many of our malls including
Barnes & Noble, Linens & Things, Dick's Sporting Goods, TJ Maxx and others.
While this creates a short-term loss of income, it will improve NOI and
occupancy levels as these stores open.
2. The strengthening economy coupled with strong sales and rental increases
bodes well for our malls.
3. We are encouraged with the level of activity in our leasing program; demand
by retailers continues to be strong.
4. We are maintaining our NOI same center growth expectations of 1.0-2.0% for
the remainder of 2004 and anticipate greater NOI performance in our
portfolio in 2005.
5. There have been a number of questions to us in recent months about whether
our malls in middle markets are bearing a disproportionate share of
retailer bankruptcies and are underperforming malls in larger markets. We
do not feel this is the case at all, and remain confident in our middle
market focused strategy. Our results for this quarter affirm this strategy.
Retailer bankruptcies in 2004 have impacted malls across the country, and
as in the past, we will work through them and end up with stronger
properties. We are encouraged by the number of retailers who are working
with us to grow their presence in our properties such as Brookstone,
Coldwater Creek and Ann Taylor to mention just a few. Our hands-on,
proactive strategy in operating our malls has served us well in the past
and will continue to do so going forward.
We appreciate your confidence and support. John and I will now answer your
questions.
Operator: Open for Q&A.
Final Comment:
Stephen:
Thank you again for joining us today.
99.3 Supplemental Information - First Quarter Ended March 31, 2004
CBL & Associates Properties, Inc.
Supplement Financial and Operating Information
For the Three Months Ended March 31, 2004
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended
March 31,
------------------------
2004 2003
---------- ----------
REVENUES:
Minimum rents $ 109,051 $ 102,719
Percentage rents 6,696 6,327
Other rents 2,786 2,029
Tenant reimbursements 48,198 47,851
Management, development and leasing fees 1,795 1,319
Other 4,447 3,345
---------- ----------
Total revenues 172,973 163,590
---------- ----------
EXPENSES:
Property operating 27,746 26,197
Depreciation and amortization 32,745 26,225
Real estate taxes 13,193 13,949
Maintenance and repairs 10,285 10,527
General and administrative 8,233 6,353
Other 3,032 2,341
---------- ----------
Total expenses 95,234 85,592
---------- ----------
Income from operations 77,739 77,998
Interest income 880 579
Interest expense (40,445) (36,956)
Gain on sales of real estate assets 19,825 1,104
Equity in earnings of unconsolidated affiliates 2,864 1,757
Minority interest in earnings:
Operating partnership (25,034) (20,637)
Shopping center properties (1,248) (540)
---------- ----------
Income before discontinued operations 34,581 23,305
Operating income of discontinued operations 29 228
(Loss) gain on discontinued operations (5) 2,935
---------- ----------
Net income 34,605 26,468
Preferred dividends (4,416) (3,692)
---------- ----------
Net income available to common shareholders $ 30,189 $ 22,776
========== ==========
Basic per share data:
Income before discontinued operations, net of
preferred dividends $ 1.00 $ 0.66
Discontinued operations - 0.11
---------- ----------
Net income available to common shareholders $ 1.00 $ 0.77
========== ==========
Weighted average common shares outstanding 30,324 29,726
Diluted per share data:
Income before discontinued operations, net of
preferred dividend $ 0.96 $ 0.64
Discontinued operations - 0.10
---------- ----------
Net income available to common shareholders $ 0.96 $ 0.74
========== ==========
Weighted average common and potential dilutive
common shares outstanding 31,567 30,803
CBL & Associates Properties, Inc.
Supplement Financial and Operating Information
For the Three Months Ended March 31, 2004
The Company's calculation of FFO is as follows (in thousands):
Three Months Ended
March 31,
-------------------------
2004 2003
---------- ----------
Net income available to common shareholders $ 30,189 $ 22,776
Add:
Depreciation and amortization from consolidated properties 32,745 26,225
Depreciation and amortization from unconsolidated affiliates 1,196 896
Depreciation and amortization from discontinued operations - 97
Minority interest in earnings of operating partnership 25,034 20,637
Less:
Gain on disposal of operating real estate assets (19,081) -
Minority investors' share of depreciation and amortization (293) (266)
(Gain) loss on disposal of discontinued operations 5 (2,935)
Depreciation and amortization of non-real estate assets (135) (133)
---------- ----------
Funds from operations $ 69,660 $ 67,297
========== ==========
Funds from operations applicable to Company shareholders $ 38,082 $ 36,104
========= =========
Basic per share data:
Funds from operations $ 1.26 $ 1.21
========= =========
Weighted average common shares outstanding with operating
partnership units fully converted 55,471 55,409
Diluted per share data:
Funds from operations $ 1.23 $ 1.19
========= =========
Weighted average common and potential dilutive common shares
outstanding with operating partnership units fully converted 56,713 56,486
SUPPLEMENTAL FFO INFORMATION:
Straight-line rental income $ 650 $ 970
Straight-line rental income per share $ 0.01 $ 0.02
Gains on outparcel sales $ 1,339 $ 1,102
Gains on outparcel sales per share $ 0.02 $ 0.02
Rental revenue recognized under SFAS Nos. 141 and 142 $ 638 $ 50
Rental revenue recognized under SFAS Nos. 141 and 142
per share $ 0.01 $ -
Amortization of debt premiums $ 973 $ -
Amortization of debt premiums per share $ 0.02 $ -
Lease termination fees $ 1,143 $ 399
Lease termination fees per share $ 0.02 $ 0.01
CBL & Associates Properties, Inc.
Supplement Financial and Operating Information
For the Three Months Ended March 31, 2004
Same-Center Net Operating Income
(Dollars in thousands)
Three Months Ended
March 31,
-----------------------
2004 2003
---------- ----------
Net income $ 34,605 $ 26,468
Adjustments:
Depreciation and amortization 32,745 26,225
Depreciation and amortization from unconsolidated affiliates 1,196 896
Depreciation and amortization from discontinued operations - 97
Minority investors' share of depreciation and amortization in
shopping center properties (293) (266)
Interest expense 40,445 36,956
Interest expense from unconsolidated affiliates 1,417 2,096
Minority investors' share of interest expense in
shopping center properties (415) (414)
Abandoned projects expense 441 8
Gain on sales of real estate assets (19,825) (1,104)
Gain on sales of real estate assets from unconsolidated
affiliates (592) -
Minority interest in earnings - Operating Partnership 25,034 20,637
Gain on discontinued operations 5 (2,935)
Operating Partnership share of total NOI 114,763 108,664
General and administrative expenses 8,233 6,353
Management fees and non-property level revenues (5,383) (1,742)
Operating Partnership's share of property NOI 117,613 113,275
NOI of non-comparable centers (12,876) (10,244)
---------- ----------
Same center NOI $104,737 $103,031
========== ==========
Malls NOI $ 94,734 $ 95,479
Associated centers NOI 5,525 4,102
Community centers NOI 1,691 1,579
Other NOI 2,787 1,871
---------- ----------
$104,737 $103,031
========== ==========
Percentage Change:
Malls NOI -0.8%
Associated centers NOI 34.7%
Community centers NOI 7.1%
Other NOI 49.0%
---------- ----------
Total same center NOI 1.7%
========== ==========
CBL & Associates Properties, Inc.
Supplement Financial and Operating Information
For the Three Months Ended March 31, 2004
Company's Share of Consolidated and Unconsolidated Debt
(Dollars in thousands)
March 31, 2004
--------------------------------------------
Fixed Rate Variable Rate Total
--------------------------------------------
Consolidated debt $ 2,369,807 $ 446,075 $ 2,815,882
Minority investors' share of consolidated debt (53,683) - (53,683)
Company's share of unconsolidated affiliates' debt 59,311 98,877 158,188
--------------------------------------------
Company's share of consolidated and unconsolidated debt $ 2,375,435 $ 544,952 $ 2,920,387
===============-==============--=============
Weighted average interest rate 6.56% 2.46% 5.80%
===============-==============--=============
March 31, 2003
--------------------------------------------
Fixed Rate Variable Rate Total
--------------------------------------------
Consolidated debt $ 1,943,722 $ 499,760 $ 2,443,482
Minority investors' share of consolidated debt (19,992) - (19,992)
Company's share of unconsolidated affiliates' debt 38,033 28,229 66,262
--------------------------------------------
Company's share of consolidated and unconsolidated debt $ 1,961,763 $ 527,989 $ 2,489,752
===============-==============--=============
Weighted average interest rate 7.09% 3.23% 6.27%
===============-==============--=============
Debt-To-Total-Market Capitalization Ratio as of March 31, 2004
(In thousands, except stock price) Shares
Outstanding Stock Price (1) Value
--------------------------------------------
Common stock and operating partnership units 55,808 $ 61.34 $ 3,423,263
8.75% Series B Cumulative Redeemable Preferred Stock 2,000 $ 50.00 100,000
7.75% Series C Cumulative Redeemable Preferred Stock 460 $ 250.00 115,000
------------
Total market equity 3,638,263
Company's share of total debt 2,920,387
------------
Total market capitalization 6,558,650
=============
Debt-to-total-market capitalization ratio 44.5%
=============
(1) Stock price for common stock and operating partnership units equals the
closing price of the common stock on March 31, 2004. The stock price for the
preferred stock represents the face value of each respective series of preferred
stock.
Reconciliation of Shares and Operating Partnership Units Outstanding
(In thousands)
Three Months Ended
March 31,
------------------------------
Basic Diluted
------------- ---------------
2004:
Weighted average shares - EPS 30,324 31,567
Weighted average operating partnership units 25,147 25,146
------------- ---------------
Weighted average shares- FFO 55,471 56,713
============= ===============
2003:
Weighted average shares - EPS 29,726 30,803
Weighted average operating partnership units 25,683 25,683
------------- ---------------
Weighted average shares- FFO 55,409 56,486
============= ===============
Dividend Payout Ratio Three Months Ended
March 31,
------------------------------
2004 2003
------------- ---------------
Dividend per share $ 0.725 $ 0.655
FFO per diluted, fully converted share $ 1.23 $ 1.19
------------- ---------------
Dividend payout ratio 58.9% 55.0%
============= ===============
CBL & Associates Properties, Inc.
Supplement Financial and Operating Information
For the Three Months Ended March 31, 2004
Consolidated Balance Sheets
(Preliminary and unaudited, in thousands)
March 31, December 31,
2004 2003
----------- -----------
ASSETS
Real estate assets:
Land $ 583,053 $ 578,310
Buildings and improvements 3,890,836 3,678,074
----------- -----------
4,473,889 4,256,384
Less: accumulated depreciation (494,725) (467,614)
----------- -----------
3,979,164 3,788,770
Real estate assets held for sale 60,500 64,354
Developments in progress 51,879 59,096
----------- -----------
Net investment in real estate 4,091,543 3,912,220
Cash, restricted cash and cash equivalents 35,789 20,332
Cash in escrow - 78,476
Receivables:
Tenant, net of allowance 40,037 42,165
Other 11,438 3,033
Mortgage notes receivable 27,506 36,169
Investment in unconsolidated affiliates 84,895 96,450
Other assets 77,296 75,465
----------- -----------
$4,368,504 $ 4,264,310
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable $ 2,813,356 $ 2,709,348
Mortgage notes payable on real estate assets held
for sale 2,526 28,754
Accounts payable and accrued liabilities 160,289 161,478
----------- -----------
Total liabilities 2,976,171 2,899,580
----------- -----------
Commitments and contingencies
Minority interests 540,483 526,993
----------- -----------
Shareholders' equity:
Preferred Stock, $.01 par value 25 25
Common Stock, $.01 par value 307 303
Additional paid-in capital 824,106 818,051
Deferred compensation (1,511) (1,607)
Retained earnings 28,923 20,965
----------- -----------
Total shareholders' equity 851,850 837,737
----------- -----------
$4,368,504 $4,264,310
=========== ===========
The March 31, 2004 balance sheet is preliminary as of the date of this report.
Please refer to the Company's Quarterly Report on Form 10-Q when filed for the
final balance sheet as of March 31, 2004.
CBL & Associates Properties, Inc.
Supplemental Financial and Operating Information
For the Three Months Ended March 31, 2004
The Company presents the ratio of earnings before interest, taxes,
depreciation and amortization (EBITDA) to interest expense because the Company
believes that the EBITDA to interest coverage ratio, along with cash flows from
operating activities, investing activities and financing activities, provides
investors an additional indicator of the Company's ability to incur and service
debt.
Ratio of EBITDA to Interest Expense
(Dollars in thousands)
Three Months Ended
March 31,
----------------------
2004 2003
----------------------
EBITDA:
Net Income $ 34,605 $ 26,468
Adjustments:
Depreciation and amortization 32,745 26,225
Depreciation and amortization from unconsolidated affiliates 1,196 896
Depreciation and amortization from discontinued operations - 97
Minority investors' share of depreciation and amortization in
shopping center properties (293) (266)
Interest expense 40,445 36,956
Interest expense from unconsolidated affiliates 1,417 2,096
Interest expense from discontinued operations - -
Minority investors' share of interest expense in
shopping center properties (415) (414)
Income taxes 446 494
Loss on extinguishment of debt - -
Abandoned projects expense 441 8
Sales of Completed Centers (19,081) -
Minority interest in earnings - Operating Partnership 25,034 20,637
Gain on discontinued operations 5 (2,935)
----------------------
Company's share of total EBITDA $116,545 $ 110,262
======================
Interest Expense:
Interest expense $ 40,445 $ 36,956
Interest expense from discontinued operations - -
Interest expense from unconsolidated affiliates 1,417 2,096
Minority investors' share of interest expense in
shopping center properties (415) (414)
----------------------
Company's share of total interest expense $ 41,447 $ 38,638
======================
Ratio of EBITDA to Interest Expense 2.81 2.85
======================
Reconciliation of EBITDA to Cash Flows From Operating Activities
(In thousands)
Three Months Ended
March 31,
----------------------
2004 2003
----------------------
Company's share of total EBITDA $116,545 $ 110,262
Interest expense (40,445) (36,956)
Minority interest's share of interest expense 415 414
Income taxes (446) (494)
Amortization of deferred financing costs and non real estate
depreciation 1,578 1,056
Amortization of debt premiums 932 -
Amortization of above and below market leases (638) (50)
Depreciation and interest expense from unconsolidated affiliates (2,613) (2,992)
Equity in earnings in excess of distributions from unconsolidated
affiliates (782) (1,046)
Minority investors' share of depreciation and amortization in 293 266
shopping center properties
Minority interest in earnings - shopping center properties 1,248 540
Gains on outparcel sales (744) (1,104)
Issuances of stock under incentive plan 999 1,129
Amortization of deferred compensation (93) -
Deferred compensation 119 89
Changes in assets and liabilities (10,973) (12,588)
----------------------
Cash flows from operating activities $ 65,395 $ 58,526
======================
CBL & Associates Properties, Inc.
Supplemental Financial and Operating Information
For the Three Months Ended March 31, 2004
Schedule of Mortgage and Other Notes Payable as of March 31, 2004
(Dollars in thousands)
Maturity Interest Balance Balance
Property Location Date Rate 3/31/2004 Fixed Variable
---------------------------------------------------------------------------------------------------
Cincinnati, OH Eastgate Mall Feb-04 2.625% $ 41,125 $ - $ 41,125
Brownsville, TX Sunrise Mall May-04 4.900% 40,000 40,000 -
Midland, MI Midland Mall Jun-04 2.620% 30,000 - 30,000
Lexington, KY Fayette Mall Development Dec-04 2.770% 8,550 - 8,550
Brookfield, IL Brookfield Square May-05 7.498% 71,276 71,276 -
Hattiesburg, MS Turtle Creek Mall Mar-06 7.400% 30,914 30,914 -
Rockford, IL Cherryvale Mall Jul-06 7.375% 45,407 45,407 -
Lynchburg, VA River Ridge Mall Jan-07 9.302% 22,244 22,244 -
Madison, WI East Towne Mall Jan-07 8.010% 27,675 27,675 -
Madison, WI West Towne Mall Jan-07 8.010% 42,787 42,787 -
Chattanooga, TN Hamilton Place Mar-07 7.000% 65,001 65,001 -
Cincinnati, OH Eastgate Crossing Apr-07 6.380% 10,345 10,345 -
Charleston, SC Citadel Mall May-07 7.390% 31,562 31,562 -
Dalton, GA Walnut Square Feb-08 10.125% 462 462 -
Highpoint, NC Oak Hollow Mall Feb-08 7.310% 45,617 45,617 -
Uvalde, TX Uvalde Plaza Feb-08 10.625% 424 424 -
Winston-Salem NC Hanes Mall Jul-08 7.310% 110,868 110,868 -
Nashville, TN Hickory Hollow Mall Aug-08 6.770% 89,099 89,099 -
Nashville, TN Courtyard At Hickory HollowAug-08 6.770% 4,148 4,148 -
Nashville, TN Rivergate Mall Aug-08 6.770% 72,009 72,009 -
Nashville, TN Village At Rivergate Aug-08 6.770% 3,401 3,401 -
Lansing, MI Meridian Mall Oct-08 4.520% 94,952 94,952 -
Cary , NC Cary Towne Center Mar-09 6.850% 88,052 88,052 -
Fairview Heights, IL St. Claire Square Apr-09 7.000% 68,509 68,509 -
Daytona Beach, FL Volusia Mall Apr-09 6.950% 54,807 54,807 -
Terre Haute, IN Honey Creek Mall Apr-09 6.700% 33,000 33,000 -
Meridian, MS Bonita Lakes Mall Oct-09 6.820% 26,978 26,978 -
Meridian, MS Bonita Lakes Crossing Oct-09 6.820% 8,465 8,465 -
Spartanburg, SC Westgate Crossing Jul-10 8.420% 9,638 9,638 -
Burnsville, MN Burnsville Center Aug-10 8.000% 70,614 70,614 -
Roanoke, VA Valley View Mall Sep-10 5.100% 44,789 44,789 -
Nashville, TN Coolsprings Galleria Sep-10 8.290% 59,905 59,905 -
Beaumont, TX Parkdale Mall Oct-10 5.010% 56,421 56,421 -
Beaumont, TX Parkdale Crossing Oct-10 5.010% 8,909 8,909 -
Stroud, PA Stroud Mall Dec-10 8.420% 31,744 31,744 -
Wausau, WI Wausau Center Dec-10 6.700% 13,539 13,539 -
York, PA York Galleria Dec-10 8.340% 50,765 50,765 -
Lexington, KY Fayette Mall Jul-11 7.000% 95,183 95,183 -
Chattanooga, TN Hamilton Corner Aug-11 10.125% 2,447 2,447 -
Asheville, NC Asheville Mall Sep-11 6.980% 69,334 69,334 -
Portland, ME BJ'S Plaza Dec-11 10.400% 2,526 2,526 -
Ft. Smith, AR Massard Crossing Feb-12 7.540% 5,893 5,893 -
Houston, TX Willowbrook Plaza Feb-12 7.540% 30,151 30,151 -
Vicksburg, MS Pemberton Plaza Feb-12 7.540% 2,013 2,013 -
Fayetteville, NC Cross Creek Mall Apr-12 7.400% 63,912 63,912 -
Colonial Heights, VA Southpark Mall May-12 7.000% 37,874 37,874 -
Asheboro, NC Randolph Mall Jul-12 6.500% 15,258 15,258 -
Douglasville, GA Arbor Place Mall Jul-12 6.510% 79,211 79,211 -
Douglasville, GA The Landing At Arbor Place Jul-12 6.510% 8,942 8,942 -
Jackson, TN Old Hickory Mall Jul-12 6.510% 34,989 34,989 -
Louisville, KY Jefferson Mall Jul-12 6.510% 44,125 44,125 -
N. Charleston SC Northwoods Mall Jul-12 6.510% 63,174 63,174 -
Racine, WI Regency Mall Jul-12 6.510% 34,600 34,600 -
Saginaw, MI Fashion Square Jul-12 6.510% 60,647 60,647 -
Spartanburg, SC Westgate Mall Jul-12 6.500% 54,814 54,814 -
Chattanooga, TN CBL Center Aug-12 6.250% 14,717 14,717 -
Panama City, FL Panama City Mall Aug-12 7.300% 40,041 40,041 -
Greensburg, PA Westmoreland Mall Jan-13 5.050% 83,260 83,260 -
Morristown, TN College Square Sep-13 6.750% 12,074 12,074 -
Columbia, SC Columbia Mall Oct-13 5.450% 33,678 33,678 -
Janesville, WI Janesville Mall Apr-16 8.375% 14,088 14,088 -
---------- --------- ---------
2,416,952 2,337,277 79,675
---------- --------- ---------
Debt Premiums
Lynchburg, VA River Ridge Mall Jan-07 4.000% 2,320 2,320 -
Daytona Beach, FL Volusia Mall Apr-09 4.750% 4,614 4,614 -
Terre Haute, IN Honey Creek Mall Apr-09 4.750% 3,145 3,145 -
Roanoke, VA Valley View Mall Sep-10 5.100% 8,341 8,341 -
Fayetteville, NC Cross Creek Mall Apr-12 5.000% 9,690 9,690 -
Colonial Heights, VA Southpark Mall May-12 5.100% 4,420 4,420 -
---------- --------- ---------
32,530 32,530 -
---------- --------- ---------
SUBTOTAL 2,449,482 2,369,807 79,675
---------- --------- ---------
Weighted average interest rate 6.44% 6.57% 2.64%
CONSTRUCTION LOANS - - -
---------- --------- ---------
LINES OF CREDIT 366,400 - 366,400
---------- --------- ---------
Weighted average interest rate 2.29%
TOTAL BALANCE SHEET $2,815,882 $2,369,807 $ 446,075
Weighted average interest rate 5.90% 6.57% 2.35%
Plus CBL Share Of Unconsolidated Affiliates
Huntsville, AL Parkway Place Dec-04 2.620% 29,052 - 29,052
Myrtle Beach, SC Coastal Grand May-06 2.938% 64,907 - 64,907
El Centro, CA Imperial Valley Mall Dec-06 2.780% 418 - 418
Paducah, KY Kentucky Oaks Jun-07 9.000% 15,943 15,943 -
Del Rio, TX Plaza Del Sol Aug-10 9.150% 1,948 1,948 -
Clarksville, TN Governor's Square Sep-16 8.230% 15,422 15,422 -
Galileo America LLC Portfolio of 45 community various 5.074% 30,498 25,998 4,500
---------- --------- ---------
158,188 59,311 98,877
---------- --------- ---------
Less Minority Interest Share Minority Interest
Chattanooga, TN CBL Center 8.0000% 6.2500% (1,177) (1,177) -
Chattanooga, TN Hamilton Corner 10.0000% 10.1250% (245) (245) -
Chattanooga, TN Hamilton Place 10.0000% 7.0000% (6,500) (6,500) -
Ft. Smith AR Massard Crossing 10.0000% 7.5400% (5,303) (5,303) -
Highpoint, NC Oak Hollow Mall 25.0000% 7.3100% (11,404) (11,404) -
Houston, TX Willowbrook Plaza 25.0000% 7.5400% (27,136) (27,136) -
Uvalde, TX Uvalde Plaza 25.0000% 10.6250% (106) (106) -
Vicksburg, MS Pemberton Plaza 25.0000% 7.5400% (1,812) (1,812) -
---------- --------- ---------
(53,683) (53,683) -
---------- --------- ---------
TOTAL OBLIGATIONS $2,920,387 $2,375,435 $544,952
========== ========= =========
Weighted average interest rate 5.80% 6.56% 2.46%
Total Debt of Unconsolidated Affiliates
Huntsville, AL Parkway Place Dec-04 2.620% $ 58,105 $ - $ 58,105
Myrtle Beach, SC Coastal Grand May-06 2.938% 64,907 - 64,907
El Centro, CA Imperial Valley Mall Dec-06 2.840% 418 - 418
Paducah, KY Kentucky Oaks Jun-07 9.000% 31,886 31,886 -
Del Rio, TX Plaza Del Sol Aug-10 9.150% 3,850 3,850 -
Clarksville, TN Governor's Square Sep-16 8.230% 32,467 32,467 -
Galileo America LLC Portfolio of 45 community various 5.074% 304,984 259,984 45,000
---------- --------- ---------
$ 496,617 $ 328,187 $ 168,430
========== ========= =========
CBL & Associates Properties, Inc.
Supplemental Financial and Operating Information
For the Three Months Ended March 31, 2004
Comparable New and Renewal Leasing Activity for
The Three Months Ended March 31, 2004
New New
Square Prior PSF PSF Base % Change PSF Base % Change
Property Type Feet Base Rent Rent - Initial Initial Rent - Average Average
------------------- ------------ ------------- ------------- ------------- ------------- ----------
Stabilized malls 632,206 $ 24.91 $ 25.24 1.3% $ 25.69 3.1%
Associated centers 6,480 15.13 15.00 -0.9% 15.00 -0.9%
Community centers 4,560 9.29 10.14 9.1% 10.14 9.1%
Comparable Stabilized Mall Leasing Activity for
The Three Months Ended March 31, 2004
New New
Square Prior PSF PSF Base % Change PSF Base % Change
Stabilized Malls Feet Base Rent Rent - Initial Initial Rent - Average Average
------------------- ------------ ------------- --------------------------- -------------------------
New leases 209,805 $ 25.23 $ 29.42 16.6% $ 30.36 20.3%
Renewal leases 422,401 24.76 23.15 -6.5% 23.37 -5.6%
Total Leasing Activity Compared to Tenants Vacating for
The Three Months Ended March 31, 2004
Leased Vacated
Leased Average Base Vacated Average Base % Change
Property Type Sq. Ft. Rent PSF Sq. Ft. Rent PSF Average
------------------- ------------ ------------- ------------- ------------- -------------
Malls 660,135 $ 26.56 527,443 $ 21.50 23.53%
Associated centers 7,924 15.37 12,826 15.29 0.52%
Community centers 4,560 10.14 6,750 8.56 18.46%
Average Annual Base Rents Per Square Foot By Property Type
March 31,
------------------------------------------
2004 2003 % Change
------------- ------------- -------------
Stabilized malls $ 25.03 $ 23.70 5.6%
Non-stabilized malls 27.37 26.48 3.4%
Associated centers 10.05 10.01 0.4%
Community centers 7.85 10.14 -22.6%
CBL & Associates Properties, Inc.
Supplemental Financial and Operating Information
For the Three Months Ended March 31, 2004
Capital Expenditures for The Three Months Ended March 31, 2004
(In thousands)
Tenant allowances $ 6,162
------------
Renovations 2,720
------------
Deferred maintenance:
Parking lot and parking lot lighting -
Roof repairs and replacements 188
Other capital expenditures 3,173
------------
Total deferred maintenance expenditures 3,361
------------
Total capital expenditures $ 12,243
============
The capital expenditures incurred for maintenance such as parking lot
repairs, parking lot lighting and roofs are classified as deferred maintenance
expenditures. These expenditures are billed to tenants as common area
maintenance expense and the majority is recovered over a five to fifteen year
period. Renovation capital expenditures are for remodelings and upgrades for
enhancing our competitive position in the market area. A portion of these
expenditures covering items such as new floor coverings, painting, lighting and
new seating areas are also recovered through tenant billings. The costs of other
items such as new entrances, new ceilings and skylights are not recovered from
tenants. We estimate that 30% of our renovation expenditures are recoverable
from our tenants over a ten to fifteen year period. The third category of
capital expenditures is tenant allowances, sometimes made to third-generation
tenants. Tenant allowances are recovered through minimum rents from the tenants
over the term of the lease.
Deferred Leasing Costs Capitalized Three Months Ended
(In thousands) March 31,
-------------------------
2004 2003
------------ ------------
$ 492 $ 494
CBL & Associates Properties, Inc.
Supplemental Financial and Operating Information
For the Three Months Ended March 31, 2004
Properties Under Development at March 31, 2004
(Dollars in millions)
Gross CBL's Cost Cost
Leasable or Share of Spent Opening Initial
Property Location Area Cost To Date Date Yield
--------------------------------- ---------------------- ------------ ------------ ---------- -------------- ------
New Mall Developments:
Imperial Valley Mall El Centro, CA 741,000 $ 44.2 $ 10.1 March-05 10%
(60/40 joint venture)
Mall Expansions:
Arbor Place Rich's-Macy's Douglasville, GA 140,000 10.0 3.8 November-04 0%
East Towne Mall Madison, WI 139,000 20.5 9.5 November-04 7%
West Towne Mall Madison, WI 94,000 16.2 5.3 November-04 9%
Community Centers:
Charter Oak Marketplace Hartford, CT 312,000 13.3 3.0 November-04 10%
------------ ------------ ----------
1,426,000 $ 104.2 $ 31.7
============ ============ ==========