CBL CBL and Associates Properties Inc

CBL & Associates Properties, Inc. (NYSE:CBL): -- FFO per share rose 18.3% to $0.71 in the second quarter. -- Same-center NOI for the quarter and six-months ended June 30, 2005, rose 2.5% and 5.9%, respectively. -- Same store sales improved by 3.4% year-to-date. -- Portfolio occupancy rose to 91.9% as of the second quarter. -- Completed two-for-one stock split of Company's common stock. CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the second quarter ended June 30, 2005. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release. Per share amounts have been adjusted to reflect the two-for-one split of the Company's common shares, effective June 16, 2005. Net income available to common shareholders for the second quarter ended June 30, 2005, was $20,783,000 compared with $21,708,000 for the prior-year period representing a decline of 4.3%. Net income available to common shareholders per diluted share was $0.32 in the second quarter ended June 30, 2005, compared with $0.34 for the prior-year period, representing a decline of 5.9%. Net income available to common shareholders for the second quarter ended June 30, 2005, declined over the prior year period primarily due to an increase in depreciation expense for the properties acquired in 2004. Net income available to common shareholders for six months ended June 30, 2005, was $46,154,000 compared with $51,897,000 for the six months ended June 30, 2004, representing a decline of 11.1%. On a diluted per share basis, net income available to common shareholders for the six months ended June 30, 2005, was $0.71 compared with $0.82 in the prior-year period, representing a decline of 13.4%. Net income available to common shareholders for the six months ended June 30, 2005, declined over the prior year period due to an increase in depreciation expense for the properties acquired in 2004 and gains recognized in 2004 from the contribution of properties into the Galileo joint venture in January of 2004. Funds from operations (FFO) increased 21.0% to $83,203,000 for the second quarter of 2005 from $68,738,000 for the second quarter of 2004. FFO per share on a diluted fully converted basis increased 18.3% to $0.71 for the second quarter of 2005 from $0.60 in the prior-year period. FFO increased 24.0% to $171,664,000 for the six months ended June 30, 2005 from $138,398,000 for the six months ended June 30, 2004. FFO per share increased 21.3% on a diluted, fully converted basis for the six months ended June 30, 2005, to $1.48 from $1.22 per share in the prior-year period. HIGHLIGHTS -- Total revenues increased 13.4% in the second quarter 2005 to $198,996,000 from $175,506,000 in the prior-year period. Total revenues increased 17.9% in the first six months of 2005 to $409,901,000 from $347,662,000 in the comparable period a year ago. -- Same center net operating income for the portfolio improved for the quarter and six months ended June 30, 2005, by 2.5% and 5.9%, respectively, compared with a 1.5% and 1.1% increase, respectively, for the prior-year periods. -- Same-store sales for mall tenants of 10,000 square feet or less for stabilized malls for the six months ended June 30, 2005, increased 3.4% for those tenants who have reported sales, compared with a 5.9% increase for the prior year period. -- The debt-to-total-market capitalization ratio as of June 30, 2005, was 40.3% based on the common stock closing price of $43.07 and a fully converted common stock share count of 115,162,000 shares as of the same date. The debt-to-total-market capitalization ratio as of June 30, 2004, was 49.4% based on the split-adjusted common stock closing price of $27.50 and a fully converted common stock share count of 111,962,000 shares as of the same date. -- Variable rate debt of $767,697,000 represents 8.6% of the total market capitalization for the Company and 21.2% of the Company's share of total consolidated and unconsolidated debt. CBL's Chairman and Chief Executive Officer, Charles B. Lebovitz, said, "The proactive management approach we provide has once again produced impressive results in all facets of our business including development, acquisition, leasing, property management, and financial strategies. We are committed to effectively executing these strategies so as to continue achieving our goal of double-digit increases in FFO for 2005 and beyond. "With the recent transactions involving our community center portfolio, we are reallocating resources and creating further efficiencies to better leverage the productivity of our team of professionals. The current healthy retail environment is having a very positive impact on our mall portfolio and has allowed us to accelerate our program of mall redevelopments, renovations, and expansions as well as ground-up developments of regional malls, open-air lifestyle centers and community/power centers. These transactions and the continued strong performance in our portfolio demonstrate our focus and commitment to producing long-term growth and value creation for our shareholders." -0- *T PORTFOLIO OCCUPANCY(a) June 30, 2005 2004 ------ ------ Portfolio occupancy 91.9% 91.1% Mall portfolio 91.9% 91.1% Stabilized malls (69) 92.2% 91.4% Non-stabilized malls (3) 84.1% 85.1% Associated centers (28) 93.8% 89.3% Community centers (5) 81.1% 92.6% (a) Figures exclude the community centers that were contributed into the Galileo America joint venture. *T ACQUISITIONS In June, the Company acquired a 70% joint venture interest in the 505,000-square-foot Laurel Park Place in Livonia, MI, for $82.2 million, including closing costs. Subsequent to the quarter-end, the Company closed on the acquisition of The Mall of Acadiana in Lafayette, LA, for approximately $175.3 million, including closing costs. The Company also entered into an agreement to acquire 14.62 acres located adjacent to the mall for $3.2 million as well as an option agreement to purchase an additional 14.32 acres for $3.2 million. DISPOSITIONS Subsequent to the quarter end, the Company entered into a definitive agreement to transfer its 8.4% equity interest in Galileo America, LLC ("Galileo"), a joint venture between CBL and Galileo America Inc., to Galileo. Additionally, CBL's management and advisory contracts with Galileo will be purchased by New Plan Excel Realty Trust, Inc. (NYSE: NXL), a shopping center REIT. CBL will receive total consideration of approximately $100.0 million related to these transactions, which are expected to close in August. The Company has determined that the $41.8 million gain from the sale of the equity interest will be recognized in net income in the third quarter 2005. This gain will not be included in FFO. OTHER SIGNIFICANT EVENTS On May 11, 2005, the Company announced a two-for-one stock split of the Company's common stock effective on June 16, 2005. OUTLOOK AND GUIDANCE Based on today's outlook and the Company's second quarter results, the Company is providing guidance for 2005 FFO in the range of $3.27 to $3.31 per share. The full year guidance assumes NOI growth in the range of 3% to 4% and excludes the impact of any future acquisitions, lease termination fee income, gains on sales of outparcels, or gains on sales of non-operating properties. The guidance does incorporate the expected sale of CBL's equity interest and management contracts with Galileo, which represents $0.26 per share in FFO. Included in net income is the $41.8 million gain on the sale of the equity interest, which represents $0.36 per share. The $0.36 per share gain will not be included in FFO. The Company expects to update its annual guidance after each quarter's results. -0- *T Low High ------ ------ Expected diluted earnings per common share $2.07 $2.11 Adjust to fully converted shares from common shares (0.92) (0.93) ------ ------ Expected earnings per diluted, fully converted common share 1.15 1.18 Add: depreciation and amortization 1.52 1.52 Add: gain on sales of interest in Galileo (0.36) (0.36) Add: minority interest in earnings of Operating Partnership 0.96 0.97 ------ ------ Expected FFO per diluted, fully converted common share $3.27 $3.31 ====== ====== *T INVESTOR CONFERENCE CALL AND SIMULCAST CBL & Associates Properties, Inc. will conduct a conference call at 10:00 a.m. EDT on August 3, 2005, to discuss the second quarter results. The number to call for this interactive teleconference is 913-981-5532. A seven-day replay of the conference call will be available by dialing 719-457-0820 and entering the passcode 4800349. A transcript of the Company's prepared remarks will be furnished on a Form 8-K following the conference call. To receive the CBL & Associates Properties, Inc., second quarter earnings release and supplemental information please visit our website at cblproperties.com or contact Investor Relations at 423-490-8292. The Company will also provide an online Web simulcast and rebroadcast of its 2005 second 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 cblproperties.com, as well as www.streetevents.com and www.earnings.com, on August 3, 2005, beginning at 10:00 a.m. EDT. The online replay will follow shortly after the call and continue through August 17, 2005. CBL & Associates Properties, Inc. is the fourth largest mall REIT in North America and the largest owner of malls and shopping centers in the Southeast, ranked by GLA. CBL owns, holds interests in or manages 174 properties including 72 enclosed regional malls. The properties are located in 30 states and total 75.7 million square feet including 2.0 million square feet of non-owned shopping centers managed for third parties. CBL currently has eight projects under construction totaling approximately 1.5 million square feet. The projects include two open-air shopping centers located in Ft. Myers, FL and Memphis (Southaven, MS), TN, three community centers 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 cblproperties.com. 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 decline 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 affect 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. 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. -0- *T CBL & Associates Properties, Inc. Consolidated Statements of Operations (Unaudited; in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- REVENUES: Minimum rents $127,378 $113,487 $257,809 $221,937 Percentage rents 1,758 1,472 9,857 8,157 Other rents 2,795 2,456 5,920 5,242 Tenant reimbursements 58,315 50,523 119,101 98,519 Management, development and leasing fees 3,773 1,716 6,818 3,511 Other 4,977 5,849 10,396 10,296 --------- --------- --------- --------- Total revenues 198,996 175,503 409,901 347,662 --------- --------- --------- --------- EXPENSES: Property operating 28,361 26,350 60,026 53,995 Depreciation and amortization 43,339 32,878 84,625 65,434 Real estate taxes 15,892 14,095 31,343 27,176 Maintenance and repairs 11,926 10,174 24,271 20,367 General and administrative 9,234 7,992 18,420 16,225 Loss on impairment of real estate assets - - 262 - Other 3,057 4,923 6,487 7,955 --------- --------- --------- --------- Total expenses 111,809 96,412 225,434 191,152 --------- --------- --------- --------- Income from operations 87,187 79,091 184,467 156,510 Interest income 2,594 706 4,277 1,586 Interest expense (50,255) (42,798) (99,176) (83,232) Loss on extinguishment of debt - - (884) - Gain on sales of real estate assets 4,382 4,955 7,096 24,780 Equity in earnings of unconsolidated affiliates 2,683 2,682 5,774 5,546 Minority interest in earnings: Operating partnership (16,895) (17,840) (37,721) (42,874) Shopping center properties (1,178) (1,819) (2,575) (3,058) --------- --------- --------- --------- Income before discontinued operations 28,518 24,977 61,258 59,258 Operating income (loss) of discontinued operations (39) 622 266 951 Gain (loss) on discontinued operations (54) 525 (86) 520 --------- --------- --------- --------- Net income 28,425 26,124 61,438 60,729 Preferred dividends (7,642) (4,416) (15,284) (8,832) --------- --------- --------- --------- Net income available to common shareholders $20,783 $21,708 $46,154 $51,897 ========= ========= ========= ========= Basic per share data: Income before discontinued operations, net of preferred dividends $0.33 $0.34 $0.73 $0.83 Discontinued operations (0.00) 0.02 0.01 0.02 --------- --------- --------- --------- Net income available to common shareholders $0.33 $0.35 $0.74 $0.85 ========= ========= ========= ========= Weighted average common shares outstanding 62,685 61,200 62,567 60,928 Diluted per share data: Income before discontinued operations, net of preferred dividends $0.32 $0.32 $0.71 $0.80 Discontinued operations (0.00) 0.02 0.00 0.02 --------- --------- --------- --------- Net income available to common shareholders $0.32 $0.34 $0.71 $0.82 ========= ========= ========= ========= Weighted average common and potential dilutive common shares outstanding 65,004 63,510 64,895 63,372 The Company's calculation of FFO is as follows (in thousands, except per share data): Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------- 2005 2004 2005 2004 --------- -------- --------- --------- Net income available to common shareholders $20,783 $21,708 $46,154 $51,897 Add: Depreciation and amortization from consolidated properties 43,339 32,878 84,625 65,434 Depreciation and amortization from unconsolidated affiliates 2,210 1,547 3,920 2,743 Depreciation and amortization from discontinued operations - 156 - 345 Minority interest in earnings of operating partnership 16,895 17,840 37,721 42,874 Less: (Gain) loss on sales of operating real estate assets 397 (4,484) 174 (23,565) Minority investors' share of depreciation and amortization (289) (304) (651) (597) (Gain) loss on discontinued operations 54 (525) 86 (520) Depreciation and amortization of non-real estate assets (186) (78) (365) (213) --------- -------- --------- --------- Funds from operations $83,203 $68,738 $171,664 $138,398 ========= ======== ========= ========= Funds from operations applicable to Company shareholders $45,646 $37,732 $94,228 $75,814 ========= ======== ========= ========= Basic per share data: Funds from operations $0.73 $0.62 $1.51 $1.24 ========= ======== ========= ========= Weighted average common shares outstanding with operating partnership units fully converted 114,134 111,490 113,923 111,220 Diluted per share data: Funds from operations $0.71 $0.60 $1.48 $1.22 ========= ======== ========= ========= Weighted average common and potential dilutive common shares outstanding with operating partnership units fully converted 116,452 113,802 116,251 113,664 SUPPLEMENTAL FFO INFORMATION: Lease termination fees $178 $1,444 $2,426 $2,601 Lease termination fees per share $- $0.01 $0.02 $0.02 Straight-line rental income $1,327 $596 $2,852 $1,242 Straight-line rental income per share $0.01 $0.01 $0.02 $0.01 Gains on outparcel sales $6,023 $705 $8,633 $2,041 Gains on outparcel sales per share $0.05 $0.01 $0.07 $0.02 Amortization of acquired above- and below-market leases $1,279 $607 $2,812 $1,242 Amortization of acquired above- and below-market leases per share $0.01 $0.01 $0.02 $0.01 Amortization of debt premiums $1,948 $1,166 $3,661 $2,139 Amortization of debt premiums per share $0.02 $0.01 $0.03 $0.02 Gain on sales of non operating properties $406 $- $815 $- Gain on sales of non operating properties per share $- $- $0.01 $- Loss on impairment of real estate assets $- $- $(262) $- Loss on impairment of real estate assets per share $- $- $- $- Same-Center Net Operating Income (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Net income $28,425 $26,124 $61,438 $60,729 Adjustments: Depreciation and amortization 43,339 32,878 84,625 65,434 Depreciation and amortization from unconsolidated affiliates 2,210 1,547 3,920 2,743 Depreciation and amortization from discontinued operations - 156 - 345 Minority investors' share of depreciation and amortization in shopping center properties (289) (304) (651) (597) Interest expense 50,255 42,798 99,176 83,232 Interest expense from unconsolidated affiliates 3,538 1,658 6,060 3,077 Interest expense from discontinued operations - 9 - 20 Minority investors' share of interest expense in shopping center properties (392) (369) (770) (702) Loss on extinguishment of debt - - 884 - Abandoned projects expense 17 1,240 138 1,685 Gain on sales of real estate assets (4,382) (4,955) (7,096) (24,780) Loss on impairment of real estate assets - - 262 - Gain on sales of real estate assets of unconsolidated affiliates (1,689) - (2,623) (592) Minority interest in earnings of operating partnership 16,895 17,840 37,721 42,874 (Gain) loss on discontinued operations 54 (525) 86 (520) --------- --------- --------- --------- Operating partnership's share of total NOI 137,981 118,097 283,170 232,948 General and administrative expenses 9,234 7,992 18,420 16,225 Management fees and non-property level revenues (7,283) (1,786) (12,815) (5,317) --------- --------- --------- --------- Operating partnership's share of property NOI 139,932 124,303 288,775 243,856 NOI of non-comparable centers (24,716) (11,948) (48,099) (16,485) --------- --------- --------- --------- Total same center NOI $115,216 $112,355 $240,676 $227,371 ========= ========= ========= ========= Malls $106,088 $102,946 $221,983 $209,137 Associated centers 5,580 4,971 11,039 11,322 Community centers 1,044 867 2,354 1,381 Other 2,504 3,571 5,300 5,531 --------- --------- --------- --------- Total same center NOI $115,216 $112,355 $240,676 $227,371 ========= ========= ========= ========= Percentage Change: Malls 3.1% 6.1% Associated centers 12.3% -2.5% Community centers 20.4% 70.5% Other -29.9% -4.2% --------- --------- Total same center NOI 2.5% 5.9% ========= ========= Company's Share of Consolidated and Unconsolidated Debt (Dollars in thousands) June 30, 2005 ---------------------------------- Variable Fixed Rate Rate Total ------------ --------- ----------- Consolidated debt $2,778,311 $680,530 $3,458,841 Minority investors' share of consolidated debt (52,436) - (52,436) Company's share of unconsolidated affiliates' debt 121,715 87,167 208,882 ------------ --------- ----------- Company's share of consolidated and unconsolidated debt $2,847,590 $767,697 $3,615,287 ============ ========= =========== Weighted average interest rate 6.36% 4.26% 5.91% ============ ========= =========== June 30, 2004 ---------------------------------- Variable Fixed Rate Rate Total ------------ --------- ----------- Consolidated debt $2,366,070 $729,365 $3,095,435 Minority investors' share of consolidated debt (53,365) - (53,365) Company's share of unconsolidated affiliates' debt 58,885 121,041 179,926 ------------ --------- ----------- Company's share of consolidated and unconsolidated debt $2,371,590 $850,406 $3,221,996 ============ ========= =========== Weighted average interest rate 6.56% 2.36% 5.45% ============ ========= =========== Debt-To-Total-Market Capitalization Ratio as of June 30, 2005 (In thousands, except stock price) Shares Outstanding Stock Price (1) Value ------------ --------------- ----------- Common stock and operating partnership units 115,162 $43.07 $4,960,027 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 7.375% Series D Cumulative Redeemable Preferred Stock 700 250.00 175,000 ----------- Total market equity 5,350,027 Company's share of total debt 3,615,287 ----------- Total market capitalization $8,965,314 =========== Debt-to-total-market capitalization ratio 40.3% =========== (1) Stock price for common stock and operating partnership units equals the closing price of the common stock on June 30, 2005. The stock price for the preferred stock represents the liquidation preference of each respective series of preferred stock. Reconciliation of Shares and Operating Partnership Units Outstanding (In thousands) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005: Basic Diluted Basic Diluted --------- --------- --------- --------- Weighted average shares - EPS 62,685 65,004 62,567 64,895 Weighted average operating partnership units 51,449 51,448 51,356 51,356 --------- --------- --------- --------- Weighted average shares- FFO 114,134 116,452 113,923 116,251 ========= ========= ========= ========= 2004: Weighted average shares - EPS 61,200 63,510 60,928 63,372 Weighted average operating partnership units 50,290 50,292 50,292 50,292 --------- --------- --------- --------- Weighted average shares- FFO 111,490 113,802 111,220 113,664 ========= ========= ========= ========= Dividend Payout Ratio Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Weighted average dividend per share $0.40861 $0.36270 $0.81800 $0.72540 FFO per diluted, fully converted share $0.71 $0.60 $1.48 $1.22 --------- --------- --------- --------- Dividend payout ratio 57.6% 60.5% 55.3% 59.5% ========= ========= ========= ========= Consolidated Balance Sheets (Preliminary and unaudited, in thousands) June 30, December 31, 2005 2004 ----------- ------------ ASSETS Real estate assets: Land $666,681 $659,782 Buildings and improvements 4,820,211 4,670,462 ----------- ------------ 5,486,892 5,330,244 Less: accumulated depreciation (651,614) (575,464) ----------- ------------ 4,835,278 4,754,780 Real estate assets held for sale - 61,607 Developments in progress 170,131 78,393 ----------- ------------ Net investment in real estate assets 5,005,409 4,894,780 Cash and cash equivalents 37,888 25,766 Receivables: Tenant, net of allowance 35,326 38,409 Other 10,216 13,706 Mortgage notes receivable 18,301 27,804 Investment in unconsolidated affiliates 98,737 84,782 Other assets 119,047 119,253 ----------- ------------ $5,324,924 $5,204,500 =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage and other notes payable $3,458,841 $3,359,466 Mortgage notes payable on real estate assets held for sale - 12,213 Accounts payable and accrued liabilities 222,894 212,064 ----------- ------------ Total liabilities 3,681,735 3,583,743 ----------- ------------ Commitments and contingencies Minority interests 577,115 566,606 ----------- ------------ Shareholders' equity: Preferred stock, $.01 par value 32 32 Common stock, $.01 par value 633 626 Additional paid-in capital 1,049,974 1,025,479 Deferred compensation (10,570) (3,081) Retained earnings 26,005 31,095 ----------- ------------ Total shareholders' equity 1,066,074 1,054,151 ----------- ------------ $5,324,924 $5,204,500 =========== ============ The balance sheet above is preliminary as of the date of this report. Please refer to the Company's Quarterly Report on Form 10-Q when filed for a complete balance sheet as of June 30, 2005. *T