SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d)
OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period
Ended: September 30, 2003
Commission File No.
1-11530
Taubman Centers, Inc.
(Exact name of
registrant as specified in its charter)
| Michigan | 38-2033632 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| 200 East Long Lake Road, Suite 300, P.O. Box 200, Bloomfield Hills, Michigan | 48303-0200 |
| (Address of principal executive offices) | (Zip Code) |
| (248) 258-6800 | |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes X. | No . |
Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes X. | No . |
As of November 11, 2003, there were outstanding 49,932,834 shares of the Company’s common stock, par value $0.01 per share.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following consolidated financial statements of Taubman Centers, Inc. (the Company) are provided pursuant to the requirements of this item.
| Consolidated Balance Sheet as of September 30, 2003 and December 31, 2002 | 2 | ||
| Consolidated Statement of Operations and Comprehensive Income for the three months ended September 30, 2003 and 2002 | 3 | ||
| Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 2003 and 2002 | 4 | ||
| Consolidated Statement of Cash Flows for the nine months ended September 30, 2003 and 2002 | 5 | ||
| Notes to Consolidated Financial Statements | 6 | ||
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TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE
SHEET
(in thousands, except share data)
| September 30 | December 31 | |||||||
| 2003 | 2002 | |||||||
| Assets: | ||||||||
| Properties | $ | 2,521,608 | $ | 2,393,428 | ||||
| Accumulated depreciation and amortization | (428,912 | ) | (375,738 | ) | ||||
| $ | 2,092,696 | $ | 2,017,690 | |||||
| Cash and cash equivalents | 23,947 | 32,470 | ||||||
| Accounts and notes receivable, less allowance | ||||||||
| for doubtful accounts of $6,778 and $5,829 in 2003 and 2002 | 27,077 | 30,904 | ||||||
| Accounts and notes receivable from related parties (Note 5) | 2,503 | 3,887 | ||||||
| Deferred charges and other assets | 42,402 | 38,148 | ||||||
| Assets of discontinued operations (Note 2) | 112,304 | 115,206 | ||||||
| $ | 2,300,929 | $ | 2,238,305 | |||||
| Liabilities: | ||||||||
| Notes payable (Note 6) | $ | 1,534,024 | $ | 1,463,725 | ||||
| Accounts payable and accrued liabilities | 250,340 | 234,882 | ||||||
| Dividends and distributions payable | 12,832 | 13,746 | ||||||
| Distributions in excess of net income of (investment in) | ||||||||
| Unconsolidated Joint Ventures (Note 4) | 13,310 | (31,402 | ) | |||||
| Liabilities of discontinued operations (Note 2) | 83,392 | 85,897 | ||||||
| $ | 1,893,898 | $ | 1,766,848 | |||||
| Commitments and Contingencies (Note 8) | ||||||||
| Preferred Equity of TRG (Note 1) | $ | 97,275 | $ | 97,275 | ||||
| Partners' Equity of TRG allocable to minority partners (Note 1) | ||||||||
| Shareowners' Equity: | ||||||||
| Series A Cumulative Redeemable Preferred Stock, | ||||||||
| $0.01 par value, 8,000,000 shares authorized, | ||||||||
| $200 million liquidation preference, | ||||||||
| 8,000,000 shares issued and outstanding at | ||||||||
| September 30, 2003 and December 31, 2002 | $ | 80 | $ | 80 | ||||
| Series B Non-Participating Convertible Preferred Stock, | ||||||||
| $0.001 par and liquidation value, 40,000,000 shares | ||||||||
| authorized and 31,965,751 and 31,767,066 shares issued | ||||||||
| and outstanding at September 30, 2003 and December 31, 2002 | 32 | 32 | ||||||
| Series C Cumulative Redeemable Preferred Stock, | ||||||||
| $0.01 par value, 2,000,000 shares authorized, $75 million | ||||||||
| liquidation preference, none issued | ||||||||
| Series D Cumulative Redeemable Preferred Stock, | ||||||||
| $0.01 par value, 250,000 shares authorized, $25 million | ||||||||
| liquidation preference, none issued | ||||||||
| Common Stock, $0.01 par value, 250,000,000 shares | ||||||||
| authorized, 49,363,273 and 52,207,756 issued and | ||||||||
| outstanding at September 30, 2003 and December 31, 2002 | 494 | 522 | ||||||
| Additional paid-in capital | 693,977 | 690,387 | ||||||
| Accumulated other comprehensive income | (15,734 | ) | (17,485 | ) | ||||
| Dividends in excess of net income | (369,093 | ) | (299,354 | ) | ||||
| $ | 309,756 | $ | 374,182 | |||||
| $ | 2,300,929 | $ | 2,238,305 | |||||
See notes to consolidated financial statements.
2
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT
OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except
share data)
| Three Months Ended September 30 | ||||||||
| 2003 | 2002 | |||||||
| Income: | ||||||||
| Minimum rents | $ | 51,371 | $ | 45,763 | ||||
| Percentage rents | 951 | 160 | ||||||
| Expense recoveries | 29,939 | 30,578 | ||||||
| Revenues from management, leasing and development services | 5,087 | 5,576 | ||||||
| Other | 5,318 | 9,715 | ||||||
| $ | 92,666 | $ | 91,792 | |||||
| Operating Expenses: | ||||||||
| Recoverable expenses | $ | 28,409 | $ | 26,817 | ||||
| Other operating | 8,231 | 7,766 | ||||||
| Costs related to unsolicited tender offer (Note 8) | 6,046 | |||||||
| Management, leasing and development services | 4,326 | 4,594 | ||||||
| General and administrative | 5,837 | 4,434 | ||||||
| Interest expense | 20,562 | 18,467 | ||||||
| Depreciation and amortization | 22,251 | 18,891 | ||||||
| $ | 95,662 | $ | 80,969 | |||||
| Income (loss) before equity in income of Unconsolidated | ||||||||
| Joint Ventures, discontinued operations and minority and | ||||||||
| preferred interests | $ | (2,996 | ) | $ | 10,823 | |||
| Equity in income of Unconsolidated Joint Ventures (Note 4) | 8,144 | 5,761 | ||||||
| Income before discontinued operations and minority and | ||||||||
| preferred interests | $ | 5,148 | $ | 16,584 | ||||
| Discontinued operations-income (loss) from operations (Note 2) | 55 | (212 | ) | |||||
| Income before minority and preferred interests | $ | 5,203 | $ | 16,372 | ||||
| Minority interest in consolidated joint ventures | 53 | (34 | ) | |||||
| Minority interest in TRG: | ||||||||
| TRG income allocable to minority partners | (287 | ) | (4,504 | ) | ||||
| Distributions in excess of earnings allocable to minority partners | (8,773 | ) | (3,677 | ) | ||||
| TRG Series C and D preferred distributions (Note 1) | (2,250 | ) | (2,250 | ) | ||||
| Net income (loss) | $ | (6,054 | ) | $ | 5,907 | |||
| Series A preferred dividends | (4,150 | ) | (4,150 | ) | ||||
| Net income (loss) allocable to common shareowners | $ | (10,204 | ) | $ | 1,757 | |||
| Net income (loss) | $ | (6,054 | ) | $ | 5,907 | |||
| Other comprehensive income (loss): | ||||||||
| Change in fair value of available-for-sale securities | (247 | ) | 264 | |||||
| Unrealized gain (loss) on interest rate instruments | 911 | (6,307 | ) | |||||
| Reclassification adjustment for amounts recognized in net income | 164 | 270 | ||||||
| Comprehensive income (loss) | $ | (5,226 | ) | $ | 134 | |||
| Basic income (loss) per common share (Note 9): | ||||||||
| Income (loss) from continuing operations | $ | (0.21 | ) | $ | 0.04 | |||
| Net income (loss) | $ | (0.21 | ) | $ | 0.03 | |||
| Diluted income (loss) per common share (Note 9): | ||||||||
| Income (loss) from continuing operations | $ | (0.21 | ) | $ | 0.03 | |||
| Net income (loss) | $ | (0.21 | ) | $ | 0.03 | |||
| Cash dividends declared per common share | $ | 0.26 | $ | 0.255 | ||||
| Weighted average number of common shares outstanding | 49,348,000 | 51,194,177 | ||||||
See notes to consolidated financial statements.
3
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT
OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except
share data)
| Nine Months Ended September 30 | ||||||||
| 2003 | 2002 | |||||||
| Income: | ||||||||
| Minimum rents | $ | 150,764 | $ | 133,738 | ||||
| Percentage rents | 2,440 | 1,779 | ||||||
| Expense recoveries | 93,440 | 85,490 | ||||||
| Revenues from management, leasing and development services | 15,450 | 16,439 | ||||||
| Other | 21,792 | 22,725 | ||||||
| $ | 283,886 | $ | 260,171 | |||||
| Operating Expenses: | ||||||||
| Recoverable expenses | $ | 84,114 | $ | 73,721 | ||||
| Other operating | 26,616 | 23,554 | ||||||
| Charge related to technology investments | 8,125 | |||||||
| Costs related to unsolicited tender offer (Note 8) | 25,058 | |||||||
| Management, leasing and development services | 14,387 | 14,638 | ||||||
| General and administrative | 18,074 | 14,799 | ||||||
| Interest expense | 62,083 | 56,796 | ||||||
| Depreciation and amortization | 65,596 | 57,459 | ||||||
| $ | 295,928 | $ | 249,092 | |||||
| Income (loss) before equity in income of Unconsolidated | ||||||||
| Joint Ventures, discontinued operations, and minority and | ||||||||
| preferred interests | $ | (12,042 | ) | $ | 11,079 | |||
| Equity in income of Unconsolidated Joint Ventures (Note 4) | 26,829 | 16,638 | ||||||
| Income before discontinued operations, and minority and preferred | ||||||||
| interests | $ | 14,787 | $ | 27,717 | ||||
| Discontinued operations (Note 2): | ||||||||
| Income from operations | 173 | 2,502 | ||||||
| Gain on disposition of interests in centers | 12,024 | |||||||
| Income before minority and preferred interests | $ | 14,960 | $ | 42,243 | ||||
| Minority interest in consolidated joint ventures | 143 | 612 | ||||||
| Minority interest in TRG: | ||||||||
| TRG income allocable to minority partners | (529 | ) | (14,041 | ) | ||||
| Distributions in excess of earnings allocable to minority partners | (25,827 | ) | (10,445 | ) | ||||
| TRG Series C and D preferred distributions (Note 1) | (6,750 | ) | (6,750 | ) | ||||
| Net income (loss) | $ | (18,003 | ) | $ | 11,619 | |||
| Series A preferred dividends | (12,450 | ) | (12,450 | ) | ||||
| Net income (loss) allocable to common shareowners | $ | (30,453 | ) | $ | (831 | ) | ||
| Net income (loss) | $ | (18,003 | ) | $ | 11,619 | |||
| Other comprehensive income (loss): | ||||||||
| Change in fair value of available-for-sale securities | (297 | ) | 264 | |||||
| Unrealized gain (loss) on interest rate instruments | 1,556 | (12,642 | ) | |||||
| Reclassification adjustment for amounts recognized in net income | 492 | 622 | ||||||
| Comprehensive income (loss) | $ | (16,252 | ) | $ | (137 | ) | ||
| Basic income (loss) per common share (Note 9): | ||||||||
| Income (loss) from continuing operations | $ | (0.60 | ) | $ | (0.14 | ) | ||
| Net income (loss) | $ | (0.60 | ) | $ | (0.02 | ) | ||
| Diluted income (loss) per common share (Note 9): | ||||||||
| Income (loss) from continuing operations | $ | (0.60 | ) | $ | (0.14 | ) | ||
| Net income (loss) | $ | (0.60 | ) | $ | (0.03 | ) | ||
| Cash dividends declared per common share | $ | 0.78 | $ | 0.765 | ||||
| Weighted average number of common shares outstanding | 50,562,963 | 51,052,528 | ||||||
See notes to consolidated financial statements.
4
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT
OF CASH FLOWS
(in thousands)
| Nine Months Ended September 30 | ||||||||
| 2003 | 2002 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Income before minority and preferred interests | $ | 14,960 | $ | 42,243 | ||||
| Adjustments to reconcile income before | ||||||||
| minority and preferred interests to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization of continuing operations | 65,596 | 57,459 | ||||||
| Depreciation and amortization of discontinued operations | 3,227 | 4,083 | ||||||
| Charge related to technology investments | 8,125 | |||||||
| Provision for losses on accounts receivable | 3,633 | 3,410 | ||||||
| Gains on sales of land | (1,361 | ) | (7,463 | ) | ||||
| Gain on disposition of interests in centers | (12,024 | ) | ||||||
| Other | 3,167 | 1,948 | ||||||
| Increase (decrease) in cash attributable to changes | ||||||||
| in assets and liabilities: | ||||||||
| Receivables, deferred charges and other assets | (4,231 | ) | (2,588 | ) | ||||
| Accounts payable and other liabilities | 2,548 | (14,592 | ) | |||||
| Net Cash Provided By Operating Activities | $ | 87,539 | $ | 80,601 | ||||
| Cash Flows from Investing Activities: | ||||||||
| Additions to properties | $ | (109,015 | ) | $ | (71,954 | ) | ||
| Proceeds from sales of land | 1,344 | 13,316 | ||||||
| Investment in technology business | (4,090 | ) | ||||||
| Dividend received from technology investment | 305 | 3,090 | ||||||
| Net proceeds from disposition of interests in centers | 76,446 | |||||||
| Acquisition of interests in Joint Ventures | (8,126 | ) | (45,203 | ) | ||||
| Distributions from Unconsolidated Joint Ventures in excess | ||||||||
| of income | 44,994 | 73,523 | ||||||
| Net Cash Provided By (Used In) Investing Activities | $ | (70,498 | ) | $ | 45,128 | |||
| Cash Flows from Financing Activities: | ||||||||
| Debt proceeds | $ | 397,412 | $ | 40,831 | ||||
| Debt payments | (333,009 | ) | (96,578 | ) | ||||
| Debt issuance costs | (3,285 | ) | (1,433 | ) | ||||
| Distributions to minority and preferred interests | (33,106 | ) | (31,236 | ) | ||||
| Issuance of stock pursuant to Continuing Offer (Note 8) | 1,645 | 6,646 | ||||||
| Issuance of partnership units (Note 10) | 49,985 | |||||||
| Repurchase of common stock (Note 10) | (52,762 | ) | ||||||
| Cash dividends to Series A preferred shareowners | (12,450 | ) | (12,450 | ) | ||||
| Cash dividends to common shareowners | (39,994 | ) | (38,983 | ) | ||||
| Net Cash Used In Financing Activities | $ | (25,564 | ) | $ | (133,203 | ) | ||
| Net Decrease in Cash and Cash Equivalents | $ | (8,523 | ) | $ | (7,474 | ) | ||
| Cash and Cash Equivalents at Beginning of Period | 32,470 | 27,447 | ||||||
| Cash and Cash Equivalents at End of Period | $ | 23,947 | $ | 19,973 | ||||
See notes to consolidated financial statements.
5