UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from...................................to................................................
Commission file number:
1-13274
Mack-Cali Realty Corporation
(Exact name of registrant as specified in its charter)
| Maryland (State or other jurisdiction of incorporation or organization) |
22-3305147 (I.R.S. Employer Identification Number) |
| 11 Commerce Drive,
Cranford, New Jersey (Address of principal executive office) |
07016-3501 (Zip Code) |
(908) 272-8000
(Registrant’s
telephone number, including area code)
Not Applicable
(Former
name, former address and former fiscal year, if changed since last report)
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 twelve (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 ninety (90) days. YES X NO
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES X NO
As of July 30, 2004, there were 60,625,328 shares of Common Stock, par value $0.01 per share, outstanding.
| Part I | Financial Information | Page |
| Item 1. | Financial Statements: | |
| Consolidated Balance Sheets as of June 30, 2004 | ||
| and December 31, 2003 | 4 | |
| Consolidated Statements of Operations for the three and six month | ||
| periods ended June 30, 2004 and 2003 | 5 | |
| Consolidated Statement of Changes in Stockholders' Equity | ||
| for the three months ended June 30, 2004 | 6 | |
| Consolidated Statement of Cash Flows for six months | ||
| ended June 30, 2004 and 2003 | 7 | |
| Notes to Consolidated Financial Statements | 8-36 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition | |
| and Results of Operations | 37-53 | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 54 |
| Item 4. | Controls and Procedures | 54 |
| Part II | Other Information | |
| Item 1. | Legal Proceedings | 55 |
| Item 2. | Changes in Securities, Use of Proceeds and | |
| Issuer Purchases of Equity Securities | 56 | |
| Item 3. | Defaults Upon Senior Securities | 56 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 56 |
| Item 5. | Other Information | 56 |
| Item 6. | Exhibits and Reports on Form 8-K | 57 |
| Signatures | 58 |
2
The accompanying unaudited consolidated balance sheets, statements of operations, of changes in stockholders’ equity, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.
The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
The results of operations for the three and six month periods ended June 30, 2004 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.
3
MACK-CALI REALTY
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| ASSETS |
June 30, 2004 (unaudited) |
December 31, 2003 | ||||||
|---|---|---|---|---|---|---|---|---|
| Rental property | ||||||||
| Land and leasehold interests | $ | 588,228 | $ | 552,287 | ||||
| Buildings and improvements | 3,252,593 | 3,176,236 | ||||||
| Tenant improvements | 239,625 | 218,493 | ||||||
| Furniture, fixtures and equipment | 7,584 | 7,616 | ||||||
| 4,088,030 | 3,954,632 | |||||||
| Less - accumulated depreciation and amortization | (594,402 | ) | (546,007 | ) | ||||
| 3,493,628 | 3,408,625 | |||||||
| Rental property held for sale, net | 32,929 | -- | ||||||
| Net investment in rental property | 3,526,557 | 3,408,625 | ||||||
| Cash and cash equivalents | 7,933 | 78,375 | ||||||
| Investments in unconsolidated joint ventures | 53,242 | 48,624 | ||||||
| Unbilled rents receivable, net | 80,582 | 74,608 | ||||||
| Deferred charges and other assets, net | 141,538 | 126,791 | ||||||
| Restricted cash | 7,840 | 8,089 | ||||||
| Accounts receivable, net of allowance for doubtful accounts | ||||||||
| of $1,820 and $1,392 | 3,159 | 4,458 | ||||||
| Total assets | $ | 3,820,851 | $ | 3,749,570 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Senior unsecured notes | $ | 1,030,702 | $ | 1,127,859 | ||||
| Revolving credit facilities | 98,975 | -- | ||||||
| Mortgages, loans payable and other obligations | 564,823 | 500,725 | ||||||
| Dividends and distributions payable | 47,501 | 46,873 | ||||||
| Accounts payable, accrued expenses and other liabilities | 43,269 | 41,423 | ||||||
| Rents received in advance and security deposits | 41,051 | 40,099 | ||||||
| Accrued interest payable | 22,581 | 23,004 | ||||||
| Total liabilities | 1,848,902 | 1,779,983 | ||||||
| Minority interest in Operating Partnership | 423,566 | 428,099 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value, 5,000,000 shares authorized, 10,000 | ||||||||
| and 10,000 shares outstanding, at liquidation preference | 25,000 | 25,000 | ||||||
| Common stock, $0.01 par value, 190,000,000 shares authorized, | ||||||||
| 60,606,543 and 59,420,484 shares outstanding | 606 | 594 | ||||||
| Additional paid-in capital | 1,636,538 | 1,597,785 | ||||||
| Dividends in excess of net earnings | (108,965 | ) | (74,721 | ) | ||||
| Unamortized stock compensation | (4,796 | ) | (7,170 | ) | ||||
| Total stockholders' equity | 1,548,383 | 1,541,488 | ||||||
| Total liabilities and stockholders' equity | $ | 3,820,851 | $ | 3,749,570 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
MACK-CALI REALTY
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share amounts) (unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| REVENUES |
2004 |
2003 |
2004 |
2003 | ||||||||||||||||
| Base rents | $ | 128,197 | $ | 125,201 | $ | 253,152 | $ | 248,395 | ||||||||||||
| Escalations and recoveries from tenants | 16,036 | 13,915 | 31,571 | 29,382 | ||||||||||||||||
| Parking and other | 2,492 | 3,247 | 5,965 | 9,070 | ||||||||||||||||
| Total revenues | 146,725 | 142,363 | 290,688 | 286,847 | ||||||||||||||||
| EXPENSES | ||||||||||||||||||||
| Real estate taxes | 16,839 | 15,652 | 33,433 | 31,094 | ||||||||||||||||
| Utilities | 9,775 | 9,133 | 20,954 | 19,618 | ||||||||||||||||
| Operating services | 19,504 | 17,102 | 37,131 | 36,573 | ||||||||||||||||
| General and administrative | 8,689 | 6,874 | 15,096 | 13,605 | ||||||||||||||||
| Depreciation and amortization | 32,651 | 28,691 | 63,337 | 57,295 | ||||||||||||||||
| Interest expense | 26,671 | 28,722 | 55,867 | 58,233 | ||||||||||||||||
| Interest income | (220 | ) | (265 | ) | (940 | ) | (591 | ) | ||||||||||||
| Loss on early retirement of debt, net | -- | 970 | -- | 2,372 | ||||||||||||||||
| Total expenses | 113,909 | 106,879 | 224,878 | 218,199 | ||||||||||||||||
| Income from continuing operations before | ||||||||||||||||||||
| minority interest and equity in earnings | ||||||||||||||||||||
| of unconsolidated joint ventures | 32,816 | 35,484 | 65,810 | 68,648 | ||||||||||||||||
| Minority interest in Operating Partnership | (7,154 | ) | (7,606 | ) | (14,359 | ) | (15,043 | ) | ||||||||||||
| Equity in earnings of unconsolidated | ||||||||||||||||||||
| joint ventures (net of minority interest), net | 965 | 6,005 | 1,122 | 8,099 | ||||||||||||||||
| Gain on sale of investment in unconsolidated | ||||||||||||||||||||
| joint ventures (net of minority interest) | -- | -- | 637 | -- | ||||||||||||||||
| Income from continuing operations | 26,627 | 33,883 | 53,210 | 61,704 | ||||||||||||||||
| Discontinued operations (net of minority interest): | ||||||||||||||||||||
| Income from discontinued operations | 127 | 377 | 367 | 1,372 | ||||||||||||||||
| Realized gains (unrealized losses) | ||||||||||||||||||||
| on disposition of rental property, net | (10,501 | ) | -- | (10,501 | ) | 1,165 | ||||||||||||||
| Total discontinued operations, net | (10,374 | ) | 377 | (10,134 | ) | 2,537 | ||||||||||||||
| Net income | 16,253 | 34,260 | 43,076 | 64,241 | ||||||||||||||||
| Preferred stock dividends | (500 | ) | (672 | ) | (1,000 | ) | (672 | ) | ||||||||||||
| Net income available to common shareholders | $ | 15,753 | $ | 33,588 | $ | 42,076 | $ | 63,569 | ||||||||||||
| Basic earnings per common share: | ||||||||||||||||||||
| Income from continuing operations | $ | 0.43 | $ | 0.58 | $ | 0.87 | $ | 1.06 | ||||||||||||
| Discontinued operations | (0.17 | ) | -- | (0.17 | ) | 0.05 | ||||||||||||||
| Net income available to common shareholders | $ | 0.26 | $ | 0.58 | $ | 0.70 | $ | 1.11 | ||||||||||||
| Diluted earnings per common share: | ||||||||||||||||||||
| Income from continuing operations | $ | 0.43 | $ | 0.58 | $ | 0.86 | $ | 1.06 | ||||||||||||
| Discontinued operations | (0.17 | ) | -- | (0.17 | ) | 0.04 | ||||||||||||||
| Net income available to common shareholders | $ | 0.26 | $ | 0.58 | $ | 0.69 | $ | 1.10 | ||||||||||||
| Dividends declared per common share | $ | 0.63 | $ | 0.63 | $ | 1.26 | $ | 1.26 | ||||||||||||
| Basic weighted average shares outstanding | 60,388 | 57,529 | 60,094 | 57,379 | ||||||||||||||||
| Diluted weighted average shares outstanding | 68,645 | 65,761 | 68,466 | 65,454 | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
MACK-CALI REALTY CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six
Months Ended June 30, 2004 (in thousands) (unaudited)
| Shares |
Preferred Amount |
Shares |
Common Par Value |
Additional Paid-In Capital |
Dividends Excess of Net Earnings |
Unamortized Stock Compensation |
Total Stockholders’ Equity | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 1, 2004 | 10 | $ | 25,000 | 59,420 | $ | 594 | $ | 1,597,785 | $ | (74,721 | ) | $ | (7,170 | ) | $ | 1,541,488 | ||||||||||
| Net income | -- | -- | -- | -- | -- | 43,076 | -- | 43,076 | ||||||||||||||||||
| Preferred stock dividends | -- | -- | -- | -- | -- | (1,000 | ) | -- | (1,000 | ) | ||||||||||||||||
| Common stock dividends | -- | -- | -- | -- | -- | (76,320 | ) | -- | (76,320 | ) | ||||||||||||||||
| Redemption of common units | ||||||||||||||||||||||||||
| for shares of common stock | -- | -- | 6 | -- | 180 | -- | -- | 180 | ||||||||||||||||||
| Shares issued under Dividend | ||||||||||||||||||||||||||
| Reinvestment and Stock | ||||||||||||||||||||||||||
| Purchase Plan | -- | -- | 8 | -- | 273 | -- | -- | 273 | ||||||||||||||||||
| Proceeds from stock options | ||||||||||||||||||||||||||
| exercised | -- | -- | 1,041 | 10 | 33,277 | -- | -- | 33,287 | ||||||||||||||||||
| Proceeds from stock warrants | ||||||||||||||||||||||||||
| exercised | -- | -- | 149 | 2 | 4,923 | -- | -- | 4,925 | ||||||||||||||||||
| Stock options expense | -- | -- | -- | -- | 334 | -- | -- | 334 | ||||||||||||||||||
| Deferred compensation plan | ||||||||||||||||||||||||||
| for directors | -- | -- | -- | -- | 130 | -- | -- | 130 | ||||||||||||||||||
| Issuance of Restricted Stock | ||||||||||||||||||||||||||