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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended June 30, 2002 Commission file number 0-18694

CATELLUS DEVELOPMENT
CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware 94-2953477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

201 Mission Street
San Francisco, California 94105
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:
(415) 974-4500

       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. Yesx   No o

       As of August 6, 2002, there were 87,150,243 issued and outstanding shares of the Registrant’s Common Stock.

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CATELLUS DEVELOPMENT CORPORATION

INDEX

      Page No.
       
PART I. FINANCIAL INFORMATION  
  Item 1. Financial Statements (Unaudited)  
    Condensed Consolidated Balance Sheet as of June 30, 2002 and December 31, 2001 1
    Condensed Consolidated Statement of Operations for the three months and six months ended June 30, 2002 and 2001 2
    Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2002 and 2001 3
    Notes to Condensed Consolidated Financial Statements 4
       
  Item 2. Management’s Discussion and Analysis of Financial  
    Condition and Results of Operations 16
       
       
  Item 3. Quantitative and Qualitative Disclosures about Market Risk 40
       
       
PART II. OTHER INFORMATION 41
       
SIGNATURES 43

Table of Contents

PART I

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CATELLUS DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)

  June 30,   December 31,
  2002   2001
 
 
  (Unaudited)  
Assets              
Properties $ 2,346,916     $ 2,276,508  
Less accumulated depreciation   (371,301 )     (354,557 )
 
   
 
    1,975,615       1,921,951  
Other assets and deferred charges, net   231,124       167,305  
Notes receivable, less allowance   58,390       73,335  
Accounts receivable, less allowance   15,044       22,663  
Assets held for sale   2,230       —  
Restricted cash and investments   26,160       7,566  
Cash and cash equivalents   214,306       222,695  
 
   
 
          Total $ 2,522,869     $ 2,415,515  
 
   
 
               
               
Liabilities and stockholders’ equity              
               
Mortgage and other debt $ 1,385,405     $ 1,310,457  
Accounts payable and accrued expenses   102,420       145,688  
Deferred credits and other liabilities   154,302       177,656  
Liabilities associated with assets held for sale   1,936       —  
Deferred income taxes   314,496       290,658  
 
   
 
          Total liabilities   1,958,559       1,924,459  
 
   
 
               
Commitments and contingencies (Note 8)              
               
Minority interests   54,312       55,799  
 
   
 
               
               
Stockholders’ equity              
     Common stock, 110,790 and 110,209 shares issued and 87,143 and 86,562
         shares outstanding at June 30, 2002 and December 31, 2001, respectively		   1,108       1,102  
     Paid-in capital   530,924       521,312  
     Treasury stock, at cost (23,647 shares at June 30, 2002 and December 31, 2001)   (401,082 )     (401,082 )
     Accumulated earnings   379,048       313,925  
 
   
 
          Total stockholders’ equity   509,998       435,257  
 
   
 
          Total $ 2,522,869     $ 2,415,515  
 
   
 

See notes to condensed consolidated financial statements

1

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CATELLUS DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)

  Three Months Ended   Six Months Ended
  June 30,   June 30,  
  2002   2001   2002   2001
 
 
 
 
Rental properties (Unaudited)   (Unaudited)
      Rental revenue $ 64,982     $ 56,600     $ 127,979     $ 111,754  
      Property operating costs   (17,249 )     (13,882 )     (32,976 )     (27,710 )
      Equity in earnings of operating joint ventures, net   2,324       2,669       5,845       5,833  
 
   
   
   
 
    50,057       45,387       100,848       89,877  
 
   
   
   
 
Property sales and fee services                              
      Sales revenue   43,998       67,966       98,692       125,862  
      Cost of sales   (28,167 )     (41,824 )     (67,252 )     (76,875 )
 
   
   
   
 
          Gain on property sales   15,831       26,142       31,440       48,987  
      Equity in earnings of development joint ventures, net   8,177       332       15,624       8,127  
 
   
   
   
 
          Total gain on property sales   24,008       26,474       47,064       57,114  
      Management and development fees   1,764       1,374       2,896       2,554  
      Selling, general and administrative expenses   (6,130 )     (6,932 )     (13,980 )     (15,580 )
      Other, net   2,142       1,358       12,096       6,082  
 
   
   
   
 
    21,784       22,274       48,076       50,170  
 
   
   
   
 
Interest expense   (13,945 )     (14,656 )     (26,535 )     (28,939 )
Depreciation and amortization   (15,002 )     (12,833 )     (28,469 )     (25,656 )
Corporate administrative costs   (4,362 )     (5,062 )     (8,464 )     (10,607 )
Gain on non-strategic asset sales   7,059       1,389       6,821       3,136  
Other, net   (297 )     2,479       (230 )     6,706  
 
   
   
   
 
      Income before minority interests, income taxes,
       and discontinued operations		   45,294       38,978       92,047       84,687  
Minority interests   (1,526 )     (1,841 )     (3,053 )     (3,712 )
 
   
   
   
 
      Income before income taxes and discontinued operations   43,768       37,137       88,994       80,975  
 
   
   
   
 
Income tax expense                              
      Current   (11,531 )     (1,450 )     (19,127 )     (6,873 )
      Deferred   (6,068 )     (13,416 )     (16,663 )     (25,529 )
 
   
   
   
 
    (17,599 )     (14,866 )     (35,790 )     (32,402 )
 
   
   
   
 
      Income from continuing operations   26,169       22,271       53,204       48,573  
 
   
   
   
 
Discontinued operations, net of income tax:                              
      Gain from disposal of discontinued operations   7,550       —       12,055       —  
      Loss from discontinued operations   (80 )     (100 )     (136 )     (194 )
 
   
   
   
 
          Gain (loss) from discontinued operations   7,470       (100 )     11,919       (194 )
 
   
   
   
 
      Net income $ 33,639     $ 22,171     $ 65,123     $ 48,379  
 
   
   
   
 
                               
      Income per share from continuing operations                              
          Basic $ 0.30     $ 0.22     $ 0.61     $ 0.47  
 
   
   
   
 
          Assuming dilution $ 0.29     $ 0.21     $ 0.59     $ 0.46  
 
   
   
   
 
      Income per share from discontinued operations                              
          Basic $ 0.09     $ —     $ 0.14     $ —  
 
   
   
   
 
          Assuming dilution $ 0.08     $ —     $ 0.14     $ —  
 
   
   
   
 
      Net income per share                              
          Basic $ 0.39     $ 0.22     $ 0.75     $ 0.47  
 
   
   
   
 
          Assuming dilution $ 0.37     $ 0.21     $ 0.73     $ 0.46  
 
   
   
   
 
Average number of common shares outstanding – basic   86,976       100,469       86,815       102,649  
 
   
   
   
 
Average number of common shares outstanding – diluted   89,864       103,324       89,508       105,522  
 
   
   
   
 

See notes to condensed consolidated financial statements

2

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CATELLUS DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)

  Six Months Ended
  June 30,
  2002   2001
 
 
  (Unaudited)
               
               
Cash flows from operating activities:              
     Net income $ 65,123     $ 48,379  
     Adjustments to reconcile net income to net cash provided by operating activities:              
        Depreciation and amortization   28,469       25,656  
        Deferred income taxes   16,663       25,529  
        Deferred gain recognized   (14,255 )     (4,744 )
        Amortization of deferred loan fees and other costs   3,398       2,344  
        Equity in earnings of joint ventures   (21,469 )     (13,960 )
        Operating distributions from joint ventures   62,098       20,265  
        Gain on sale of investment property   (20,165 )     (12,666 )
        Cost of development property sold   59,621       56,924  
        Capital expenditures for development property   (26,071 )     (24,032 )
        Other, net   10,107       (477 )
     Change in deferred credits and other liabilities   8,660       101,218  
     Change in other operating assets and liabilities   (13,501 )     24,535  
 
   
 
Net cash provided by operating activities   158,678       248,971  
 
   
 
Cash flows from investing activities: