Back to GetFilings.com



Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2003
or
    [     ]   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: 001-16765

TRIZEC PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

     
Delaware   33-0387846
 
(State or other jurisdiction of
incorporation or organization)

233 South Wacker Drive		   (I.R.S. Employer Identification No.)
Chicago, IL   60606
 
(Address of principal executive offices)   (Zip Code)

312-798-6000

(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 and 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 check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes   [     ]     No  [ X ]   

As of August 8, 2003, 150,533,305 shares of common stock, par value $0.01 per share, were issued and outstanding.

 

TABLE OF CONTENTS

PART I — FINANCIAL STATEMENTS
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EX-31 RULE 13A-14(A)/15D-14(A) CERTIFICATION
EX-32 SECTION 1350 CERTIFICATIONS

Table of Contents

Table of Contents

     
    Page
   
PART I — FINANCIAL INFORMATION    
Item 1. Financial Statements   3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   26
Item 3. Quantitative and Qualitative Disclosures about Market Risk   45
Item 4. Controls and Procedures   45
PART II — OTHER INFORMATION    
Item 1. Legal Proceedings   47
Item 2. Changes in Securities and Use of Proceeds   47
Item 3. Defaults Upon Senior Securities   47
Item 4. Submission of Matters to a Vote of Security Holders   47
Item 5. Other Information   48
Item 6. Exhibits and Reports on Form 8-K   49

Forward-Looking Statements

This Form 10-Q, including the discussion in “Part I — Financial Information — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements relating to our business and financial outlook, which are based on our current expectations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any such statement to reflect new information, the occurrence of future events or circumstances or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Such factors include those set forth in more detail in the Risk Factors section in our Form 10-K for the year ended December 31, 2002 and in our Form 10-Q for the quarter ended March 31, 2003 filed with the U.S. Securities and Exchange Commission.

2

Table of Contents

Consolidated Balance Sheets (unaudited)

PART I — FINANCIAL STATEMENTS

Item 1. Financial Statements

                   
      June 30   December 31
$ thousands, except share and per share amounts   2003   2002
   
     
Assets
                
Real estate
   $ 5,231,612     $ 5,389,013  
 
Less: accumulated depreciation
     (622,192 )     (565,350 )
 
    
     
 
Real estate, net
     4,609,420       4,823,663  
Cash and cash equivalents
     30,174       62,253  
Escrows and restricted cash
     54,483       46,798  
Investment in unconsolidated real estate joint ventures
     241,110       220,583  
Investment in Sears Tower
     23,600       23,600  
Office tenant receivables, net
     18,262       26,536  
Other receivables, net
     27,294       20,499  
Deferred rent receivables, net
     140,930       131,395  
Deferred charges, net
     128,272       141,407  
Prepaid expenses and other assets
     81,352       82,525  
 
    
     
 
Total Assets
   $ 5,354,897     $ 5,579,259  
 
    
     
 
Liabilities and Shareholders’ Equity
                
Liabilities
                
Mortgage debt and other loans
   $ 3,150,502     $ 3,345,238  
Trade, construction and tenant improvements payables
     43,490       53,816  
Accrued interest expense
     16,158       12,931  
Accrued operating expenses and property taxes
     79,458       92,901  
Other accrued liabilities
     100,137       83,419  
Dividends payable
     30,702       —  
Taxes payable
     59,581       109,949  
 
    
     
 
Total Liabilities
     3,480,028       3,698,254  
 
    
     
 
Commitments and Contingencies
                
Minority Interest
     3,076       2,540  
 
    
     
 
Redeemable Stock
     200       200  
 
    
     
 
Shareholders’ Equity
                
Common Stock, 500,000,000 shares authorized at June 30, 2003 and December 31, 2002, $0.01 par value, 150,378,310 and 150,033,310 issued and 150,360,299 and 150,029,664 outstanding at June 30, 2003 and December 31, 2002, respectively
     1,503       1,500  
Additional paid in capital
     2,185,092       2,181,958  
Accumulated deficit
     (276,557 )     (285,482 )
Treasury stock, at cost, 18,011 and 3,646 shares at June 30, 2003 and December 31, 2002, respectively
     (237 )     (40 )
Unearned compensation
     (5,254 )     (3,593 )
Accumulated other comprehensive loss
     (32,954 )     (16,078 )
 
    
     
 
Total Shareholders’ Equity
     1,871,593       1,878,265  
 
    
     
 
Total Liabilities and Shareholders’ Equity
   $ 5,354,897     $ 5,579,259  
 
    
     
 

See accompanying notes to the financial statements.

3

Table of Contents

Consolidated Statements of Operations (unaudited)

                                   
      For the three months ended   For the six months ended        
$ thousands, except share and   June 30   June 30        
per share amounts  
 
       
    2003   2002   2003   2002        
 
 
 
 
       
Revenues
                                
 
Rentals
   $ 166,459     $ 171,309     $ 335,217     $ 338,747  
 
Recoveries from tenants
     27,887       27,864       58,547       56,208  
 
Parking and other
     23,239       24,508       47,235       50,991  
 
Fee income
     2,838       2,377       4,792       4,988  
 
Interest
     876       2,072       2,656       4,734  
 
 
    
     
     
     
 
Total Revenues
     221,299       228,130       448,447       455,668  
 
 
    
     
     
     
 
Expenses
                                
 
Operating
     79,240       73,545       155,171       145,988  
 
Property taxes
     24,951       24,136       50,577       48,969  
 
General and administrative
     8,554       12,169       18,621       18,684  
 
Interest
     44,931       47,777       91,795       91,625  
 
Depreciation and amortization
     45,616       38,609       91,377       76,928  
 
Stock option grant expense
     122       2,002       280       2,002  
 
Gain on early debt retirement
     (3,620 )     —       (3,363 )     —  
 
 
    
     
     
     
 
Total Expenses
     199,794       198,238       404,458       384,196  
 
 
    
     
     
     
 
Income before Income Taxes, Minority Interest, Income from Unconsolidated Real Estate Joint Ventures, Recovery on Insurance Claims, Discontinued Operations and Gain on Disposition of Real Estate
     21,505       29,892       43,989       71,472  
Provision for income and other corporate taxes
     (1,176 )     (1,522 )     (2,906 )     (2,766 )
Minority interest
     (777 )     (288 )     (536 )     (324 )
Income from unconsolidated real estate joint ventures
     3,689       3,277       13,615       6,665  
Recovery on insurance claims
     2,218       —       7,484       —  
 
 
    
     
     
     
 
Income from Continuing Operations
     25,459       31,359       61,646       75,047  
Discontinued Operations
                                
 
Income from discontinued operations
     663       1,802       3,485       3,696  
 
Loss on disposition of discontinued real estate
     (14,592 )     (197 )     (6,066 )     (197 )
 
 
    
     
     
     
 
Income Before Gain on Disposition of Real Estate
     11,530       32,964       59,065       78,546  
Gain on disposition of real estate
     —       4,013       11,351       4,013  
 
 
    
     
     
     
 
Net Income
     11,530       36,977       70,416       82,559  
 
 
    
     
     
     
 
Special voting and Class F convertible shareholders’ dividends
     630       304       1,413       304  
 
 
    
     
     
     
 
Net Income Available to Common Shareholders
   $ 10,900     $ 36,673     $ 69,003     $ 82,255  
 
 
    
     
     
     
 
                                     
                Pro forma           Pro forma
 
 
              
             
 
Earnings per common share
                                
 
Net Income Available to Common Shareholders per Weighted Average Common Share Outstanding:
                                
   
Basic
   $ 0.07     $ 0.25     $ 0.46     $ 0.55  
   
Diluted
   $ 0.07     $ 0.24     $ 0.46     $ 0.55  
Weighted average shares outstanding
                                
   
Basic
     149,785,046       149,372,623       149,785,046       149,345,705  
   
Diluted
     150,289,382       150,239,058       149,979,535       149,884,795  

See accompanying notes to the financial statements.

4

Table of Contents

Consolidated Statements of Comprehensive Income (unaudited)

                                       
          For the three months ended   For the six months ended
          June 30   June 30
         
 
$ thousands   2003   2002   2003   2002
 
 
 
 
Net income
   $ 11,530     $ 36,977     $ 70,416     $ 82,559  
 
 
        
     
     
     
 
Other comprehensive loss:
                                
 
Unrealized gains on investments in securities:
                                
     
Unrealized foreign currency exchange gains arising during the period
     100       5,365       163       5,365  
     
Unrealized holding losses arising during the period
     —       (8,455 )     —       (8,455 )
 
Unrealized foreign currency exchange gain on foreign operations
     1,357       1,380       2,075       1,380  
 
Unrealized derivative losses:
                                
     
Effective portion of interest rate contracts
     (8,370 )     (6,309 )     (15,677 )     (5,129 )
 
Settlement of forward rate contract
     (3,437 )     —       (3,437 )     —  
 
 
        
     
     
     
 
Total other comprehensive loss
     (10,350 )     (8,019 )     (16,876 )     (6,839 )
 
 
        
     
     
     
 
Net comprehensive income
   $ 1,180     $ 28,958     $ 53,540     $ 75,720  
 
 
        
     
     
     
 

See accompanying notes to the financial statements.

5

Table of Contents

Consolidated Statements of Cash Flows (unaudited)

                     
        For the six months ended
        June 30
       
$ thousands   2003   2002
 
 
Cash Flows from Operating Activities
                
Net income
   $ 70,416     $ 82,559  
Adjustments to reconcile net income to net cash provided by operating activities:
                
   
Income from unconsolidated real estate joint ventures
     (13,615 )     (6,665 )
   
Depreciation and amortization expense (including discontinued operations)
     92,782       81,559  
   
Amortization of financing costs
     4,548       3,051  
   
Gain on disposition of real estate (including discontinued operations)
     (5,840 )     (3,816 )
   
Early debt retirement
     (4,085 )     —  
   
Minority interest
     536       324  
   
Deferred compensation
     1,547       2,124  
   
Stock option grant expense
     280       2,002  
Changes in assets and liabilities:
                
   
Escrows and restricted cash
     (7,685 )     (24,588 )
   
Office tenant receivables
     8,274       4,235  
   
Other receivables
     (6,795 )     (2,331 )
   
Deferred rent receivables
     (13,322 )     (15,405 )
   
Prepaid expenses and other assets
     (6,563 )     (18,451 )
   
Accounts payable, accrued liabilities and other liabilities
     (53,492 )     (30,409 )
 
    
     
 
Net cash provided by operating activities
     66,986       74,189  
 
    
     
 
Cash Flows from Investing Activities
                
 
Real estate:
                
   
Tenant improvements and capital expenditures
     (48,824 )     (42,737 )
   
Tenant leasing costs
     (8,953 )     (13,549 )
   
Dispositions
     157,638       82,053  
   
Development expenditures
     (852 )     (45,830 )
   
Acquisitions
     —       (72,211 )
 
Unconsolidated real estate joint ventures:
                
   
Investments
     (20,277 )     (7,709 )
   
Distributions
     11,609