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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 March 31, 2004

 

Commission file number 1-31908

 

 

CATELLUS DEVELOPMENT CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

Delaware   94-2953477

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

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.    Yes  x    No  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    x  Yes    ¨  No

 

As of April 30, 2004, there were 102,990,879 issued and outstanding shares of the Registrant’s Common Stock.

 

Table of Contents

CATELLUS DEVELOPMENT CORPORATION

 

INDEX

 

     Page No

PART I. FINANCIAL INFORMATION

    

Item 1.

   Financial Statements (Unaudited)     
    Condensed Consolidated Balance Sheet as of March 31, 2004 and December 31, 2003    2
    Condensed Consolidated Statement of Operations for the three months ended March 31, 2004 and 2003    3
    Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2004 and 2003    4
    Notes to Condensed Consolidated Financial Statements    5

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    16

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk    38

Item 4.

   Controls and Procedures    38

PART II. OTHER INFORMATION

   39

Item 1.

   Legal Proceedings    39

Item 2.

   Changes in securities and use of proceeds    40

Item 3.

   Defaults upon senior securities    40

Item 4.

   Submission of matters to a vote of Security Holders    40

Item 5.

   Other information    40

Item 6.

   Exhibits and reports on Form 8-K    40

SIGNATURES

   41

 

1

Table of Contents

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

CATELLUS DEVELOPMENT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

    

March 31,

2004

    

December 31,

2003

  
     (Unaudited)  

Assets

         

Properties

    $ 2,495,731     $ 2,498,015  

Less accumulated depreciation

      (457,741 )     (446,872 )
    
 
       2,037,990       2,051,143  

Other assets and deferred charges, net

      309,632       292,312  

Notes receivable, less allowance

      103,659       119,202  

Accounts receivable, less allowance

      18,428       19,752  

Assets held for sale

      19,739       2,352  

Restricted cash and investments

      29,290       64,617  

Cash and cash equivalents

      44,623       45,931  
    
 

Total

    $ 2,563,361     $ 2,595,309  
    
 

Liabilities and stockholders’ equity

                 

Mortgage and other debt

    $ 1,332,731     $ 1,378,054  

Accounts payable and accrued expenses

      137,505       157,036  

Deferred credits and other liabilities

      299,694       291,530  

Liabilities associated with assets held for sale

      19,641       2,296  

Deferred income taxes

      52,613       56,712  
    
 

Total liabilities

      1,842,184       1,885,628  
    
 

Commitments and contingencies (Note 8)

                 

Stockholders’ equity

                 

Common stock, 104,285 and 103,822 shares issued, and 102,991 and 102,724 shares outstanding at March 31, 2004 and December 31, 2003, respectively

      1,044       1,039  

Paid-in capital

      498,449       489,143  

Unearned value of restricted stock and restricted stock unit grants (1,294 and 1,098 shares at March 31, 2004 and December 31, 2003, respectively)

      (24,816 )     (22,720 )

Accumulated earnings

      246,500       242,219  
    
 

Total stockholders’ equity

      721,177       709,681  
    
 

Total

    $ 2,563,361     $ 2,595,309  
    
 

 

See notes to condensed consolidated financial statements.

 

2

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CATELLUS DEVELOPMENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

     Three Months Ended
March 31,
  
     2004
     2003
  
     (Unaudited)  

Revenues

         

Rental revenue

    $ 76,143     $ 72,891  

Sales revenue

      37,691       8,010  

Management, development and other fees

      1,699       2,084  
    
 
       115,533       82,985  
    
 

Costs and expenses

                 

Property operating costs

      (21,207 )     (19,150 )

Cost of sales

      (23,090 )     (2,972 )

Selling, general and administrative expenses

      (12,951 )     (9,891 )

Depreciation and amortization

      (17,814 )     (16,287 )
    
 
       (75,062 )     (48,300 )
    
 

Operating income

      40,471       34,685  
    
 

Other income

                 

Equity in earnings of operating joint ventures, net

      2,414       2,523  

Equity in earnings of development joint ventures, net

      1,227       3,854  

Gain on non-strategic asset sales

      61       5,879  

Interest income

      2,777       1,917  

Other

      301       1,157  
    
 
       6,780       15,330  
    
 

Other expenses

                 

Interest expense

      (15,533 )     (16,540 )

REIT transition costs

      (212 )     (1,558 )

Other

      (430 )     —    
    
 
       (16,175 )     (18,098 )
    
 

Income before income taxes and discontinued operations

      31,076       31,917  

Income tax expense

      (931 )     (11,571 )
    
 

Income from continuing operations

      30,145       20,346  
    
 

Discontinued operations, net of income tax:

                 

Gain from disposal of discontinued operations

      1,616       2,639  

Income from discontinued operations

      330       426  
    
 

Net gain from discontinued operations

      1,946       3,065  
    
 

Net income

    $ 32,091     $ 23,411  
    
 

Income per share from continuing operations

                 

Basic

    $ 0.29     $ 0.21  
    
 

Assuming dilution

    $ 0.29     $ 0.20  
    
 

Income per share from discontinued operations

                 

Basic

    $ 0.02     $ 0.03  
    
 

Assuming dilution

    $ 0.02     $ 0.03  
    
 

Net income per share

                 

Basic

    $ 0.31     $ 0.24  
    
 

Assuming dilution

    $ 0.31     $ 0.23  
    
 

Average number of common shares outstanding—basic

      102,844       97,910  
    
 

Average number of common shares outstanding—diluted

      104,031       100,599  
    
 

Dividends declared per share

    $ 0.27     $ —    
    
 

 

See notes to condensed consolidated financial statements.

 

3

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CATELLUS DEVELOPMENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Three Months Ended
March 31,
  
     2004
     2003
  
     (Unaudited)  

Cash flows from operating activities:

         

Net income

    $ 32,091     $ 23,411  

Adjustments to reconcile net income to net cash provided by operating activities:

                 

Depreciation and amortization

      17,814       16,287  

Deferred income taxes (benefit)

      (4,099 )     (2,972 )

Deferred gain recognized

      (7,990 )     (544 )

Amortization of deferred loan fees and other costs

      1,372       1,119  

Equity in earnings of joint ventures

      (3,641 )     (6,377 )

Gain on sales of investment property

      (1,616 )     (4,398 )

Operating distributions from joint ventures

      4,399       7,338  

Cost of development property and non-strategic assets sold

      43,216       2,538  

Capital expenditures for development property

      (19,299 )     (14,541 )

Other, net

      2,061       (1,909 )

Change in deferred credits and other liabilities

      19,263       6,520  

Change in other operating assets and liabilities

      (17,452 )     4,679  
    
 

Net cash provided by operating activities

      66,119       31,151  
    
 

Cash flows from investing activities:

                 

Property acquisitions

      (1,214 )     (74,401 )

Capital expenditures for investment property

      (55,935 )     (35,125 )

Tenant improvements

      (1,784 )     (2,600 )

Reimbursable construction costs

      (3,579 )     (6,845 )

Net proceeds from sale of investment property

      3,454       24,202  

Distributions from joint ventures

      —         8,601  

Contributions to joint ventures

      (259 )     (4,523 )

(Increase) decrease in restricted cash and investments

      35,327       (5,208 )
    
 

Net cash used in investing activities

      (23,990 )     (95,899 )
    
 

Cash flows from financing activities:

                 

Borrowings

      91,351       14,221  

Repayment of borrowings

      (110,427 )     (20,326 )

Dividends

      (27,729 )     —    

Distributions to minority partners

      —         (4,540 )

Proceeds from issuance of common stock

      3,368       1,965  
    
 

Net cash used in financing activities

      (43,437 )     (8,680 )
    
 

Net decrease in cash and cash equivalents

      (1,308 )     (73,428 )

Cash and cash equivalents at beginning of period

      45,931       274,927  
    
 

Cash and cash equivalents at end of period

    $ 44,623     $ 201,499  
    
 

Supplemental disclosures of cash flow information: