CBL & Associates Properties, Inc. - 10-Q Summary
Business Context and Reporting Period
CBL & Associates Properties, Inc. is a self-managed, self-administered Real Estate Investment Trust (REIT) engaged in the development, acquisition, and operation of regional shopping malls and community centers, primarily in the Southeast, Northeast, and Midwest United States. This report covers the quarterly period ended June 30, 2003.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2003 | Six Months Ended June 30, 2002 |
|---|---|---|
| Total Revenues | $330.99 million | $291.88 million |
| Net Income | $51.18 million | $39.92 million |
| Net Income Available to Common Shareholders | $43.80 million | $36.30 million |
| Diluted EPS (Common) | $1.42 | $1.27 |
| Funds From Operations (FFO) | $134.70 million | $114.86 million |
| Net Cash Provided by Operating Activities | $124.99 million | $122.70 million |
| Total Debt (Mortgage & Other Notes Payable) | $2.54 billion | $2.40 billion (Dec 31, 2002) |
| Cash and Cash Equivalents | $25.75 million | $13.36 million (Dec 31, 2002) |
| Portfolio Occupancy | 92.4% | 91.1% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 13.4% ($39.1 million) year-over-year, driven primarily by the acquisition and opening of nine properties since May 2002 and the consolidation of three previously unconsolidated properties (East Towne, West Towne, and West Towne Crossing).
- Profitability: Net income available to common shareholders rose 20.7% to $43.8 million. This was supported by a 12.3% increase in operating income and a significant reduction in losses on debt extinguishment ($0.17 million in 2003 vs. $3.19 million in 2002).
- Expense Increases: Property operating expenses increased 15.1% and depreciation/amortization rose 17.1%, largely attributable to the expanded portfolio and ongoing capital expenditures for renovations.
- Debt Structure: Total debt increased to $2.54 billion. The company entered into a new $255 million secured credit facility in February 2003, replacing prior facilities.
Guidance, Outlook, and Risks
- Acquisitions: On July 25, 2003, the company announced agreements to acquire four regional malls for $340 million (including $170 million debt assumption), expected to close in Q3 and Q4 2003.
- Capital Markets: On August 6, 2003, the company agreed to issue 4.2 million depositary shares of 7.75% Series C Preferred Stock to partially fund the mall acquisitions and general corporate purposes.
- Developments: Several projects are under construction, including Coastal Grand (Myrtle Beach, SC) and Waterford Commons (Waterford, CT), with openings projected between late 2003 and 2004.
- Risks: Management highlights risks related to general economic conditions, interest rate fluctuations, tenant bankruptcies, and the availability of financing. The company maintains a conservative debt-to-total-market capitalization ratio of 50.3%.
- Discontinued Operations: The company sold Capital Crossing in February 2003, recognizing a $2.9 million gain. Results of a community center sold in August 2003 will be reported as discontinued operations starting in Q3.
Investor Verification Checklist
- Debt Maturities: Verify the weighted average remaining term of debt (5.3 years) and the specific maturity schedule of the $255 million credit facility (expires Feb 2006).
- Acquisition Financing: Confirm the closing dates and financing terms for the four new malls announced in July 2003.
- Preferred Stock Offering: Monitor the closing of the Series C Preferred Stock offering scheduled for August 22, 2003, and its impact on dividend obligations.
- Occupancy Trends: Review occupancy rates for "Non-Stabilized Malls" (77.8%), which are significantly lower than the stabilized portfolio (92.2%), and assess lease-up progress.
- Environmental Liabilities: While management states no material exposure exists, verify ongoing environmental studies for the expanding portfolio.