Securities Exchange Act of 1934 -- Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
---------- ------------
Commission File No. 1-12494
CBL & ASSOCIATES PROPERTIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-1545718
- ------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indetification Number)
2030 Hamilton Place Blvd., Suite #500
Chattanooga, Tennessee 37421-6000
- ------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 855-0001
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
- ---------------------------------------------- -----------------------
Common Stock, $.01 par value per share New York Stock Exchange
9.0% Series A Cumulative Redeemable Preferred New York Stock Exchange
Stock, par value $.01 per share
8.75% Series B Cumulative Redeemable Preferred New York Stock Exchange
Stock, par value $.01 per share
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
--- ----
The number of shares outstanding of each of the registrant's classes of common
stock, as of November 11, 2002: Common Stock, par value $.01 per share,
29,760,238 shares.
1
CBL & Associates Properties, Inc.
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL INFORMATION 3
CONSOLIDATED BALANCE SHEETS - AS OF 4
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
CONSOLIDATED STATEMENTS OF OPERATIONS - 5
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
AND 2001 AND THE NINE MONTHS ENDED SEPTEMBER 30,
2002 AND 2001
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 6
THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF 14
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE 28
ABOUT MARKET RISK
ITEM 4: CONTROLS AND PROCEDURES 29
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 30
ITEM 2: CHANGES IN SECURITIES 30
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 30
ITEM 4: SUBMISSION OF MATTERS TO HAVE A VOTE 30
OF SECURITY HOLDERS
ITEM 5: OTHER INFORMATION 30
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 30
SIGNATURE AND CERTIFICATIONS 31
2
CBL & Associates Properties, Inc.
ITEM 1: FINANCIAL INFORMATION
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and in conjunction with the
rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the disclosures required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the financial statements
for these interim periods have been included. The results for the interim
periods ended September 30, 2002 are not necessarily indicative of the results
to be obtained for the full fiscal year.
These financial statements should be read in conjunction with the CBL &
Associates Properties, Inc. (the "Company") December 31, 2001 audited financial
statements and notes thereto included in the CBL & Associates Properties, Inc.
Form 10-K for the year ended December 31, 2001.
3
CBL & Associates Properties, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
September 30, December 31,
2002 2001
--------------- ---------------
ASSETS
Real estate assets:
Land.............................................................. $ 547,598 $ 520,334
Buildings and improvements........................................ 3,070,141 2,961,185
--------------- ---------------
3,617,739 3,481,519
Less accumulated depreciation................................... (407,173) (346,940)
--------------- ---------------
3,210,566 3,134,579
Developments in progress.......................................... 110,008 67,043
--------------- ---------------
Net investment in real estate assets............................ 3,320,574 3,201,622
Cash and cash equivalents........................................... 18,745 10,137
Receivables:
Tenant, net of allowance for doubtful accounts of $2,850 in
2002 and $2,865 in 2001........................................ 36,467 38,353
Other............................................................. 4,388 2,833
Mortgage notes receivable........................................... 14,645 10,634
Investment in unconsolidated affiliates............................. 110,821 77,673
Other assets........................................................ 42,015 31,599
--------------- ---------------
$ 3,547,655 $ 3,372,851
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable.................................... $ 2,210,391 $ 2,315,955
Accounts payable and accrued liabilities............................ 105,065 103,707
--------------- ---------------
Total liabilities................................................. 2,315,456 2,419,662
--------------- ---------------
Minority interest................................................... 487,715 431,101
--------------- ---------------
Commitments and contingencies (Note 10).............................
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized:
9.0% Series A Cumulative Redeemable Preferred Stock,
2,675,000 and 2,875,000 shares outstanding in 2002 and
2001, respectively ........................................ 27 29
8.75% Series B Cumulative Redeemable Preferred Stock,
2,000,000 shares outstanding in 2002 and none in 2001 ..... 20 --
Common stock, $.01 par value, 95,000,000 shares authorized,
29,729,009 and 25,616,917 shares issued and outstanding
in 2002 and 2001, respectively.................................. 297 256
Additional paid - in capital...................................... 754,171 556,383
Accumulated other comprehensive loss.............................. (3,377) (6,784)
Accumulated deficit............................................... (6,654) (27,796)
--------------- ---------------
Total shareholders' equity...................................... 744,484 522,088
--------------- ---------------
$ 3,547,655 $ 3,372,851
=============== ===============
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
4
CBL & Associates Properties, Inc.
Consolidated Statements Of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2002 2001 2002 2001
---------- ----------- ----------- -----------
REVENUES:
Rentals:
Minimum rents..................................... $ 95,509 $ 89,523 $ 281,903 $ 254,474
Percentage rents.................................. 2,093 1,581 10,608 6,644
Other rents....................................... 1,277 1,344 5,032 4,281
Tenant reimbursements................................ 43,284 42,477 125,811 119,424
Management, development and leasing fees............. 1,754 1,498 5,508 3,807
Interest and other................................... 1,696 1,270 4,890 3,472
---------- ----------- ----------- -----------
Total revenues..................................... 145,613 137,693 433,752 392,102
---------- ----------- ----------- -----------
EXPENSES:
Property operating................................... 24,716 25,032 74,305 67,035
Depreciation and amortization........................ 24,182 21,668 70,478 62,220
Real estate taxes.................................... 11,981 11,166 34,871 31,334
Maintenance and repairs.............................. 9,294 8,087 26,816 23,233
General and administrative........................... 5,499 4,522 16,706 14,151
Interest............................................. 36,620 40,694 107,458 118,751
Other................................................ 1 1 58 5
---------- ----------- ----------- -----------
Total expenses..................................... 112,293 111,170 330,692 316,729
---------- ----------- ----------- -----------
Income from operations............................... 33,320 26,523 103,060 75,373
Gain on sales of real estate assets.................. 497 1,145 2,702 5,757
Equity in earnings of unconsolidated affiliates...... 2,353 1,770 6,455 4,743
Minority interest in earnings:
Operating partnership.............................. (14,599) (7,932) (47,131) (31,660)
Shopping center properties......................... (389) (354) (2,515) (1,347)
---------- ----------- ----------- -----------
Income before discontinued operations
and extraordinary item........................ 21,182 21,152 62,571 52,866
Operating income of discontinued operations.......... 20 327 352 855
Gain on disposal of discontinued operations.......... 165 -- 1,571 --
Extraordinary loss on extinguishment of debt......... (210) (11,621) (3,415) (13,323)
---------- ----------- ----------- -----------
Net income........................................... 21,157 9,858 61,079 40,398
Preferred dividends.................................. (3,692) (1,617) (7,319) (4,851)
---------- ----------- ----------- -----------
Net income available to common shareholders.......... $ 17,465 $ 8,241 $ 53,760 $ 35,547
========== =========== =========== ===========
Basic per share data:
Income before discontinued operations and
extraordinary item, net of preferred dividends $ 0.59 $ 0.77 $ 1.95 $ 1.90
Discontinued operations and
extraordinary item............................ (0.00) (0.45) (0.05) (0.50)
---------- ----------- ----------- -----------
Net income available to common shareholders...... $ 0.59 $ 0.32 $ 1.90 $ 1.40
========== =========== =========== ===========
Weighted average common shares outstanding....... 29,616 25,474 28,364 25,307
Diluted per share data:
Income before discontinued operations and
extraordinary items, net of preferred dividends $ 0.57 $ 0.75 $ 1.89 $ 1.86
Discontinued operations and
extraordinary item............................ (0.00) (0.43) (0.05) (0.48)
---------- ----------- ----------- -----------
Net income available to common shareholders...... $ 0.57 $ 0.32 $ 1.84 $ 1.38
========== =========== =========== ===========
Weighted average common and potential dilutive
common shares outstanding........................ 30,476 26,016 29,191 25,760
<FN>
The accompanying notes are an integral part of these statements.
</FN>
5
CBL & Associates Properties, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
---------------------------------
2002 2001
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................... $ 61,079 $ 40,398
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................................... 56,566 52,931
Amortization...................................................... 15,713 12,758
Gain on sales of real estate assets............................... (2,702) (5,757)
Gain on disposal of discontinued operations....................... (1,571) --
Extraordinary loss on extinguishment of debt...................... 3,415 13,323
Issuance of stock under incentive plan............................ 1,503 1,385
Write-off of development projects................................. 58 5
Equity in earnings of unconsolidated affiliates................... (6,455) (4,742)
Minority interest in earnings of consolidated affiliates.......... 49,646 33,015
Distributions to minority investors............................... (48,929) (33,884)
Distributions from unconsolidated affiliates...................... 7,145 11,260
Changes in:
Tenant and other receivables...................................... 1,017 (11,636)
Other assets...................................................... (11,429) (7,758)
Accounts payable and accrued liabilities.......................... 23,258 18,420
--------------- --------------
Net cash provided by operating activities................. 148,314 119,718
=============== ==============
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate assets.............................. (53,494) (116,993)
Additions to real estate assets................................. (54,145) (53,145)
Capitalized interest............................................ (3,454) (4,670)
Other capital expenditures...................................... (70,362) (41,461)
Additions to other assets....................................... (1,537) (3,629)
Proceeds from sales of real estate assets....................... 83,358 38,887
Payments received on mortgage notes receivable.................. 1,809 591
Additions to mortgage notes receivable.......................... (5,819) (2,608)
Additional investments in and advances to unconsolidated
affiliates.................................................... (5,955) (15,187)
--------------- --------------
Net cash used in investing activities..................... (109,599) (198,215)
=============== ==============
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other notes payable.................. 565,362 549,836
Principal payments on mortgage and other notes payable.......... (748,095) (406,036)
Additions to deferred financing costs........................... (5,176) (7,281)
Proceeds from issuance of common stock.......................... 117,121 2,141
Proceeds from issuance of preferred stock....................... 96,397 --
Proceeds from exercise of stock options......................... 4,737 8,110
Redemption of preferred stock................................... (5,000) --
Prepayment penalties on extinguishment of debt.................. (1,875) (13,037)
Dividends paid.................................................. (53,578) (44,683)
--------------- --------------
Net cash provided by (used in) financing activities....... (30,107) 89,050
--------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS............................. 8,608 10,553
CASH AND CASH EQUIVALENTS, beginning of period...................... 10,137 5,184
--------------- --------------
CASH AND CASH EQUIVALENTS, end of period............................ 18,745 15,737
=============== ==============
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized................ $ 106,670 $ 106,021
=============== ==============
Debt assumed in acquisition of property interest.................. $ 77,103 $ 875,425
=============== ==============
Issuance of minority interest in acquisition of property interests $ 24,303 $ 339,976
=============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
6
CBL & Associates Properties, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1 - Investment In Unconsolidated Affiliates
Condensed combined results of operations for the unconsolidated
affiliates are presented as follows (in thousands):
Total for the Nine Months Company's Share for Nine Months
Ended September 30, Ended September 30,
--------------------------------- ---------------------------------
2002 2001 2002 2001
----------------- --------------- ----------------- ---------------
Revenues $41,303 $39,899 $20,120 $19,218
----------------- --------------- ----------------- ---------------
Depreciation and Amortization 5,099 5,858 3,137 2,780
Interest Expense 10,767 11,056 4,692 5,318
Other operating expenses 11,921 13,135 5,836 6,377
----------------- --------------- ----------------- ---------------
Income from operations $13,516 $9,850 $6,455 $4,743
================= =============== ================= ===============
At September 30, 2002, the Company had investments in eight partnerships
representing five malls, three associated centers and two community centers, as
well as two malls under construction, all of which are reflected using the
equity method of accounting. One of the malls under construction was opened in
October 2002.
In February 2002, the Company contributed its interests in two community
centers and one associated center to a joint venture with a third party and
retained a 10% interest. The total consideration of $63.0 million consisted of
cash of $46.8 million and the Company's retained interest. The Company has
deferred the gain of $11.0 million from the transaction due to certain
restrictions included in the joint venture agreement related to the subsequent
sale of the properties that demonstrate the Company's continuing involvement.
In February 2002, the Company acquired additional partnership interests in
three existing partnerships representing four malls and one associated center.
The purchase price consisted of $422,088 in cash, the assumption of $26.6
million of debt and the issuance of 499,730 special common units of the
Operating Partnership with a fair value of $17.6 million (weighted average fair
value of $35.24 per unit). The special common units have a minimum annual
distribution rate of $2.9025 per unit. The Company began including one of these
partnerships in its consolidated financial statements since the additional
interest acquired resulted in the Company owning a controlling interest.
7
Note 2 - Mortgage and Other Notes Payables
Mortgage and other notes payable consisted of the following at September
30, 2002 and December 31, 2001, respectively (in thousands):
September 30, 2002 December 31, 2001
----------------------------- ------------------------------
Weighted Average Weighted Average
Amount Interest Rate(1) Amount Interest Rate(1)
----------- ---------------- ----------- ----------------
Fixed-rate debt:
Non-recourse loans on operating properties $1,813,841 7.14% $1,463,351 7.50%
----------- -----------
Variable-rate debt:
Non-recourse loans on operating properties 275,711 4.35% 595,785 3.38%
Construction loans 16,839 3.40% 40,553 3.26%
Lines of credit 104,000 2.84% 216,266 3.20%
----------- -----------
Total variable-rate debt 396,550 3.88% 852,604 4.19%
----------- -----------
Total $2,210,391 6.56% $2,315,955 6.30%
=========== ===========
<FN>
(1) Weighted-average interest rate before amortization of deferred financing costs.
</FN>
The Company's credit facilities total $345.3 million, of which $241.3 was
available at September 30, 2002. Additionally, the Company had other credit
facilities totaling $14.6 million that are used only for issuances of letters of
credit, of which $8.8 million was outstanding at September 30, 2002.
As of September 30, 2002, the Company had total commitments under
construction loans of $80.8 million, of which $64.0 million was available to be
used for completion of construction and redevelopment projects and replenishment
of working capital previously used for construction.
On May 31, 2002, the Company assumed a $40.7 million non-recourse mortgage
with an interest rate of 7.30% in connection with the acquisition of a mall,
which is discussed in Note 7.
On June 20, 2002, the Company obtained $407.2 million of non-recourse
mortgage loans for terms of 10 years each that bear interest at 6.51% based on a
25-year amortization schedule. Eight regional malls and one associated center
secure the mortgage loans, which are not cross-defaulted or
cross-collateralized.
Proceeds from the $407.2 million financing were used to retire
variable-rate debt on seven of the properties and to refinance a maturing loan
on one property that had a fixed interest rate of 6.95%. Excess proceeds of
approximately $58.0 million were used to reduce outstanding borrowings on the
Company's lines of credit and to retire loans on certain operating properties.
On July 25, 2002, the Company obtained a $15.0 million non-recourse
mortgage loan on the office building that serves as its corporate headquarters.
This loan has a term of 10 years and bears interest at 6.25% based on a 25-year
amortization schedule.
The weighted average maturities of the Company's consolidated debt was 6.3
years at September 30, 2002, as compared to 4.7 years at December 31, 2001.
Thirteen malls, four associated centers and the office building are owned
by special purpose subsidiaries of the Company that are included in the
consolidated financial statements. The sole business purpose of the special
purpose subsidiaries is the ownership and operation of the properties. The
mortgaged real estate and other assets owned by these special purpose
subsidiaries are restricted under the loan agreements in that they are not
available to settle other debts of the Company. However, so long as the loans
are not under an event of default, as defined in the loan agreements, the cash
flows from these properties, after payments of debt service, operating expenses
and reserves, are available for distribution to the Company.
8
Note 3 -Derivative Financial Instruments
The Company uses derivative financial instruments to manage exposure to
interest rate risks inherent in variable-rate debt and does not use them for
trading or speculative purposes. The Company had the following interest rate
swap, which was designated as a cash flow hedge, in place at September 30, 2002
(in thousands):
Notional Amount Fixed LIBOR Component Expiration Date Fair Value
- -------------------- ------------------------ ------------------- -------------
$ 80,000 5.830% 08/30/2003 $(3,392)
At September 30, 2002, the interest rate swap's fair value of $(3.4)
million was recorded in other liabilities. For the quarter, adjustments of $0.8
million were recorded as adjustments in other comprehensive income. Over time,
unrealized gains and losses held in accumulated other comprehensive loss will be
reclassified to earnings. This reclassification occurs in the same period or
periods that the hedged cash flows affect earnings. Within the next twelve
months, the Company estimates that it will reclassify the entire balance of $3.4
million to earnings as interest expense.
The Company is exposed to credit losses if counterparties to the swap
agreements are unable to perform; therefore, the Company continually monitors
the credit standing of the counterparties.
Note 4 - Shareholders' Equity
Common Stock
On March 14, 2002, the Company completed a follow-on offering of 3,352,770
shares of its common stock. Net proceeds of approximately $115.0 million were
used to repay outstanding borrowings under the Company's credit facilities.
Preferred Stock
On June 14, 2002, the Company completed an offering of 2,000,000 shares of
its 8.75% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred
Stock"), having a par value of $.01 per share, at $50 per share. The net
proceeds of approximately $96.6 million were used to reduce outstanding balances
under the Company' credit facilities and to retire term loans on several
properties.
The dividends on the Series B Preferred Stock are cumulative and accrue
from the date of issue and are payable quarterly in arrears at a rate of $4.375
per share per annum. The Series B Preferred Stock has no stated maturity, is not
subject to any sinking fund or mandatory redemption, and is not convertible into
any other securities of the Company.
9
The Series B Preferred Stock cannot be redeemed by the Company prior to
June 14, 2007. After that date, the Company may redeem shares, in whole or in
part, at any time for a cash redemption price of $50.00 per share plus accrued
and unpaid dividends.
On June 14, 2002, the Company redeemed 200,000 shares of its 9.0% Series A
Cumulative Redeemable Preferred Stock for its face amount of $25.00 per share,
or $5,000,000.
Note 5 - Segment Information
Management of the Company measures performance and allocates resources
according to property type, which are determined based on criteria such as
nature of tenants, capital requirements, economic risks, leasing terms, and
short- and long-term returns on capital. Rental income and tenant reimbursements
from tenant leases provide the majority of revenues from all segments.
Information on management's reportable segments is presented as follows (in
thousands):
Associated Community
Three Months Ended September 30, 2002 Malls Centers Centers All Other Total
- -------------------------------------- --------- ---------- --------- --------- ---------
Revenues $ 123,527 $ 4,143 $ 13,871 $ 4,072 $ 145,613
Property operating expenses (1) (43,504) (950) (3,656) 2,119 (45,991)
Interest expense (32,872) (747) (2,202) (799) (36,620)
Gain on sales of real estate assets -- -- -- 497 497
--------- ---------- --------- --------- ---------
Segment profit and loss $ 47,151 $ 2,446 $ 8,013 $ 5,889 63,499
========= ========== ========= ========= =========
Depreciation and amortization (24,182)
General and administrative and other (5,500)
Equity in earnings and minority
interest adjustments (12,635)
---------
Income before discontinued operations
and extraordinary item $ 21,182
=========
Capital expenditures (2) $ 32,734 $ 1,818 $ 1,710 $ 8,355 $ 44,617
Associated Community
Three Months Ended September 30, 2001 Malls Centers Centers All Other Total
- -------------------------------------- --------- ---------- --------- --------- ---------
Revenues $ 114,672 $ 4,067 $ 16,422 $ 2,532 $ 137,693
Property operating expenses (1) (40,346) (881) (3,586) 528 (44,285)
Interest expense (32,741) (1,066) (3,378) (3,509) (40,694)
Gain on sales of real estate assets 134 -- 198 813 1,145
--------- ---------- --------- --------- ---------
Segment profit and loss $ 41,719 $ 2,120 $ 9,656 $ 364 53,859
========= ========== ========= ========= =========
Depreciation and amortization (21,668)
General and administrative and other (4,523)
Equity in earnings and minority
interest adjustments (6,516)
---------
Income before discontinued operations
and extraordinary item $ 21,152
=========
Capital expenditures (2) $ 28,553 $ 134 $ 3,558 $ 6,326 $ 38,571
10
Associated Community
Nine Months Ended September 30, 2002 Malls Centers Centers All Other Total
- -------------------------------------- --------- ---------- --------- --------- ----------
Revenues $ 371,966 $ 12,547 $ 41,933 $ 7,306 $ 433,752
Property operating expenses (1) (129,416) (2,979) (10,657) 7,060 (135,992)
Interest expense (91,937) (2,465) (7,077) (5,979) (107,458)
Gain on sales of real estate assets 286 -- 990 1,426 2,702
--------- ---------- --------- --------- ---------
Segment profit and loss $ 150,899 $7,103 $ 25,189 $ 9,813 193,004
========= ========== ========= ========= =========
Depreciation and amortization (70,478)
General and administrative and other (16,764)
Equity in earnings and minority
interest adjustments (43,191)
----------
Income before discontinued operations
and extraordinary item $ 62,571
==========
Total assets (2) $2,910,756 $121,838 $387,777 $127,284 $3,547,655
Capital expenditures (2) $ 228,560 $ 4,224 $30,171 $41,575 $ 304,530
Associated Community
Nine Months Ended September 30, 2001 Malls Centers Centers All Other Total
- -------------------------------------- --------- ---------- --------- --------- ----------
Revenues $ 322,421 $ 12,203 $ 51,615 $ 5,863 $ 392,102
Property operating expenses (1) (109,515) (2,794) (11,405) 2,112 (121,602)
Interest expense (93,906) (3,496) (10,916) (10,433) (118,751)
Gain on sales of real estate assets 134 -- 3,679 1,944 5,757
--------- ---------- --------- --------- ----------
Segment profit and loss $ 119,134 $ 5,913 $ 32,973 $ (514) 157,506
========= ========== ========= ========= ==========
Depreciation and amortization (62,220)
General and administrative and other (14,156)
Equity in earnings and minority
interest adjustments (28,264)
----------
Net income before discontinued
operations and extraordinary item $ 52,866
==========
Total assets (2) $2,652,693 $122,236 $483,946 $143,203 $3,402,078
Capital expenditures (2) $1,268,393 $ 4,896 $52,807 $ 16,840 $1,342,936
<FN>
(1) Property operating expenses include property operating expenses, real estate taxes, and maintenance and repairs.
(2) Amounts include investments in unconsolidated affiliates. Developments in progress are included in the All Other category.
</FN>
Note 6 - Discontinued Operations
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121 and requires that
long-lived assets that are to be disposed of by sale be measured at the lower of
book value or fair value less costs to sell. SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed by sale, but broadens the definition of what
constitutes a discontinued operation and how the results of a discontinued
operation are to be measured and presented.
11
During the nine months ended September 30, 2002, the Company sold four
properties for $26.2 million and recognized a net gain of $1.6 million. In
accordance with SFAS No. 144, the net gain is reported as a component of
discontinued operations in the accompanying consolidated statement of
operations. Total revenues for the properties were $1.1 million and $1.6 million
for the nine months ended September 30, 2002 and 2001, respectively.
Note 7 - Acquisitions
On May 1, 2002, the Company acquired Richland Mall located in Waco, Texas
for a cash purchase price of $43.5 million. On May 31, 2002, the Company
acquired Panama City Mall located in Panama City, Florida for a purchase price
of $45.7 million. The purchase price of Panama City Mall consisted of the
assumption of $40.7 million of nonrecourse mortgage debt with an interest rate
of 7.30%, the issuance of 118,695 limited partnership units with a fair value of
$4.5 million ($37.80 per unit), and $458,000 in cash closing costs. The limited
partnership units issued will receive an annual dividend of 7.50% ($3.375 per
unit) based on a value of $45.00 per unit until May 2012 or until the common
dividend exceeds $3.375 per unit, if earlier, at which time it will match the
common dividend. Additionally, if the annual dividend on the Company's common
stock should ever be less than $2.22 per share, the $3.375 per unit dividend
will be reduced by the amount the per share dividend is less than $2.22 per
share.
The Company entered into a ground lease on May 31, 2002, for land adjacent
to Panama City Mall that provides the lessor with the option to require the
Company to purchase the land for $4.1 million between August 1, 2003 and
February 1, 2004.
During the third quarter of 2002, the Company acquired the remaining 21%
ownership interest in Columbia Place in Columbia, South Carolina. The total
consideration was $10.6 million, which consisted of the issuance of 61,622
limited partnership units with a fair value of $2.3 million ($36.97 per unit)
and the assumption of $8.3 million of debt.
Note 8 - Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing earnings available
to common shareholders by the weighted-average number of unrestricted common
shares outstanding for the period. Diluted EPS assumes the issuance of common
stock for all potential dilutive common shares outstanding. The limited
partners' rights to convert their minority interest in the Operating Partnership
into shares of common stock are not dilutive. The difference in basic and
diluted EPS is due to the assumed exercise of outstanding stock options and
nonvested restricted stock resulting in 860,000 and 542,000 potential dilutive
common shares for the three months ended September 30, 2002 and 2001,
respectively, and 827,000 and 453,000 potential dilutive common shares for the
nine months ended September 30, 2002 and 2001, respectively.
12
Note 9 - Comprehensive Income
Comprehensive income includes all changes in shareholders' equity during
the period, except those resulting from investments by shareholders and
distributions to shareholders. Comprehensive income consisted of the following
components (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2002 2001 2002 2001
--------------- -------------- ------------- ---------------
Net income $ 21,157 $ 9,858 $ 61,079 $ 40,398
Gain (loss) on current period cash flow hedges 799 (3,418) 3,407 (7,160)
--------------- -------------- ------------- ---------------
Comprehensive income $ 21,956 $ 6,440 $ 64,486 $ 33,238
=============== ============== ============= ===============
Note 10 - Contingencies
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial position and results of
operations of the Company.
Based on environmental studies completed to date on the real estate
properties, management believes any exposure related to environmental cleanup
will not be significant to the Company's financial position and results of
operations.
Note 11 - Recent Accounting Pronouncements
In May 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections", which rescinds SFAS No. 4. As a
result, gains and losses from extinguishments of debt should be classified as
extraordinary items only if they meet the criteria of Accounting Principles
Board Opinion No. 30 ("APB 30"). SFAS No. 145 will be effective for fiscal years
beginning after May 15, 2002. Any gain or loss on extinguishment of debt that
was classified as an extraordinary item in prior periods presented that does not
meet the criteria of APB 30 will be reclassified. The Company anticipates that
all extraordinary losses in prior periods will be reclassified as an operating
expense upon adoption of SFAS No. 145 on January 1, 2003.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 requires that the costs
associated with exit or disposal activity be recognized and measured at fair
value when the liability is incurred. The provisions of SFAS No. 146 are
effective for exit or disposal activities initiated after December 31, 2002. As
the Company typically does not engage in significant disposal activities, it is
not expected that the implementation of SFAS No. 146 in 2003 will have a
significant impact on the Company's reported financial results.
Note 12 - Accounting For Stock Options
Historically, the Company has accounted for stock options using the
intrinsic value method of APB No. 25, "Accounting for Stock Issued to
Employees". Effective January 1, 2003, the Company will begin recording the
expense associated with stock options granted after January 1, 2003, on a
prospective basis in accordance with the fair value and transition provisions of
SFAS No. 123, "Accounting for Stock Based Compensation".
13
Note 13 - Reclassifications
Certain reclassifications have been made to prior periods' financial
information to conform to the current period presentation.
Item 2: Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and accompanying notes that are included in this Form 10-Q.
Certain statements made in this section or elsewhere in this report may be
deemed "forward looking statements" within the meaning of the federal securities
laws. Although the Company believes the expectations reflected in any
forward-looking statements are based on reasonable assumptions, the Company can
give no assurance that these expectations will be attained, and it is possible
that actual results may differ materially from those indicated by these
forward-looking statements due to a variety of risks and uncertainties. The
Company directs you to its other filings with the Securities and Exchange
Commission, including without limitation its Annual Report on Form 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference therein, for a discussion of such risks
and uncertainties.
GENERAL BACKGROUND
CBL & Associates Properties, Inc.'s consolidated financial statements and
accompanying notes reflect the consolidated financial results of CBL &
Associates Limited Partnership (the "Operating Partnership"), which includes at
September 30, 2002, the operations of a portfolio of properties consisting of
forty-eight regional malls, fifteen associated centers, sixty-three community
centers, an office building, joint venture investments in five regional malls,
three associated centers and two community centers, and income from ten
mortgages (the "Properties"). The Operating Partnership also has one mall
expansion, one associated center expansion, two associated centers, two
community centers and two malls, each in separate joint ventures, currently
under construction and options to acquire certain shopping center development
sites. The consolidated financial statements also include the accounts of CBL &
Associates Management, Inc. (the "Management Company"). CBL & Associates
Properties, Inc., the Operating Partnership and the Management Company are
referred to collectively as the "Company".
The Company classifies its regional malls into two categories - malls that
have completed their initial lease-up ("Stabilized Malls") and malls that are in
their initial lease-up phase ("Non-Stabilized Malls"). The Non-Stabilized Mall
category is presently comprised of Springdale Mall, a redevelopment project in
Mobile, Alabama, Arbor Place Mall in Atlanta (Douglasville), Georgia, which
opened in October 1999, The Lakes Mall in Muskegon, Michigan, which opened in
August 2001, and Parkway Place Mall in Huntsville, Alabama, which opened in
October 2002. Parkway Place Mall was acquired in December 1998 and was under
development in a joint venture with a third party at September 30, 2002.
14
RESULTS OF OPERATIONS
The following significant transactions impact the comparison of the results
of operations for both the three and nine months ended September 30, 2002 to the
comparable periods ended September 30, 2001:
The Company opened or acquired six properties since February 1, 2001.
Depending on the date each property was opened or acquired, the comparable 2001
period discussed below may not include results of operations for the entire
period as compared to the 2002 period, which does include a full period of
operations. The new properties opened or acquired are as follows:
Opening/
Project Name Location Total GLA Type of Addition Acquisition Date
- ------------------------------ ----------------------------- --------------- ------------------------- ------------------
Willowbrook Plaza Houston, Texas 388,000 Acquisition February 2001
Creekwood Crossing Bradenton, Florida 404,000 New Development April 2001
The Lakes Mall Muskegon, Michigan 553,000 New Development August 2001
CBL Center Chattanooga, Tennessee 128,000 New Development January 2002
Richland Mall Waco, Texas 725,000 Acquisition May 2002
Panama City Mall Panama City, Florida 607,000 Acquisition May 2002
The following properties were sold during 2001 and their results of
operations are included in the consolidated statement of operations in 2001
through each property's respective disposal date. The results of operations for
properties sold during 2002 have been included in discontinued operations for
all periods as a result of the adoption of a new accounting pronouncement (see
Note 6 to the unaudited consolidated financial statements). Therefore, when
comparing resultds for the three and nine month periods ended September 30, 2002
to the corresponding periods of 2001, the variances will include a reduction
from the dispositions that occurred in 2001.
Project Name Location Disposal Date
---------------------------- ------------------------------ --------------------
Jean Ribaut Square Beaufort, South Carolina February 2001
Bennington Place Roanoke, Virginia March 2001
Sand Lake Corners Orlando, Florida May 2001
Park Village Lakeland, Florida August 2001
Sutton Plaza Mt. Olive, New Jersey November 2001
Creekwood Crossing Bradenton, Florida November 2001
Rhett @ Remount Charleston, South Carolina January 2002
LaGrange Commons LaGrange, New York April 2002
One Park Place Chattanooga, Tennessee April 2002
Chesterfield Crossing Richmond, Virginia June 2002
During the first quarter of 2002, the Company began to include Columbia
Place in Columbia, South Carolina, in its consolidated financial statements
after it acquired an additional interest in it, which resulted in the Company
owning a controlling interest. The Company's interest in Columbia Place was
previously accounted for using the equity method of accounting.
15
In February 2002, the Company contributed 90% of its interests in Pemberton
Plaza, an associated center in Vicksburg, Mississippi, and Massard Crossing and
Willowbrook Plaza, community centers located in Ft. Smith, Arkansas and Houston,
Texas, respectively, to a joint venture, which is accounted for using the equity
method of accounting. Prior to the date of contribution, the results of
operations of these properties were included in the Company's consolidated
statement of operations.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER
30, 2002 TO THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2001
(Dollars in Thousands)
2002 2001 $ Variance % Variance
--------- --------- ----------- -----------
Total revenues $145,613 $137,693 $ 7,920 5.8 %
--------- --------- ----------- -----------
Expenses:
Property operating, real estate taxes and
maintenance and repairs 45,991 44,285 1,706 3.9 %
Depreciation and amortization 24,182 21,668 2,514 11.6 %
General, administrative and other 5,500 4,523 977 21.6 %
Interest expense 36,620 40,694 (4,074) (10.0)%
--------- --------- ----------- -----------
Total expenses 112,293 111,170 1,123 1.0 %
--------- --------- ----------- -----------
Income from operations 33,320 26,523 6,797 25.6 %
Gain on sales of real estate assets 497 1,145 (648) (56.1)%
Equity in earnings of unconsolidated affiliates 2,353 1,770 583 32.9 %
Minority interest in earnings:
Operating partnership (14,599) (7,932) (6,667) 84.1 %
Shopping center properties (389) (354) (35) 9.9 %
--------- --------- ----------- -----------
Income before discontinued operations and
extraordinary item 21,182 21,152 30 0.1 %
Income from discontinued operations 185 327 (142) (43.4)%
Extraordinary loss on extinguishment of debt (210) (11,621) (11,411) (98.2)%
--------- --------- ----------- -----------
Net income 21,157 9,858 11,299 114.6 %
Preferred dividends (3,692) (1,617) 2,075 128.3 %
--------- --------- ----------- -----------
Net income available to common shareholders $ 17,465 $ 8,241 $ 9,224 111.9 %
========= ========= =========== ===========
Revenues
Improved operations at properties with a full period of operations in 2002
and 2001 contributed $4.2 million to the increase in revenues. Other components
of the increase were revenues of $5.2 million from the four new properties
opened or acquired since August 2001 and revenues of $2.2 million from Columbia
Place. These increases were offset by reductions in revenues of $1.3 million
related to properties that have been sold since August 2001 and $1.9 million
related to the properties that were contributed to a joint venture and are now
accounted for using the equity method of accounting. Additionally, lease
termination fees were $0.5 million less than the prior year period.
Expenses
Property operating expenses (including real estate taxes and maintenance
and repairs) and depreciation and amortization expense for the properties with a
full period of operations in 2002 and 2001 increased by $1.2 million as a result
of increases in operating costs. The increase is also due to additional expenses
of $2.0 million from the four new properties opened or acquired since August
2001 and additional expenses of $0.9 million from Columbia Place Mall.
Depreciation and amortization expense also increased as a result of the ongoing
capital expenditures the Company has made since July 2001. These increases were
offset by reductions in expenses of $0.8 million related to properties that have
been sold since August 2001.
16
Interest expense decreased due to reductions of debt with net proceeds of
$115.0 million from the March 2002 common stock offering and net proceeds of
$96.6 million from the June 2002 preferred stock offering. Additionally, the
weighted average interest rate on the Company's total debt has declined as
compared to the prior year period.
Gain on Sales of Real Estate Assets
The gain on sales of $497,000 in the third quarter of 2002 was primarily
from gains on two outparcel sales.
Equity in Earnings of Unconsolidated Affiliates
The increase in equity in earnings of unconsolidated affiliates resulted
from the Company's acquisition of additional partnership interests in East Towne
Mall, West Towne Mall and West Town Crossing in Madison, Wisconsin, and Kentucky
Oaks Mall in Paducah, Kentucky in February 2002. The net effect of the Columbia
Place transaction and the contribution of the Company's interests in three
properties to a joint venture did not significantly impact the increase from
2001 to 2002.
Discontinued Operations
The Company did not sell any operating properties during the third quarter
of 2002. During the first and second quarters of 2002, three community centers
and an office building were sold. The $185,000 reflected in discontinued
operations for the third quarter of 2002 represents the true-up of estimated
closing costs recorded at the time of these sales to the actual amounts that
became known during the third quarter. Income from discontinued operations of
$327,000 for the third quarter of 2001 reflects the operations of these four
properties for that period.
Extraordinary Loss
Extrordinary loss decreased from $11.6 million in 2001 to $0.2 million in
2002. The decrease is due to the Company retiring more high interest rate debt
in 2001 than it did in 2002.
17
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2002 TO THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(Dollars in Thousands)
2002 2001 $ Variance % Variance
--------- --------- ----------- -----------
Total revenues $433,752 $392,102 $ 41,650 10.6 %
--------- --------- ----------- -----------
Expenses:
Property operating, real estate taxes and
maintenance and repairs 135,992 121,602 14,390 11.8 %
Depreciation and amortization 70,478 62,220 8,258 13.3 %
General, administrative and other 16,764 14,156 2,608 18.4 %
Interest expense 107,458 118,751 (11,293) (9.5)%
--------- --------- ----------- -----------
Total expenses 330,692 316,729 13,963 4.4 %
--------- --------- ----------- -----------
Income from operations 103,060 75,373 27,687 36.7 %
Gain on sales of real estate assets 2,702 5,757 (3,055) (53.1)%
Equity in earnings of unconsolidated affiliates 6,455 4,743 1,712 36.1 %
Minority interest in earnings:
Operating partnership (47,131) (31,660) (15,471) 48.9 %
Shopping center properties (2,515) (1,347) (1,168) 86.7 %
--------- --------- ----------- -----------
Income before discontinued operations and
extraordinary item 62,571 52,866 9,705 18.4 %
Income from discontinued operations 1,923 855 1,068 124.9 %
Extraordinary loss on extinguishment of debt (3,415) (13,323) 9,908 (74.4)%
--------- --------- ----------- -----------
Net income 61,079 40,398 20,681 51.2 %
Preferred dividends (7,319) (4,851) (2,468) (50.9)%
--------- --------- ----------- -----------
Net income available to common shareholders $ 53,760 $ 35,547 $ 18,213 51.2 %
========= ========= =========== ===========
Revenues
Improved operations at properties with a full period of operations in 2002
and 2001, including one additional month this year for the properties acquired
from The Richard E. Jacobs Group (Jacobs) on January 31, 2001, contributed $24.1
million to the increase in revenues. Other components of the increase were (i)
revenues of $11.3 million from the six new properties opened or acquired since
February 2001, (ii) revenues of $9.2 million from Columbia Place Mall, (iii)
additional lease termination fees of $4.1 million recognized in 2002 and (iv) an
increase in management, development and leasing fees of $2.1 million related to
new joint venture projects. These increases were offset by reductions in
revenues of $4.5 million related to properties that have been sold since
February 2001 and $4.7 million related to the properties that were contributed
to a joint venture and are now accounted for using the equity method of
accounting.
Expenses
Property operating expenses (including real estate taxes and maintenance
and repairs) and depreciation and amortization expense for the properties with a
full period of operations in 2002 and 2001 increased by $12.7 million as a
result of increases in operating costs. The $12.7 million increase also includes
one additional month this year of expenses for the properties acquired from
Jacobs on January 31, 2001. The overall increase is also due to expenses of $7.4
million from the six new properties opened or acquired since February 2001 and
expenses of $3.8 million from Columbia Place Mall. Depreciation and amortization
expense also increased as a result of the ongoing capital expenditures made
since January 2001. These increases were offset by reductions of $1.5 million
related to properties that have been sold since February 2001.
18
Interest expense decreased due to reductions of debt with net proceeds of
$115.0 million from the March 2002 common stock offering and net proceeds of
$96.6 million from the June 2002 preferred stock offering. Additionally, the
weighted average interest rate on the Company's total debt has declined as
compared to the prior year period.
Gain on Sales of Real Estate Assets
The net gain on sales of $2.7 million in 2002 was primarily from gains on
seven outparcel sales offset by losses on two outparcel sales and one department
store building.
Equity in Earnings of Unconsolidated Affiliates
The increase in equity in earnings of unconsolidated affiliates resulted
from the Company's acquisition of additional partnership interests in East Towne
Mall, West Towne Mall and West Town Crossing in Madison, Wisconsin, and Kentucky
Oaks Mall in Paducah, Kentucky. Additionally, the Company had an interest in one
additional month of operations at these four properties in 2002 as compared to
2001 as the Company acquired its original interest in them on January 31, 2001.
The net effect of the Columbia Place Mall transaction and the contribution of
the Company's interests in three properties to a joint venture did not
significantly impact the increase from 2001 to 2002.
Discontinued Operations
During the nine months ended September 30, 2002, three community centers
and an office building were sold. A net gain on the disposal of discontinued
operations of $1.6 million was recognized. Two community centers and the office
building were sold for a gain and one community center was sold at a loss.
Operating income from discontinued operations was $0.4 million and $0.9 million
for the nine months ended September 30, 2002 and 2001, respectively. The decline
results from the prior year period including a full nine months of operations
while the current period only includes the results of operations through the
date each property was sold.
Extraordinary Loss
Extraordinary loss decreased from $13.3 million in 2001 to $3.4 million in
2002. The decrease is due to the Company retiring more high interest rate debt
in 2001 than it did in 2002.
PERFORMANCE MEASUREMENTS
The shopping center business is, to some extent, seasonal in nature with
tenant sales achieving the highest levels during the fourth quarter because of
the holiday season. The malls earn most of their "temporary" rents (rents from
short-term tenants) during the holiday period. Thus, occupancy levels and
revenue production are generally the highest in the fourth quarter of each year.
Results of operations realized in any one quarter may not be indicative of the
results likely to be experienced over the course of the fiscal year.
For the nine months ended September 30, 2002, including the Company's share
of total revenues from unconsolidated affiliates, malls represented 86.4% of
total revenues; revenues from associated centers represented 2.9%; revenues from
community centers represented 9.7%; and revenues from mortgages and the office
buildings represented 1.0%. Accordingly, revenues and results of operations are
disproportionately impacted by the malls' achievements.
19
For the nine months ended September 30, 2002, mall shop sales, for those
tenants reporting sales, declined by 1.5% as compared to the prior year period.
Total portfolio occupancy increased by 0.6% compared to the prior year as a
result of increases in occupancy for the malls and associated centers offset by
a decline in community centers. Average base rents for the total portfolio have
improved, including average base rents for rollover and replacement leases.
Operational highlights for the three months and nine months ended September
30, 2002 as compared to September 30, 2001 are as follows:
Sales and Occupancy Costs
Mall shop sales, for those tenants who have reported sales, in the fifty
Stabilized Malls decreased by 1.5% on a comparable per square foot basis to
$192.56 per square foot for the nine months ended September 30, 2002 from
$195.49 per square foot for the nine months ended September 30, 2001.
Total sales volume in the mall portfolio, including Non-Stabilized Malls,
but excluding Parkway Place, decreased 4.5% to $1.867 billion for the nine
months ended September 30, 2002 from $1.951 billion for the nine months ended
September 30, 2001.
Occupancy costs as a percentage of sales for the nine months ended
September 30, 2002 and 2001 for the Stabilized Malls were 13.8% and 12.8%,
respectively. Occupancy costs as a percentage of sales are generally higher in
the first three quarters of the year as compared to the fourth quarter due to
the seasonality of retail sales.
Occupancy
Occupancy for the Company's owned portfolio was as follows:
At September 30,
---------------------------------
2002 2001
-------------- ---------------
Total Portfolio Occupancy 92.8% 92.2%
Total Mall Portfolio 91.8% 90.3%
Stabilized Malls (50) 92.1% 90.5%
Non-Stabilized Malls (3) 87.0% 86.8%
Associated Centers 96.2% 92.5%
Community Centers 94.3% 96.7%
Occupancy for the community centers declined because of the vacancies of
Home Place at Kingston Overlook in Knoxville, Tennessee and Quality Stores at
Sattler Square in Big Rapids, Michigan resulting from the bankruptcy of those
companies. The space at Sattler Square has been re-leased to two tenants, both
of which are under construction and scheduled to open within the next few
months.
20
Average Base Rents
Average base rents per square foot for the portfolio were as follows:
At September 30,
------------------------------------
2002 2001
----------------- ------------------
Malls $22.98 $22.67
Associated centers 9.85 9.51
Community centers 9.66 9.49
Lease Rollovers
The Company achieved the following results from rollover and replacement
leasing for the nine months ended September 30, 2002 compared to the base rent
at the end of the lease term for spaces previously occupied:
Base Rent Base Rent
Per Square Per Square
Foot Foot Percentage
Prior Lease New Lease (1) Increase
------------ -------------- ----------
Stabilized malls $23.91 $27.55 15.2%
Associated centers 18.81 20.08 6.7%
Community centers 11.49 12.02 4.6%
<FN>
(1) Average base rent over the term of the lease.
</FN>
CASH FLOWS
Cash provided by operating activities increased $28.6 million due to (i)
improved operating performance at properties with a full period of operations in
2002 and 2001, (ii) one additional month of operations for the properties
acquired from Jacobs on January 31, 2001, (iii) the addition of the six new
properties that were opened or acquired since February 2001 and (iv) the
acquisition of an additional interests in Columbia Place Mall, West Towne Mall,
East Towne Mall and West Towne Crossing during 2002. These increases were offset
by reductions in results of operations related to the properties that have been
sold since February 2001 and the properties in which the Company contributed 90%
of its interest to a joint venture.
Cash used in investing activities decreased $88.6 million due to increased
proceeds from the sales of real estate assets as compared to the prior year and
less acquisition activity as compared to the prior year period when the Company
acquired twenty-five new properties. This was partially offset by increased
capital expenditures in the current period, which are primarily related to
remodeling and renovating the Jacobs properties to improve their competitive
position in their respective market places.
Cash used in financing activities was $30.1 million in 2002 as compared to
cash provided by financing activities of $89.1 million in 2001. The change was
due to the significant increase in the amount of loan repayments, the redemption
of preferred stock and the increase in the amount of dividends paid. This was
partially offset by proceeds from the issuance of common and preferred stock and
by increased borrowings and a reduction in the amount of prepayment penalties
incurred in 2002 as compared to 2001.
21
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources have
historically been for property development, expansions, renovations,
acquisitions, debt repayment and distributions to shareholders. In order to
maintain its qualification as a real estate investment trust for federal income
tax purposes, the Company is required to distribute at least 90% of its taxable
income, computed without regard to net capital gains or the dividends-paid
deduction, to its shareholders.
The Company's current capital structure includes property specific
mortgages, which are generally non-recourse, construction and term loans,
revolving lines of credit, common stock, preferred stock, joint venture
investments and a minority interest in the Operating Partnership.
The Company anticipates that the combination of its equity and debt sources
will, for the foreseeable future, provide adequate liquidity to continue its
capital programs substantially as in the past and make distributions to its
shareholders in accordance with the requirements applicable to real estate
investment trusts.
The Company's policy is to maintain a conservative debt to total market
capitalization ratio in order to enhance its access to the broadest range of
capital markets, both public and private. Based on the Company's share of total
consolidated and unconsolidated debt and the market value of equity described
above, the Company's debt to total market capitalization (debt plus market value
equity) ratio was 50.3% at September 30, 2002.
Equity
As a publicly traded company, the Company has access to capital through
both the public equity and debt markets. The Company has an effective shelf
registration statement authorizing it to publicly issue shares of its preferred
stock, common stock and warrants to purchase shares of the common stock with an
aggregate public offering price of up to $350 million, of which approximately
$62.3 million remains after the preferred stock offering on June 14, 2002.
As of September 30, 2002, the minority interest in the Operating
Partnership includes the 16.3% ownership interest in the Operating Partnership
held by the Company's executive and senior officers that may be exchanged for
approximately 8.9 million shares of common stock. Additionally, executive
officers and directors own approximately 2.1 million shares of the Company's
outstanding common stock, for a combined total interest in the Operating
Partnership of approximately 20.2%.
Limited partnership interests issued to fund the acquisition of interests
in properties from Jacobs in January 2001 and February 2002 may be exchanged for
approximately 12.0 million shares of common stock, which represents a 21.9%
interest in the Operating Partnership. Other third-party interests may be
exchanged for approximately 3.9 million shares of common stock, which represents
a 7.2% interest in the Operating Partnership.
Assuming the exchange of all limited partnership interests in the Operating
Partnership for common stock, there would be approximately 54.5 million shares
of common stock outstanding with a market value of approximately $2.111 billion
at September 30, 2002 (based on the closing price of $38.75 per share on
September 30, 2002). The Company's total market equity is $2.278 billion, which
includes 2.675 million shares of Series A preferred stock ($66.9 million based
on a liquidation preference of $25.00 per share) and 2.0 million shares of
Series B preferred stock ($100.0 million based on a liquidation preference of
$50.00 per share). The Company's executive and senior officers' ownership
interests had a market value of approximately $425.6 million at September 30,
2002.
22
Debt
The Company's share of mortgage debt on consolidated properties, adjusted
for minority investors' interests in five properties, and its pro rata share of
mortgage debt on nine unconsolidated properties consisted of the following at
September 30, 2002 and 2001, respectively (in thousands):
September 30, 2002 September 30, 2001
--------------------------------- --------------------------------
Weighted Average Weighted Average
Amount Interest Rate(1) Amount Interest Rate(1)
--------------- ----------------- --------------- ----------------
Fixed-rate debt:
Non-recourse loans on operating properties $1,880,597 7.18% $1,563,408 7.53%
--------------- ----------------- --------------- ----------------
Variable-rate debt:
Non-recourse loans on operating properties 301,708 4.26% 569,606 4.92%
Construction loans 16,839 3.40% 31,322 4.79%
Lines of credit 104,000 2.84% 263,176 5.49%
--------------- ----------------- --------------- ----------------
Total variable-rate debt 422,547 3.88% 864,104 5.09%
--------------- ----------------- --------------- ----------------
Total $2,303,144 6.58% $2,427,512 6.65%
=============== ================= =============== ================
<FN>
(1) Weighted average interest rate before amortization of deferred financing costs.
</FN>
The Company's credit facilities total $345.3 million, of which $241.3
million was available at September 30, 2002.
As of September 30, 2002, total commitments under construction loans were
$115.1 million, of which $72.2 million was available to be used for completion
of construction and redevelopment projects and replenishment of working capital
previously used for construction.
The Company had other credit facilities totaling $14.6 million that are
used only for issuances of letters of credit, of which $8.8 million was
outstanding at September 30, 2002.
The Company has fixed the interest rate on $80.0 million of an operating
property's debt at a rate of 6.95% using an interest rate swap agreement that
expires in August 2003. The Company did not incur any fees for the swap
agreement.
During the nine months ended September 30, 2002, the Company closed five
variable rate loans totaling $115.4 million to be used for construction and
acquisition purposes, of which $26.3 million was outstanding at September 30,
2002.
During the third quarter, the Company closed a $15.0 million non-recourse
mortgage loan with an interest rate of 6.25% for a term of ten years for the
office building that serves as its corporate headquarters.
23
The Company expects to refinance the majority of its mortgage notes payable
maturing over the next five years with replacement loans. Taking into
consideration extension options that are available to the Company, there are no
debt maturities through December 31, 2003, other than normal principal
amortization.
DEVELOPMENTS, EXPANSIONS, ACQUISITIONS AND DISPOSITIONS
The Company expects to continue to have access to the capital resources
necessary to expand and develop its business. Future development and acquisition
activities will be undertaken as suitable opportunities arise. The Company does
not expect to pursue these activities unless adequate sources of financing are
available and a satisfactory budget with targeted returns on investment has been
internally approved.
The Company intends to fund its major development, expansion and
acquisition activities with its traditional sources of construction and
permanent debt financing as well as from other debt and equity financings,
including public financings and the credit facilities, in a manner consistent
with its intention to operate with a conservative debt to total market
capitalization ratio.
Developments and Expansions
The Company's development projects that were under construction at
September 30, 2002 are:
Property Location GLA Opening Date
- ----------------------------------- ---------------------------------------- ------------ -----------------------
MALLS
- -----------------------------------
Parkway Place Mall Huntsville, Alabama 630,000 October 2002
(50/50 Joint Venture)
Mall of South Carolina Myrtle Beach, South Carolina 1,500,000 March 2004
(50/50 Joint Venture)
ASSOCIATED CENTERS
- -----------------------------------
Parkdale Crossing Beaumont, Texas 87,000 November 2002
The Shoppes at Hamilton Place Chattanooga, Tennessee 130,000 April 2003
COMMUNITY CENTERS
- -----------------------------------
Waterford Commons Waterford, Connecticut 354,900 September 2003
(75/25 Joint Venture)*
Cobblestone Village St. Augustine, Florida 305,000 May 2003
EXPANSIONS
- -----------------------------------
Bonita Crossing Meridian, Mississippi 17,600 November 2002
Westgate Mall, Tweeters Spartanburg, South Carolina 17,245 November 2002
<FN>
* The Company will own at least 75% of the joint venture.
</FN>
The Company has entered into a number of option agreements for the
development of future regional malls and community centers. Except for the
projects discussed under Developments and Expansions above and Acquisitions
below, the Company does not have any other material capital commitments.
At September 30, 2002, the Company did not have any standby purchase
agreements or co-development agreement obligations.
24
Acquisitions
On May 1, 2002, the Company acquired Richland Mall for a cash purchase
price of $43.5 million. Richland Mall is located in Waco, Texas and has five
anchor stores.
On May 31, 2002, the Company acquired Panama City Mall for a purchase price
of $45.7 million. Panama City Mall is located in Panama City, Florida and is
anchored by four department stores. The purchase price consisted of the
assumption of $40.7 million of non-recourse mortgage debt with an interest rate
of 7.30%, the issuance of 118,695 limited partnership units with a fair value of
$4.5 million ($37.80 per unit) and $458,000 in cash closing costs. The limited
partnership units issued will receive an annual dividend of 7.50% ($3.375 per
unit) based on a value of $45.00 per unit until May 2012 or until the common
dividend exceeds $3.375 per unit, if earlier, at which time it will match the
common dividend. Additionally, if the annual dividend on the Company's common
stock should ever be less than $2.22 per share, the $3.375 per unit dividend
will be reduced by the amount the per share dividend is less than $2.22 per
share.
The Company entered into a ground lease on May 31, 2002 for land adjacent
to Panama City Mall that provides the lessor with the option to require the
Company to purchase the land for $4.1 million between August 1, 2003 and
February 1, 2004.
During the third quarter of 2002, the Company acquired the remaining 21%
ownership interest in Columbia Place Mall in Columbia, SC. The total
consideration was $10.6 million, which consisted of the issuance of 61,622
limited partnership units with a fair value of $2.3 million ($36.97 per unit)
and the assumption of $8.3 million in debt.
Dispositions
During the nine months ended September 30, 2002, three community centers
and an office building were sold for an aggregate sales price of $26.2 million,
resulting in a net gain of $1.6 million. Two community centers and the office
building were sold for a gain and one community center was sold at a loss.
In addition, the Company sold seven outparcels for gains and two outparcels
and a department store building for losses. A net gain from sales of outparcels
of $0.5 million and $2.7 million was recognized for the three and nine month
periods, respectively.
OTHER CAPITAL EXPENDITURES
The Company prepares an annual capital expenditure budget for each property
that is intended to provide for all necessary recurring and non-recurring
capital improvements. The Company believes that its annual operating cash flows,
which include reimbursements from tenants, will provide the necessary funding
for such capital improvements. These cash flows will be sufficient to cover
tenant finish costs associated with renewing or replacing current tenant leases
as their leases expire and capital expenditures that will not be reimbursed by
tenants.
Including its share of unconsolidated affiliates' capital expenditures, the
Company spent $19.1 million for revenue generating capital expenditures, or
tenant allowances, during the first nine months of 2002. Revenue generating
capital expenditures generate increased rents from these tenants over the terms
of their leases. Revenue neutral capital expenditures, a majority of which are
recovered from the tenants, were $10.5 million for the first nine months of
2002. Year-to-date, revenue neutral capital expenditures included $4.0 million
for resurfacing and improving the lighting of parking lots and $6.4 million for
roof repairs and replacements. For the nine months ended September 30, 2002
revenue enhancing capital expenditures, or remodeling and renovation costs, were
$44.4 million, a portion of which is recovered from tenants.
25
OTHER
The Company believes the Properties are in compliance, in all material
respects, with all federal, state and local ordinances and regulations regarding
the handling, discharge and emission of hazardous or toxic substances. The
Company has not been notified by any governmental authority, and is not
otherwise aware, of any material noncompliance, liability or claim relating to
hazardous or toxic substances in connection with any of our present or former
properties. Therefore, the Company has not recorded any material liability in
connection with environmental matters.
ACCOUNTING FOR STOCK OPTIONS
Historically, the Company has accounted for stock options using the
intrinsic value method of APB No. 25, "Accounting for Stock Issued to
Employees". Effective January 1, 2003, the Company will begin recording the
expense associated with stock options granted after January 1, 2003, on a
prospective basis in accordance with the fair value and transition provisions of
Statement of Financial Accountings Standards No. 123, "Accounting for
Stock-Based Compensation."
RECENT ACCOUNTING PRONOUNCEMENTS
As described in Note 11 to the unaudited consolidated financial statements,
the FASB has issued certain statements, which are effective for the subsequent
year.
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on the
Company because of the relatively low inflation rate. Substantially all tenant
leases do, however, contain provisions designed to protect the Company from the
impact of inflation. These provisions include clauses enabling the Company to
receive percentage rentals based on tenant's gross sales, which generally
increase as prices rise, and/or escalation clauses, which generally increase
rental rates during the terms of the leases. In addition, many of the leases are
for terms of less than ten years which may enable the Company to replace
existing leases with new leases at higher base and/or percentage rentals if
rents of the existing leases are below the then existing market rate. Most of
the leases require the tenants to pay their share of operating expenses,
including common area maintenance, real estate taxes and insurance, thereby
reducing the Company's exposure to increases in costs and operating expenses
resulting from inflation.
26
FUNDS FROM OPERATIONS
Funds from Operations ("FFO") is defined by the National Association of
Real Estate Investments Trusts ("NAREIT") as net income (computed in accordance
with accounting principals generally accepted in the United States) excluding
gains (or losses) on sales of operating properties, plus depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for FFO from unconsolidated partnerships and joint
ventures will be calculated on the same basis. The Company defines FFO available
for distribution to common shareholders as defined above by NAREIT less
preferred dividends and gains or losses on outparcel sales. The Company computes
FFO in accordance with the NAREIT recommendation concerning finance costs and
non-real estate depreciation.
The Company believes that FFO provides an additional indicator of the
financial performance of the Properties. The use of FFO as an indicator of
financial performance is influenced not only by the operations of the Properties
and interest rates, but also by the capital structures of the Company and the
Operating Partnership. Accordingly, FFO will be one of the significant factors
considered by the Board of Directors in determining the amount of cash
distributions the Operating Partnership will make to its partners, including the
REIT.
FFO does not represent cash flow from operations as defined by accounting
principals generally accepted in the United States, is not necessarily
indicative of cash available to fund all cash flow needs and should not be
considered as an alternative to net income (loss) for purposes of evaluating the
Company's operating performance or to cash flow as a measure of liquidity.
Gains on outparcel sales in the third quarter of 2002 were $497,000, or
$0.01 per diluted, fully converted share as compared to $1.1 million, or $0.02
per diluted, fully converted share in the third quarter of 2001. In the nine
months ended September 30, 2002, gains on outparcel sales would have added $2.7
million, or $0.05 per diluted, fully converted share, as compared to $5.8
million, or $0.12 per diluted, fully converted share, in 2001.
For the three months ended September 30, 2002, FFO increased by $7.6
million, or 15.6%, to $56.7 million as compared to $49.1 million for the same
period in 2001. For the nine months ended September 30, 2002, FFO increased by
$33.6 million, or 24.1%, to $172.6 million as compared to $139.0 million for the
same period in 2001. The increases in FFO for both periods are primarily
attributable to reduced interest expense, the results of operations of the
properties added to the portfolio and a full nine months of operations for the
properties acquired from Jacobs compared to eight months in 2001. These
increases were offset by reductions related to operating properties that were
sold or contributed to a joint venture. Lease termination fees were $0.5 million
less in the third quarter of 2002 as compared to the third quarter of 2001 and
$4.1 million more for the nine months ended September 30, 2002, as compared to
the comparable prior year period.
27
The Company's calculation of FFO is as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------
2002 2001 2002 2001
-------------- -------------- ------------ -------------
Income from operations $ 33,320 $ 26,523 $ 103,060 $ 75,373
ADD:
Depreciation and amortization from consolidated
properties 24,182 21,668 70,478 62,220
Income from operations of unconsolidated
affiliates 2,353 1,770 6,455 4,743
Depreciation and amortization from
unconsolidated affiliates 1,365 951 3,137 2,780
Operating income of discontinued operations 20 327 352 855
Depreciation and amortization from discontinued
operations -- 169 295 516
LESS:
Preferred dividends (3,692) (1,617) (7,319) (4,851)
Minority investors' share of income from
operations in eleven properties (389) (354) (2,515) (1,346)
Minority investors share of depreciation and
amortization in eleven properties (307) (207) (1,001) (822)
Depreciation and amortization of non-real estate
assets and finance costs (128) (152) (355) (441)
-------------- -------------- ------------ -------------
FUNDS FROM OPERATIONS $ 56,724 $ 49,078 $ 172,587 $ 139,027
============== ============== ============ =============
DILUTED WEIGHTED AVERAGE SHARES AND POTENTIAL
DILUTIVE COMMON SHARES WITH OPERATING
PARTNERSHIP UNITS FULLY CONVERTED 54,366 50,533 54,013 48,819
Item 3: Quantitative and Qualitative
Disclosure About Market Risk
The Company has exposure to interest rate risk on its debt obligations and
interest rate instruments. Based on the Company's share of consolidated and
unconsolidated variable rate debt in place at September 30, 2002, excluding debt
fixed using an interest rate swap agreement, a 0.5% increase or decrease in
interest rates on this variable rate debt would decrease or increase cash flows
by approximately $1.7 million and, due to the effect of capitalized interest,
annual earnings by approximately $1.5 million.
28
Item 4: Controls and Procedures
Within the 90 days prior to the date of this quarterly report, an
evaluation was performed under the supervision of the Company's Chief Executive
Officer and Chief Financial Officer and with the participation of the Company's
management, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
No significant changes have been made in the Company's internal controls or in
other factors that could significantly affect these internal controls subsequent
to the date of the evaluation.
29
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matter to a Vote of Security Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
A. Exhibits
99.1 Chief Executive Officer Certification of Form 10-Q.
99.2 Chief Financial Officer Certification of Form 10-Q.
B. Reports on Form 8-K
The following items were reported:
The outline from the Company's October 30, 2002 conference
call with analysts and investors regarding earnings (Item 9)
was filed on October 30, 2002.
30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
--------------------------------------------
Vice Chairman of the Board, Chief Financial
Officer and Treasurer
(Authorized Officer of the Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: November 14, 2002
31
CERTIFICATIONS
I, Charles B. Lebovitz, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of CBL & Associates
Properties, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Charles B. Lebovitz
------------------------------------
Charles B. Lebovitz, Chief Executive Officer
32
I, John N. Foy, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of CBL & Associates
Properties, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 14, 2002
/s/ John N. Foy
------------------------------------
John N. Foy, Chief Financial Officer
33
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CBL & ASSOCIATES PROPERTIES,
INC. (the "Company") on Form 10-Q for the period ending September 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Charles B. Lebovitz, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Charles B. Lebovitz
- ------------------------------------
Charles B. Lebovitz, Chief Executive Officer
November 14, 2002
- ------------------------------------
Date
34
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CBL & ASSOCIATES PROPERTIES,
INC. (the "Company") on Form 10-Q for the period ending September 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, John N. Foy, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ John N. Foy
- ------------------------------------
John N. Foy, Vice Chairman of the Board,
Chief Financial Officer and Treasurer
November 14, 2002
- ------------------------------------
Date
35