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FORM 10-Q |
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009
OR
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
COMMISSION FILE NO. 1-12494
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CBL & ASSOCIATES PROPERTIES, INC. |
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(Exact name of registrant as specified in its charter) |
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DELAWARE |
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62-1545718 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN 37421-6000
(Address of principal executive office, including zip code)
423.855.0001
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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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. |
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Yes x |
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No o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x |
Accelerated filer o |
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Non-accelerated filer o (Do not check if smaller reporting company) |
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Smaller Reporting Company o |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
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Yes o |
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No x |
As of August 5, 2009, there were 137,859,925 shares of common stock, par value $0.01 per share, outstanding.
1
CBL & Associates Properties, Inc.
Table of Contents
2
PART I – FINANCIAL INFORMATION
CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
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June 30, |
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December 31, |
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ASSETS |
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Real estate assets: |
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Land |
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$ |
926,588 |
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$ |
902,504 |
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Buildings and improvements |
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7,567,502 |
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7,503,334 |
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||||
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8,494,090 |
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8,405,838 |
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Accumulated depreciation |
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(1,433,863 |
) |
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(1,310,173 |
) |
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||||
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7,060,227 |
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7,095,665 |
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Developments in progress |
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217,207 |
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225,815 |
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||||
Net investment in real estate assets |
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7,277,434 |
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7,321,480 |
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Cash and cash equivalents |
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50,789 |
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51,227 |
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Cash held in escrow |
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— |
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2,700 |
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Receivables: |
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Tenant, net of allowance for doubtful accounts of $2,133 in 2009 and $1,910 in 2008 |
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69,386 |
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74,402 |
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Other |
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12,725 |
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12,145 |
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Mortgage and other notes receivable |
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51,380 |
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58,961 |
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Investments in unconsolidated affiliates |
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196,106 |
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207,618 |
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Intangible lease assets and other assets |
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285,712 |
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305,802 |
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$ |
7,943,532 |
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$ |
8,034,335 |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
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Mortgage and other notes payable |
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$ |
5,688,602 |
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$ |
6,095,676 |
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Accounts payable and accrued liabilities |
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291,152 |
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329,991 |
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Total liabilities |
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5,979,754 |
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6,425,667 |
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Commitments and contingencies (Notes 3, 5 and 11) |
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Redeemable noncontrolling interests: |
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Redeemable noncontrolling partnership interests |
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91,792 |
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18,393 |
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Redeemable noncontrolling preferred joint venture interest |
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421,457 |
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421,279 |
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Total redeemable noncontrolling interests |
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513,249 |
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439,672 |
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Shareholders’ equity: |
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Preferred stock, $.01 par value, 15,000,000 shares authorized: |
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7.75% Series C cumulative redeemable preferred stock, 460,000 shares outstanding in 2009 and 2008 |
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5 |
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5 |
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7.375% Series D cumulative redeemable preferred stock, 700,000 shares outstanding in 2009 and 2008 |
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7 |
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7 |
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Common Stock, $.01 par value, 180,000,000 shares authorized, 137,855,513 and 66,394,844 issued and outstanding in 2009 and 2008, respectively |
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1,378 |
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664 |
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Additional paid-in capital |
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1,420,214 |
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993,941 |
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Accumulated other comprehensive loss |
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(6,968 |
) |
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(12,786 |
) |
Accumulated deficit |
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(223,202 |
) |
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(193,307 |
) |
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Total shareholders’ equity |
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1,191,434 |
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788,524 |
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Noncontrolling interests |
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259,095 |
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380,472 |
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||||
Total equity |
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1,450,529 |
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1,168,996 |
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$ |
7,943,532 |
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$ |
8,034,335 |
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The accompanying notes are an integral part of these balance sheets.
3
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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2009 |
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2008 |
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2009 |
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2008 |
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REVENUES: |
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Minimum rents |
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$ |
170,491 |
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$ |
177,943 |
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$ |
342,428 |
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$ |
352,474 |
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Percentage rents |
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1,604 |
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1,610 |
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6,408 |
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6,606 |
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Other rents |
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4,142 |
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4,204 |
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8,422 |
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9,218 |
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Tenant reimbursements |
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81,695 |
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79,952 |
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163,179 |
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166,375 |
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Management, development and leasing fees |
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1,615 |
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2,484 |
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4,080 |
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5,422 |
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Other |
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6,977 |
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6,290 |
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13,067 |
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13,320 |
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Total revenues |
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266,524 |
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272,483 |
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537,584 |
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553,415 |
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EXPENSES: |
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Property operating |
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39,355 |
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44,094 |
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83,372 |
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92,386 |
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Depreciation and amortization |
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75,793 |
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73,064 |
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154,104 |
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148,144 |
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Real estate taxes |
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24,449 |
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23,898 |
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48,603 |
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48,077 |
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Maintenance and repairs |
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13,416 |
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15,003 |
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29,410 |
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32,919 |
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General and administrative |
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10,893 |
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11,114 |
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22,372 |
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23,645 |
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Other |
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5,914 |
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6,541 |
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11,071 |
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13,540 |
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||||||||
Total expenses |
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169,820 |
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173,714 |
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348,932 |
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358,711 |
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Income from operations |
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96,704 |
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98,769 |
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188,652 |
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194,704 |
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Interest and other income |
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1,362 |
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2,182 |
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2,943 |
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4,909 |
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Interest expense |
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(72,842 |
) |
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(76,455 |
) |
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(144,727 |
) |
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(156,679 |
) |
Impairment of investment |
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— |
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— |
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(7,706 |
) |
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— |
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Gain (loss) on sales of real estate assets |
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72 |
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4,269 |
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(67 |
) |
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7,345 |
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Equity in earnings (losses) of unconsolidated affiliates |
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62 |
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(186 |
) |
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1,596 |
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|
793 |
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Income tax provision |
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(152 |
) |
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(3,838 |
) |
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(755 |
) |
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(4,195 |
) |
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Income from continuing operations |
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25,206 |
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24,741 |
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39,936 |
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46,877 |
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Operating income of discontinued operations |
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86 |
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|
1,053 |
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20 |
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1,335 |
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Gain (loss) on discontinued operations |
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(12 |
) |
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3,112 |
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(72 |
) |
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3,112 |
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Net income |
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25,280 |
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28,906 |
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39,884 |
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51,324 |
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Net income attributable to noncontrolling interests: |
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Operating Partnership |
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(5,109 |
) |
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(7,385 |
) |
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(6,415 |
) |
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(12,127 |
) |
Other consolidated subsidiaries |
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(6,580 |
) |
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(6,402 |
) |
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(12,711 |
) |
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(12,451 |
) |
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Net income attributable to the Company |
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13,591 |
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15,119 |
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20,758 |
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26,746 |
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Preferred dividends |
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(5,454 |
) |
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(5,454 |
) |
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(10,909 |
) |
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(10,909 |
) |
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Net income available to common shareholders |
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$ |
8,137 |
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$ |
9,665 |
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$ |
9,849 |
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$ |
15,837 |
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The accompanying notes are an integral part of these statements.
4
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
(Continued)
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Three Months Ended |
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Six Months Ended |
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2009 |
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2008 |
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2009 |
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2008 |
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Basic per share data attributable to common shareholders: |
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Income from continuing operations, net of preferred dividends |
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$ |
0.10 |
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$ |
0.10 |
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$ |
0.13 |
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$ |
0.19 |
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Discontinued operations |
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— |
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|
0.04 |
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— |
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|
0.03 |
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Net income available to common shareholders |
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$ |
0.10 |
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$ |
0.14 |
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$ |
0.13 |
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$ |
0.22 |
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Weighted average common shares outstanding |
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82,918 |
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71,062 |
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77,072 |
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|
71,027 |
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Diluted per share data attributable to common shareholders: |
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Income from continuing operations, net of preferred dividends |
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$ |
0.10 |
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$ |
0.10 |
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$ |
0.13 |
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$ |
0.19 |
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Discontinued operations |
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— |
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|
0.04 |
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— |
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|
0.03 |
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Net income available to common shareholders |
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$ |
0.10 |
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$ |
0.14 |
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$ |
0.13 |
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$ |
0.22 |
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Weighted average common and potential dilutive common shares outstanding |
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|
82,957 |
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71,250 |
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|
77,109 |
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|
71,209 |
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Amounts attributable to common shareholders: |
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Income from continuing operations, net of preferred dividends |
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$ |
8,092 |
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$ |
7,259 |
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$ |
9,880 |
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$ |
13,269 |
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Discontinued operations |
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45 |
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|
2,406 |
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(31 |
) |
|
2,568 |
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Net income available to common shareholders |
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$ |
8,137 |
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$ |
9,665 |
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$ |
9,849 |
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$ |
15,837 |
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Dividends declared per common share |
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$ |
0.1100 |
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$ |
0.5450 |
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$ |
0.4800 |
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$ |
1.0900 |
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5
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Equity |
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Shareholders’ Equity |
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Redeemable |
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Preferred |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Noncontrolling |
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Total |
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Comprehensive |
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|||||||||||||||||||||||||||||||
Balance, January 1, 2008 |
|
$ |
43,145 |
|
$ |
12 |
|
$ |
662 |
|
$ |
964,676 |
|
$ |
(13 |
) |
$ |
(70,154 |
) |
$ |
895,183 |
|
$ |
482,217 |
|
$ |
1,377,400 |
|
$ |
— |
|
Net income |
|
|
2,654 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,746 |
|
|
26,746 |
|
|
11,999 |
|
|
38,745 |
|
|
41,400 |
|
Net unrealized loss on available-for-sale securities |
|
|
(62 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(2,631 |
) |
|
— |
|
|
(2,631 |
) |
|
(1,958 |
) |
|
(4,589 |
) |
|
(4,651 |
) |
Unrealized loss on hedging instruments |
|
|
(41 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1,752 |
) |
|
— |
|
|
(1,752 |
) |
|
(1,305 |
) |
|
(3,057 |
) |
|
(3,098 |
) |
Unrealized gain on foreign currency translation adjustment |
|
|
21 |
|
|
— |
|
|
— |
|
|
— |
|
|
892 |
|
|
— |
|
|
892 |
|
|
664 |
|
|
1,556 |
|
|
1,577 |
|
Dividends declared - common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(72,199 |
) |
|
(72,199 |
) |
|
— |
|
|
(72,199 |
) |
|
— |
|
Dividends declared - preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,909 |
) |
|
(10,909 |
) |
|
— |
|
|
(10,909 |
) |
|
— |
|
Issuance of common stock and restricted common stock |
|
|
— |
|
|
— |
|
|
1 |
|
|
327 |
|
|
— |
|
|
— |
|
|
328 |
|
|
— |
|
|
328 |
|
|
— |
|
Cancellation of restricted common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
(507 |
) |
|
— |
|
|
— |
|
|
(507 |
) |
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— |
|
|
(507 |
) |
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|
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Exercise of stock options |
|
|
— |
|
|
— |
|
|
— |
|
|
583 |
|
|
— |
|
|
— |
|
|
583 |
|
|
— |
|
|
583 |
|
|
— |
|
Accelerated vesting of share-based compensation |
|
|
— |
|
|
— |
|
|
— |
|
|
35 |
|
|
— |
|
|
— |
|
|
35 |
|
|
— |
|
|
35 |
|
|
— |
|
Accrual under deferred compensation arrangements |
|
|
— |
|
|
— |
|
|
— |
|
|
53 |
|
|
— |
|
|
— |
|
|
53 |
|
|
— |
|
|
53 |
|
|
— |
|
Amortization of deferred compensation |
|
|
— |
|
|
— |
|
|
— |
|
|
2,487 |
|
|
— |
|
|
— |
|
|
2,487 |
|
|
— |
|
|
2,487 |
|
|
— |
|
Additions to deferred financing costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
23 |
|
|
23 |
|
|
|
|
Income tax benefit from share-based compensation |
|
|
67 |
|
|
— |
|
|
— |
|
|
1,590 |
|
|
— |
|
|
— |
|
|
1,590 |
|
|
2,079 |
|
|
3,669 |
|
|
— |
|
Distributions to noncontrolling interests |
|
|
(3,401 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(55,328 |
) |
|
(55,328 |
) |
|
— |
|
Contributions from noncontrolling interest in Operating Partnership |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,567 |
|
|
2,567 |
|
|
— |
|
Adjustment for noncontrolling interests |
|
|
(617 |
) |
|
— |
|
|
— |
|
|
525 |
|
|
— |
|
|
— |
|
|
525 |
|
|
92 |
|
|
617 |
|
|
— |
|
Reclassification of noncontrolling interests related to deconsolidation |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,257 |
) |
|
(3,257 |
) |
|
— |
|
Adjustment to record redeemable noncontolling partnership interest at redemption value |
|
|
(113 |
) |
|
— |
|
|
— |
|
|
113 |
|
|
— |
|
|
— |
|
|
113 |
|
|
— |
|
|
113 |
|
|
— |
|
|
|
|
|
|
|||||||||||||||||||||||||||
Balance, June 30, 2008 |
|
$ |
41,653 |
|
$ |
12 |
|
$ |
663 |
|
$ |
969,882 |
|
$ |
(3,504 |
) |
$ |
(126,516 |
) |
$ |
840,537 |
|
$ |
437,793 |
|
$ |
1,278,330 |
|
$ |
35,228 |
|
|
|
|
|
|
6
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Redeemable |
|
Preferred |
|
Common |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total |
|
Noncontrolling |
|
Total |
|
Comprehensive |
||||||||||
|
|
|
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Balance, January 1, 2009 |
|
$ |
18,393 |
|
$ |
12 |
|
$ |
664 |
|
$ |
993,941 |
|
$ |
(12,786 |
) |
$ |
(193,307 |
) |
$ |
788,524 |
|
$ |
380,472 |
|
$ |
1,168,996 |
|
$ |
— |
Net income |
|
|
2,688 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
20,758 |
|
|
20,758 |
|
|
6,095 |
|
|
26,853 |
|
|
29,541 |
Net unrealized gain (loss) on available-for-sale securities |
|
|
193 |
|
|
— |
|
|
— |
|
|
— |
|
|
192 |
|
|
— |
|
|
192 |
|
|
(249 |
) |
|
(57 |
) |
|
136 |
Unrealized gain on hedging instruments |
|
|
342 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,053 |
|
|
— |
|
|
3,053 |
|
|
1,728 |
|
|
4,781 |
|
|
5,123 |
Realized loss on foreign currency translation adjustment |
|
|
3 |
|
|
— |
|
|
— |
|
|
— |
|
|
44 |
|
|
— |
|
|
44 |
|
|
28 |
|
|
72 |
|
|
75 |
Unrealized gain on foreign currency translation adjustment |
|
|
350 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,529 |
|
|
— |
|
|
2,529 |
|
|
1,300 |
|
|
3,829 |
|
|
4,179 |
Dividends declared - common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(39,744 |
) |
|
(39,744 |
) |
|
— |
|
|
(39,744 |
) |
|
— |
Dividends declared - preferred stock |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,909 |
) |
|
(10,909 |
) |
|
— |
|
|
(10,909 |
) |
|
— |
Issuance of common stock and restricted common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
414 |
|
|
— |
|
|
— |
|
|
414 |
|
|
— |
|
|
414 |
|
|
— |
Issuance of common stock for dividend |
|
|
— |
|
|
— |
|
|
48 |
|
|
14,691 |
|
|
— |
|
|
— |
|
|
14,739 |
|
|
— |
|
|
14,739 |
|
|
— |
Issuance of common stock in equity offering |
|
|
— |
|
|
— |
|
|
666 |
|
|
380,936 |
|
|
— |
|
|
— |
|
|
381,602 |
|
|
— |
|
|
381,602 |
|
|
— |
Cancellation of restricted common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
(117 |
) |
|
— |
|
|
— |
|
|
(117 |
) |
|
— |
|
|
(117 |
) |
|
— |
Accrual under deferred compensation arrangements |
|
|
— |
|
|
— |
|
|
— |
|
|
39 |
|
|
— |
|
|
— |
|
|
39 |
|
|
— |
|
|
39 |
|
|
— |
Amortization of deferred compensation |
|
|
— |
|
|
— |
|
|
— |
|
|
1,515 |
|
|
— |
|
|
— |
|
|
1,515 |
|
|
— |
|
|
1,515 |
|
|
— |
Additions to deferred financing costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
23 |
|
|
23 |
|
|
— |
Transfer from noncontrolling interests to redeemable noncontrolling interests |
|
|
82,970 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(82,970 |
) |
|
(82,970 |
) |
|
— |
Issuance of noncontrolling interests for distribution |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,140 |
|
|
4,140 |
|
|
— |
Distributions to noncontrolling interests |
|
|
(6,262 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(29,062 |
) |
|
(29,062 |
) |
|
— |
Purchase of noncontrolling interests in other consolidated subsidiaries |
|
|
— |
|
|
— |
|
|
— |
|
|
217 |
|
|
— |
|
|
— |
|
|
217 |
|
|
(717 |
) |
|
(500 |
) |
|
— |
Adjustment for noncontrolling interests |
|
|
(6,238 |
) |
|
— |
|
|
— |
|
|
27,931 |
|
|
— |
|
|
— |
|
|
27,931 |
|
|
(21,693 |
) |
|
6,238 |
|
|
— |
Adjustment to record redeemable noncontrolling partnership interest at redemption value |
|
|
(647 |
) |
|
— |
|
|
— |
|
|
647 |
|
|
— |
|
|
— |
|
|
647 |
|
|
— |
|
|
647 |
|
|
— |
|
|
|
|
|||||||||||||||||||||||||||
Balance, June 30, 2009 |
|
$ |
91,792 |
|
$ |
12 |
|
$ |
1,378 |
|
$ |
1,420,214 |
|
$ |
(6,968 |
) |
$ |
(223,202 |
) |
$ |
1,191,434 |
|
$ |
259,095 |
|
$ |
1,450,529 |
|
$ |
39,054 |
|
|
|
|
7
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
||||
|
|
|
|||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
||||
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
|
$ |
39,884 |
|
$ |
51,324 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
|
96,393 |
|
|
89,193 |
|
Amortization |
|
|
62,142 |
|
|
64,255 |
|
Net amortization of debt premiums and discounts |
|
|
(3,742 |
) |
|
(3,936 |
) |
Net amortization of above- and below-market leases |
|
|
(3,112 |
) |
|
(5,108 |
) |
(Gain) loss on sales of real estate assets |
|
|
67 |
|
|
(7,345 |
) |
Realized foreign currency loss |
|
|
75 |
|
|
— |
|
(Gain) loss on discontinued operations |
|
|
72 |
|
|
(3,112 |
) |
Issuance of stock under incentive plan |
|
|
332 |
|
|
— |
|
Write-off of development projects |
|
|
143 |
|
|
2,911 |
|
Share-based compensation expense |
|
|
1,543 |
|
|
2,727 |
|
Income tax benefit from share-based compensation |
|
|
— |
|
|
3,736 |
|
Impairment of investment |
|
|
7,706 |
|
|
— |
|
Equity in earnings of unconsolidated affiliates |
|
|
(1,596 |
) |
|
(793 |
) |
Distributions of earnings from unconsolidated affiliates |
|
|
6,020 |
|
|
6,943 |
|
Changes in: |
|
|
|
|
|
|
|
Tenant and other receivables |
|
|
4,436 |
|
|
4,277 |
|
Other assets |
|
|
729 |
|
|
(430 |
) |
Accounts payable and accrued liabilities |
|
|
(11,947 |
) |
|
(14,149 |
) |
|
|
|
|
||||
Net cash provided by operating activities |
|
|
199,145 |
|
|
190,493 |
|
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Additions to real estate assets |
|
|
(115,718 |
) |
|
(252,909 |
) |
Cash placed in escrow |
|
|
2,699 |
|
|
(2,650 |
) |
Proceeds from sales of real estate assets |
|
|
4,722 |
|
|
42,113 |
|
Additions to mortgage notes receivable |
|
|
(4,437 |
) |
|
(9,741 |
) |
Payments received on mortgage notes receivable |
|
|
7,437 |
|
|
103,964 |
|
Additional investments in and advances to unconsolidated affiliates |
|
|
(42,012 |
) |
|
(71,119 |
) |
Distributions in excess of equity in earnings of unconsolidated affiliates |
|
|
45,464 |
|
|
23,365 |
|
Purchase of noncontrolling interests in other consolidated subsidiary |
|
|
(500 |
) |
|
— |
|
Changes in other assets |
|
|
15,439 |
|
|
(10,389 |
) |
|
|
|
|
||||
Net cash used in investing activities |
|
|
(86,906 |
) |
|
(177,366 |
) |
|
|
|
|
The accompanying notes are an integral part of these statements.
8
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
(Continued)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
||||
|
|
|
|||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
||||
|
|||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds from mortgage and other notes payable |
|
$ |
347,017 |
|
$ |
764,387 |
|
Principal payments on mortgage and other notes payable |
|
|
(750,349 |
) |
|
(622,553 |
) |
Additions to deferred financing costs |
|
|
(4,075 |
) |
|
(2,870 |
) |
Proceeds from issuances of common stock |
|
|
381,686 |
|
|
171 |
|
Proceeds from exercises of stock options |
|
|
— |
|
|
584 |
|
Income tax benefit from share-based compensation |
|
|
— |
|
|
(3,736 |
) |
Contributions from noncontrolling interests in other consolidated subsidiaries |
|
|
— |
|
|
2,567 |
|
Distributions to noncontrolling interests |
|
|
(41,349 |
) |
|
(67,938 |
) |
Dividends paid to holders of preferred stock |
|
|
(10,909 |
) |
|
(10,909 |
) |
Dividends paid to common shareholders |
|
|
(34,405 |
) |
|
(72,206 |
) |
|
|
|
|
||||
Net cash used in financing activities |
|
|
(112,384 |
) |
|
(12,503 |
) |
|
|
|
|
||||
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH |
|
|
(293 |
) |
|
— |
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
(145 |
) |
|
624 |
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
51,227 |
|
|
65,826 |
|
|
|
|
|
||||
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
50,789 |
|
$ |
66,450 |
|
|
|
|
|
||||
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
148,309 |
|
$ |
162,076 |
|
|
|
|
|
The accompanying notes are an integral part of these statements.
9
CBL & Associates Properties, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except per share data)
Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air centers, community centers and office properties. CBL’s shopping center properties are located in 27 states and in Brazil, but are primarily in the southeastern and midwestern United States.
CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”). At June 30, 2009, the Operating Partnership owned controlling interests in 75 regional malls/open-air centers, 30 associated centers (each adjacent to a regional mall), eight community centers, one mixed-use center and 13 office buildings, including CBL’s corporate office building. The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a variable interest entity. At June 30, 2009, the Operating Partnership owned noncontrolling interests in nine regional malls/open-air centers, three associated centers, five community centers and six office buildings. Because one or more of the other partners have substantive participating rights, the Operating Partnership does not control these partnerships and joint ventures and, accordingly, accounts for these investments using the equity method. The Operating Partnership had four community/open-air centers (three of which are owned in joint ventures) under construction at June 30, 2009. The Operating Partnership also holds options to acquire certain development properties owned by third parties.
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At June 30, 2009, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 71.6% limited partner interest for a combined interest held by CBL of 72.6%.
The noncontrolling interest in the Operating Partnership is held primarily by CBL & Associates, Inc. and its affiliates (collectively “CBL’s Predecessor”) and by affiliates of The Richard E. Jacobs Group, Inc. (“Jacobs”). CBL’s Predecessor contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993. Jacobs contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for limited partner interests when the Operating Partnership acquired the majority of Jacobs’ interests in 23 properties in January 2001 and the balance of such interests in February 2002. At June 30, 2009, CBL’s Predecessor owned a 9.8% limited partner interest, Jacobs owned a 12.1% limited partner interest and third parties owned a 5.5% limited partner interest in the Operating Partnership. CBL’s Predecessor also owned 7.2 million shares of CBL’s common stock at June 30, 2009, for a total combined effective interest of 13.6% in the Operating Partnership.
The Operating Partnership conducts CBL’s property management and development activities through CBL & Associates Management, Inc. (the “Management Company”) to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”). The Operating Partnership owns 100% of both of the Management Company’s preferred stock and common stock.
CBL, the Operating Partnership and the Management Company are collectively referred to herein as “the Company”.
The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the
10
Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP 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. Material intercompany transactions have been eliminated. The results for the interim period ended June 30, 2009, are not necessarily indicative of the results to be obtained for the full fiscal year.
Certain historical amounts have been reclassified to conform to the current year presentation. Certain properties for which the financial results were originally reported as discontinued operations in the condensed consolidated financial statements for the three and six month periods ended June 30, 2008 no longer meet the criteria to be classified as held for sale and are, thus, currently reflected in continuing operations for all periods presented. Except where noted, the information presented in the Notes to Unaudited Condensed Consolidated Financial Statements excludes discontinued operations. See Note 6 for further discussion. Also see Notes 4 and 8 for discussion regarding the impact on the presentation of the condensed consolidated financial statements and share information related to the adoption of certain accounting pronouncements as of January 1, 2009.
In April 2009, the Company paid its first quarter dividend on its common stock. The Company issued 4,754,355 shares of its common stock in connection with the dividend, which resulted in an increase of 7.2% in the number of shares outstanding. The Company elected to treat the issuance of its common stock as a stock dividend for earnings per share purposes. Therefore, all share and per share information related to earnings per share for all periods presented have been increased proportionately to reflect the additional common stock issued. See Note 8 for further discussion.
The Company has evaluated subsequent events through August 10, 2009, which is the date these financial statements were issued.
These condensed consolidated financial statements should be read in conjunction with CBL’s audited consolidated financial statements and notes thereto included in its Current Report on Form 8-K dated July 27, 2009.
Note 2 – Recent Accounting Pronouncements
Accounting Pronouncements Adopted
Effective January 1, 2009, the Company adopted the previously deferred portion of Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, which applies to fair value measurements of nonfinancial assets and liabilities. The adoption of these provisions did not have an impact on the Company’s condensed consolidated financial statements. See Note 3 for further information.
Effective January 1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51. See Noncontrolling Interests in Note 4 for further information regarding the adoption of this standard, which did have an impact on the Company’s condensed consolidated financial statements.
Effective January 1, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements, but did require additional disclosures regarding the Company’s hedging activities. See Interest Rate Hedge Instruments in Note 5 for further information.
11
Effective January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The adoption did not have a material impact on the Company’s earnings per share. See Note 8 for further information.
Effective January 1, 2009, the Company adopted SFAS No. 141(R), Business Combinations, which changes certain aspects of current business combination accounting for business combinations entered into subsequent to December 31, 2008. SFAS No. 141(R) requires, among other things, that entities generally recognize 100 percent of the fair values of assets acquired, liabilities assumed and noncontrolling interests in acquisitions of less than a 100 percent controlling interest when the acquisition constitutes a change in control of the acquired entity. Shares issued as consideration for a business combination are to be measured at fair value on the acquisition date and contingent consideration arrangements are to be recognized at their fair values on the date of acquisition, with subsequent changes in fair value generally reflected in earnings. Pre-acquisition gain and loss contingencies generally are to be recognized at their fair values on the acquisition date and any acquisition-related transaction costs are to be expensed as incurred. We will apply the provisions of SFAS No. 141(R) to future business combinations.
Effective January 1, 2009, the Company adopted FSP Financial Accounting Standard (“FAS”) 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP FAS 141(R)-1 amends the guidance of SFAS No. 141(R) related to accounting for pre-acquisition contingencies to more closely resemble the guidance originally issued under SFAS No. 141, Business Combinations. According to the provisions of FSP FAS 141(R)-1, an acquirer is required to recognize assets or liabilities arising from contingencies at fair value if fair value can be reasonably estimated. Otherwise, the asset or liability would generally be recognized in accordance with SFAS No. 5, Accounting for Contingencies. The provisions of FSP FAS 141(R)-1 are prospectively applied to business combinations completed subsequent to December 31, 2008. We will apply the provisions of SFAS No. 141(R)-1 to future business combinations.
Effective April 1, 2009, the Company adopted FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP FAS 157-4 provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly decreased or when circumstances indicate that a transaction is not orderly. The adoption of FSP FAS 157-4 did not have an impact on the Company’s condensed consolidated financial statements.
Effective April 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments to improve the presentation and disclosure of other-than-temporary impairments of debt and equity securities in an entity’s financial statements. FSP FAS 115-2 and FAS 124-2 does not amend the existing recognition and measurement guidance on other-than-temporary impairments of debt and equity securities. The adoption did not have an impact on the Company’s condensed consolidated financial statements, but did require additional disclosures regarding the Company’s other-than-temporary impairments. See Notes 3 and 4 for further information.
Effective April 1, 2009, the Company adopted FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. The pronouncement amends existing fair value disclosure and interim reporting requirements to require disclosures about fair value of financial instruments for interim reporting periods. The adoption did not have an impact on the Company’s condensed consolidated financial statements, but did require additional disclosures regarding the fair value of the Company’s financial instruments. See Note 3 for further information.
Effective April 1, 2009, the Company adopted SFAS No. 165, Subsequent Events. SFAS No. 165 establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet
12
date, but before the issuance of the financial statements. The pronouncement requires entities to disclose the date through which an entity has evaluated subsequent events, which for public companies, shall be the date the financial statements are issued. The adoption did not have an impact on the Company’s condensed consolidated financial statements.
Accounting Pronouncements Not Yet Effective
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – an Amendment of FASB Statement No. 140, which requires additional information regarding transfers of financial assets. SFAS No. 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional related disclosures. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009. The Company is currently assessing the potential impact, if any, of the adoption of SFAS No. 166 on its condensed consolidated financial statements.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting, or similar, rights should be consolidated. SFAS No. 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS No. 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS No. 167 also requires additional disclosure about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009. The Company is currently assessing the potential impact of the adoption of SFAS No. 167 on its condensed consolidated financial statements.
In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP. The Codification does not result in changes to current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one area. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. The Codification is effective for interim periods and fiscal years ending after September 15, 2009. The Codification will not have an impact on the Company’s condensed consolidated financial statements.
Note 3 – Fair Value Measurements
Pursuant to the provisions of SFAS No. 157, the Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
Level 1 – Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.
Level 2 – Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.
Level 3 – Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.
13
The following tables set forth information regarding the Company’s financial instruments that are measured at fair value in the condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at June 30, 2009 Using |
|
|||||||
|
|
|
|
|
|
||||||||
|
|
Fair Value at |
|
Quoted Prices in |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
||||||||
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
$ |
4,345 |
|
$ |
4,345 |
|
$ |
— |
|
$ |
— |
|
Privately held debt and equity securities |
|
|
2,475 |
|
|
— |
|
|
— |
|
|
2,475 |
|
Interest rate cap |
|
|
43 |
|
|
— |
|
|
43 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
10,431 |
|
$ |
— |
|
$ |
10,431 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2008 Using |
|
|||||||
|
|
|
|
|
|
||||||||
|
|
Fair Value at |
|
Quoted Prices in |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
||||||||
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
$ |
4,209 |
|
$ |
4,209 |
|
$ |
— |
|
$ |
— |
|
Privately held debt and equity securities |
|
|
4,875 |
|
|
— |
|
|
— |
|
|
4,875 |
|
Interest rate cap |
|
|
30 |
|
|
— |
|
|
30 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
15,570 |
|
$ |
— |
|
$ |
15,570 |
|
$ |
— |
|
Other assets in the condensed consolidated balance sheets include marketable securities consisting of corporate equity securities that are classified as available for sale. Net unrealized gains and losses on available-for-sale securities that are deemed to be temporary in nature are recorded as a component of accumulated other comprehensive loss in redeemable noncontrolling interests, shareholders’ equity and noncontrolling interests. If a decline in the value of an investment is deemed to be other than temporary, the investment is written down to fair value and an impairment loss is recognized in the current period to the extent of the decline in value. During the three and six months ended June 30, 2009, the Company did not recognize any realized gains or losses related to sales or disposals of marketable securities or other-than-temporary impairments. The fair value of the Company’s available-for-sale securities is based on quoted market prices and, thus, is classified under Level 1. The following is a summary of the available-for-sale securities held by the Company as of June 30, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
Adjusted Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
||||
|
|
|
|
|
|
||||||||
|
|||||||||||||
June 30, 2009 |
|
$ |
4,207 |
|
$ |
139 |
|
$ |
(1 |
) |
$ |
4,345 |
|
December 31, 2008 |
|
$ |
4,207 |
|
$ |
2 |
|
$ |
— |
|
$ |
4,209 |
|
The Company holds a secured convertible promissory note from, and a warrant to acquire shares of, Jinsheng Group (“Jinsheng”), an established mall operating and real estate development company located in Nanjing, China, in which the Company also holds a cost-method investment. The secured
14
convertible note is non-interest bearing and is secured by shares of Jinsheng. Since the secured convertible note is non-interest bearing and there is no active market for Jinsheng’s debt, the Company performed an analysis on the note considering credit risk and discounting factors to determine the fair value. The warrant was initially valued using estimated share price and volatility variables in a Black Scholes model. Due to the significant estimates and assumptions used in the valuation of the note and warrant, the Company has classified these under Level 3. As part of its investment review as of March 31, 2009, the Company determined that its investment in Jinsheng was impaired on an other-than-temporary basis due to a decline in expected future cash flows as a result of declining occupancy and sales related to the downturn of the real estate market in China. An impairment charge of $2,400 is recorded in the Company’s condensed consolidated statement of operations for the six month period ended June 30, 2009 to reduce the carrying values of the secured convertible note and warrant to their estimated fair values. The Company performed a quantitative and qualitative analysis of its investment as of June 30, 2009 and determined that the current balance of the secured convertible note and warrant of $2,475 is not impaired. A rollforward of the Company’s secured convertible note and warrant is as follows:
|
|
|
|
|
Balance at January 1, 2009 |
|
$ |
4,875 |
|
Impairment loss recognized in earnings |
|
|
(2,400 |
) |
|
|
|
||
Balance at June 30, 2009 |
|
$ |
2,475 |
|
|
|
|
See Note 4 for further discussion.
The Company uses interest rate swaps to mitigate the effect of interest rate movements on its variable-rate debt. The interest rate swaps are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related amendments. The Company currently has four interest rate swap agreements included in Accounts Payable and Accrued Liabilities that qualify as hedging instruments and are designated as cash flow hedges. The swaps have met the effectiveness test criteria since inception and changes in the fair values of the swaps are, thus, reported in other comprehensive income (loss) and will be reclassified into earnings in the same period or periods during which the hedged item affects earnings. The fair values of the Company’s interest rate swaps, classified under Level 2, are determined using a proprietary model which is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate (“LIBOR”) information, consideration of the Company’s credit standing, credit risk of the counterparties and reasonable estimates about relevant future market conditions.
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimate of fair value. The estimated fair value of mortgage and other notes payable was $5,227,981 and $5,506,725 at June 30, 2009 and December 31, 2008, respectively. The estimated fair value was calculated by discounting future cash flows for the notes payable using estimated market rates at which similar loans would be made currently.
SFAS No. 157 requires separate disclosure of assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a nonrecurring basis. As of June 30, 2009, no assets or liabilities were measured at fair value on a nonrecurring basis.
In February 2008, the FASB issued FSP 157-2 which delayed the effective date of SFAS No. 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. Effective January 1, 2009, the Company adopted this portion of SFAS No. 157. The adoption had no impact on the Company’s condensed consolidated financial statements. The provisions of SFAS No. 157 will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of SFAS No. 157.
15
Note 4 – Unconsolidated Affiliates, Noncontrolling Interests and Other Partially Owned Investments
Unconsolidated Affiliates
At June 30, 2009, the Company had investments in the following 22 entities, which are accounted for using the equity method of accounting:
|
|
|
|
|
|
Joint Venture |
|
Property Name |
|
Company's Interest |
|
|
|
|
|||
CBL Brazil |
|
Plaza Macae |
|
60.0% |
|
CBL Macapa |
|
Macapa Shopping |
|
60.0% |
|
CBL-TRS Joint Venture, LLC |
|
Friendly Center, The Shops at Friendly Center and a portfolio of six office buildings |
|
50.0% |
|
CBL-TRS Joint Venture II, LLC |
|
Renaissance Center |
|
50.0% |
|
Governor’s Square IB |
|
Governor’s Plaza |
|
50.0% |
|
Governor’s Square Company |
|
Governor’s Square |
|
47.5% |
|
High Pointe Commons, LP |
|
High Pointe Commons |
|
50.0% |
|
High Pointe Commons II-HAP, LP |
|
High Pointe Commons - Christmas Tree Shop |
|
50.0% |
|
Imperial Valley Mall L.P. |
|
Imperial Valley Mall |
|
60.0% |
|
Imperial Valley Peripheral L.P. |
|
Imperial Valley Mall (vacant land) |
|
60.0% |
|
JG Gulf Coast Town Center |
|
Gulf Coast Town Center |
|
50.0% |
|
Kentucky Oaks Mall Company |
|
Kentucky Oaks Mall |
|
50.0% |
|
Mall of South Carolina L.P. |
|
Coastal Grand—Myrtle Beach |
|
50.0% |
|
Mall of South Carolina Outparcel L.P. |
|
Coastal Grand—Myrtle Beach (vacant land) |
|
50.0% |
|
Mall Shopping Center Company |
|
Plaza del Sol |
|
50.6% |
|
Parkway Place L.P. |
|
Parkway Place |
|
50.0% |
|
Port Orange I, LLC |
|
The Pavilion at Port Orange Phase I |
|
50.0% |
|
Port Orange II, LLC |
|
The Pavilion at Port Orange Phase II |
|
50.0% |
|
Triangle Town Member LLC |
|
Triangle Town Center, Triangle Town Commons and Triangle Town Place |
|
50.0% |
|
|
|
|
|
|
|
West Melbourne I, LLC |
|
Hammock Landing Phase I |
|
50.0% |
|
West Melbourne II, LLC |
|
Hammock Landing Phase II |
|
50.0% |
|
York Town Center, LP |
|
York Town Center |
|
50.0% |
|
Condensed combined financial statement information for the unconsolidated affiliates is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for the Three Months |
|
Company’s Share for the |
|
||||||||
|
|
|
|
||||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
|
|
|
|
||||||||
|
|||||||||||||
Revenues |
|
$ |
40,547 |
|
$ |
39,633 |
|
$ |
23,124 |
|
$ |
20,575 |
|
Depreciation and amortization of real estate assets |
|
|
(13,238 |
) |
|
(13,003 |
) |
|
(7,555 |
) |
|
(6,694 |
) |
Interest expense |
|
|
(12,831 |
) |
|
(14,273 |
) |
|
(7,497 |
) |
|
(7,208 |
) |
Other operating expenses |
|
|
(13,786 |
) |
|
(13,223 |
) |
|
(8,092 |
) |
|
(6,859 |
) |
Gain (loss) on sales of real estate assets |
|
|
701 |
|
|
(6 |
) |
|
82 |
|
|
— |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
$ |
1,393 |
|
$ |
(872 |
) |
$ |
62 |
|
$ |
(186 |
) |
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for the Six Months |
|
Company’s Share for the |
|
||||||||
|
|
|
|
||||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
|
|
|
|
||||||||
|
|||||||||||||
Revenues |
|
$ |
82,379 |
|
$ |
77,919 |
|
$ |
47,992 |
|
$ |
40,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
|
(25,874 |
) |
|
(26,003 |
) |
|
(15,064 |
) |
|
(13,371 |
) |
Interest expense |
|
|
(25,519 |
) |
|
(27,279 |
) |
|
(15,362 |
) |
|
(13,834 |
) |
Other operating expenses |
|
|
(27,662 |
) |
|
(24,566 |
) |
|
(16,616 |
) |
|
(12,805 |
) |
Gain on sales of real estate assets |
|
|
1,689 |
|
|
466 |
|
|
646 |
|
|
429 |
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,013 |
|
$ |
537 |
|
$ |
1,596 |
|
$ |
793 |
|
|
|
|
|
|
|
In September 2008, the Company entered into a condominium partnership agreement with several individual investors, to acquire a 60% interest in a new retail development in Macapa, Brazil. In February 2009, the Company negotiated a divestment agreement with its Macapa partners obligating the Company to fund an additional $592 to reimburse the other partners for previously incurred land acquisition costs in exchange for the termination of any future obligations on the part of the Company to fund development costs, and to provide the other partners the option to purchase the Company’s interest in this partnership for an amount equal to its investment balance. As of June 30, 2009, the Company had incurred total funding of $825, including the $592 of reimbursements noted above.
In April 2008, the Company entered into a 50/50 joint venture, TENCO-CBL Servicos Imobiliarios S.A., with TENCO Realty S.A. to form a property management services organization in Brazil. The Company had contributed $2,000 and, in February 2009, negotiated the exercise of its put option right to divest of its portion of the investment in the TENCO-CBL Servicos Imobiliarios S.A. pursuant to the joint venture’s governing agreement. Under the terms of the agreement, TENCO Realty S.A. agreed to pay the Company $250 on March 31, 2009, and will pay monthly installments beginning January 2010 totaling $250 annually with an interest rate of 10% and a balloon payment of $1,250 on December 31, 2011.
Noncontrolling Interests
Effective January 1, 2009, the Company adopted the provisions of SFAS No. 160. SFAS No. 160 requires that a noncontrolling interest, previously referred to as a minority interest, in a consolidated subsidiary be reported as a separate component of equity and the amount of consolidated net income specifically attributable to a noncontrolling interest be presented separately, net of tax, below net income on the Company’s condensed consolidated statements of operations. These changes are to be applied on a retrospective basis. As a result, the adoption of SFAS No. 160 resulted in certain presentation reclassifications and adjustments in the Company’s condensed consolidated financial statements for all periods presented. Any previous minority interests for which the related partnership agreements either do not include redemption provisions or may be redeemed with the Company’s stock, at its election, were reclassified to noncontrolling interests in the equity section of the Company’s condensed consolidated balance sheets at their carrying value. The presentation of net income attributable to noncontrolling interests was reclassified in the condensed consolidated statements of operations for all periods presented and is included as a reduction to net income to derive net income attributable to the Company.
On a prospective basis, SFAS No. 160 also requires that after control of an investment or subsidiary is obtained, a change in ownership interest that does not result in a loss of control should be accounted for as an equity transaction. A change in ownership of a consolidated subsidiary that results in a loss of control and deconsolidation is a significant event that triggers gain or loss recognition, with the establishment of a new fair value basis in any remaining ownership interests. During the second quarter
17
of 2009, the Company purchased the outstanding ownership interest of a noncontrolling investor for $500. This purchase did not result in a loss of control and, thus, was accounted for as an equity transaction.
The FASB has amended EITF Topic D-98 (“EITF D-98”), Classification and Measurement of Redeemable Securities, to reflect the issuance of SFAS No. 160. In connection with the Company’s retrospective adoption of SFAS No. 160, a concurrent review of the measurement provisions of EITF D-98 was performed and retrospectively adopted. The Company initially identified one limited partner in the Operating Partnership and partners in five other consolidated subsidiaries that can require the Company to redeem their interests in the future with cash or real property. Accordingly, pursuant to the provisions of EITF D-98, the Company’s redeemable noncontrolling interests were recorded for all periods presented at the higher of their redemption values or their values pursuant to ARB No. 51 as of the end of the period, with any changes in value being reflected in retained earnings, or in the event of a deficit, in additional paid-in capital, and continue to be reported within temporary equity in the Company’s condensed consolidated balance sheets. Subsequent adjustments to the carrying amounts of these redeemable noncontrolling interests to reflect any changes in their redemption values at the end of each reporting period are to be recorded in the same manner. Adoption of the standard resulted in a decrease to additional paid-in capital of $14,942 as of December 31, 2008.
In contemplation of the common stock offering (see Note 8), certain holders of units in the Operating Partnership, including certain affiliates of CBL’s Predecessor and certain affiliates of Jacobs (collectively, the “Deferring Holders”), entered into a Forbearance and Waiver Agreement, dated June 2, 2009 (the “Forbearance Agreement”), with the Company. The Deferring Holders agreed to defer their right to exchange an aggregate of 37,000,000 of their Operating Partnership units for shares of our common stock or cash (at our election), until the earlier of (A) the close of business on the date upon which the Company effectively amends its Certificate of Incorporation to increase its authorized share capital to include at least 217,000,000 shares of common stock (the “Replenishment Date”) or (B) December 31, 2009. The Deferring Holders also agreed to waive the Company’s obligation under the Operating Partnership Agreement to reserve a sufficient number of shares of common stock to satisfy the Operating Partnership exchange rights with respect to such units until the Replenishment Date, regardless of when such date occurs.
The Company plans to convene a special meeting of stockholders during the third quarter of 2009 for the purpose of seeking stockholder approval to increase the number of its authorized shares of common stock from 180,000,000 shares to 1,000,000,000 shares.
If, following the deferral period described above, the Deferring Holders were to exercise their exchange rights before the Company had available a sufficient number of authorized shares of its common stock to deliver in satisfaction of such exchange rights, the Company would be compelled to satisfy such rights with cash payments to the extent it did not have sufficient shares of common stock available. As a result, the portion of the noncontrolling interests in the Operating Partnership attributable to the Deferring Holders’ Operating Partnership units that are in excess of the current authorized number of shares of common stock has been reclassified to redeemable noncontrolling interests as of June 30, 2009 and recorded pursuant to the provisions of EITF D-98.
The total redeemable noncontrolling interest in the Operating Partnership was $85,505 and $12,072 at June 30, 2009 and December 31, 2008, respectively. The total noncontrolling interest in the Operating Partnership was $258,499 and $379,408 at June 30, 2009 and December 31, 2008, respectively.
The redeemable noncontrolling partnership interests includes the third party interest in the Company’s investment interest in an entity that provides security and maintenance services. The redeemable noncontrolling preferred joint venture interest includes the perpetual preferred joint venture units (“PJV units”) issued to Westfield Group (“Westfield”) for the acquisition of certain properties as more fully described in Note 9. Activity related to the redeemable noncontrolling preferred joint venture interest represented by the PJV units is as follows:
18
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
||||
|
|
|
|||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
||||
Beginning Balance |
|
$ |
421,279 |
|
$ |
420,300 |
|
Net income attributable to redeemable noncontrolling preferred joint venture interest |
|
|
10,343 |
|
|
9,925 |
|
Distributions to redeemable noncontrolling preferred joint venture interest |
|
|
(10,165 |
) |
|
(9,209 |
) |
|
|
|
|
||||
Ending Balance |
|
$ |
421,457 |
|
$ |
421,016 |
|
|
|
|
|
Cost Method Investments
In February 2007, the Company acquired a 6.2% minority interest in subsidiaries of Jinsheng for $10,125. As of June 30, 2009, Jinsheng owns controlling interests in four home decoration shopping centers, two general retail shopping centers and four development sites.
Jinsheng also issued to the Company a secured convertible promissory note in exchange for cash of $4,875. The note is secured by 16,565,534 Series 2 Ordinary Shares of Jinsheng. The secured note is non-interest bearing and matures upon the earlier to occur of (i) January 22, 2012, (ii) the closing of the sale, transfer or other disposition of substantially all of Jinsheng’s assets, (iii) the closing of a merger or consolidation of Jinsheng or (iv) an event of default, as defined in the secured note. In lieu of the Company’s right to demand payment on the maturity date, at any time commencing upon the earlier to occur of January 22, 2010 or the occurrence of a Final Trigger Event, as defined in the secured note, the Company may, at its sole option, convert the outstanding amount of the secured note into 16,565,534 Series A-2 Preferred Shares of Jinsheng (which equates to a 2.275% ownership interest).
Jinsheng also granted the Company a warrant to acquire 5,461,165 Series A-3 Preferred Shares for $1,875. The warrant expires upon the earlier of January 22, 2010 or the date that Jinsheng distributes, as a dividend, shares of Jinsheng’s successor should Jinsheng complete an initial public offering.
The Company accounts for its noncontrolling interest in Jinsheng using the cost method because the Company does not exercise significant influence over Jinsheng and there is no readily determinable market value of Jinsheng’s shares since they are not publicly traded. The Company initially recorded the secured note at its estimated fair value of $4,513, which reflects a discount of $362 due to the fact that it is non-interest bearing. The discount is amortized and recognized as interest income over the term of the secured note using the effective interest method. The noncontrolling interest and the secured note are reflected as investment in unconsolidated affiliates in the accompanying condensed consolidated balance sheets. The Company initially recorded the warrant at its estimated fair value of $362, which is included in other assets in the accompanying condensed consolidated balance sheets. See Note 3 for information regarding the current fair value of the secured note and warrant.
As part of its investment review as of March 31, 2009, the Company determined that its noncontrolling interest in Jinsheng was impaired on an other-than-temporary basis due to a decline in expected future cash flows. The decrease resulted from declining occupancy rates and sales due to the then downturn of the real estate market in China. An impairment charge of $5,306 is recorded in the Company’s condensed consolidated statement of operation for the six months ended June 30, 2009 to reduce the carrying value of the Company’s cost-method investment to its estimated fair value. The Company performed a quantitative and qualitative analysis of its noncontrolling investment as of June 30, 2009 and determined that the current balance of its investment is not impaired. A rollforward of the Company’s noncontrolling interest is as follows:
19
|
|
|
|
|
Balance at January 1, 2009 |
|
$ |
10,125 |
|
Impairment loss recognized in earnings |
|
|
(5,306 |
) |
|
|
|
||
Balance at June 30, 2009 |
|
$ |
4,819 |
|
|
|
|
Note 5 – Mortgage and Other Notes Payable
Mortgage and other notes payable consisted of the following at June 30, 2009 and December 31, 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
December 31, 2008 |
|
||||||
|
|
|
|
||||||||
|
|
Amount |
|
Weighted |
|
Amount |
|
Weighted |
|
||
|
|
|
|
|
|
||||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
Non-recourse loans on operating properties |
|
$ |
3,978,747 |
|
6.18% |
|
$ |
4,046,653 |
|
6.14% |
|
Recourse loans on operating properties (2) |
|
|
162,301 |
|
5.72% |
|
|
161,694 |
|
5.71% |
|
Secured line of credit (3) |
|
|
400,000 |
|
4.45% |
|
|
400,000 |
|
4.45% |
|
|
|
|
|
|
|
|
|
||||
Total fixed-rate debt |
|
|
4,541,048 |
|
6.01% |
|
|
4,608,347 |
|
5.99% |
|
|
|
|
|
|
|
|
|
||||
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
Recourse term loans on operating properties |
|
|
292,858 |
|
1.63% |
|
|
262,946 |
|
2.49% |
|
Unsecured line of credit |
|
|
202,500 |
|
1.37% |
|
|
522,500 |
|
1.92% |
|
Secured lines of credit |
|
|
115,050 |
|
1.12% |
|
|
149,050 |
|
1.45% |
|
Unsecured term facilities |
|
|
437,494 |
|
1.80% |
|
|
437,494 |
|
1.88% |
|
Construction loans |
|
|
99,652 |
|
2.33% |
|
|
115,339 |
|
1.74% |
|
|
|
|
|
|
|
|
|
||||
Total variable-rate debt |
|
|
1,147,554 |
|
1.66% |
|
|
1,487,329 |
|
1.95% |
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
5,688,602 |
|
5.13% |
|
$ |
6,095,676 |
|
5.01% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Weighted-average interest rate including the effect of debt premiums (discounts), but excluding amortization of deferred financing costs. |
(2) |
The Company has entered into interest rate swaps on notional amounts totaling $127,500 as of June 30, 2009 and December 31, 2008 related to two of its variable-rate recourse loans on operating properties to effectively fix the interest rates on those loans. Therefore, these amounts are currently reflected in fixed-rate debt. |
(3) |
The Company has entered into interest rate swaps on notional amounts totaling $400,000 as of June 30, 2009 and December 31, 2008 related to its largest secured credit facility to effectively fix the interest rate on that portion of the line of credit. Therefore, this amount is currently reflected in fixed-rate debt. |
Unsecured Line of Credit
The Company has an unsecured credit facility with total capacity of $560,000 that bears interest at LIBOR plus a margin of 0.75% to 1.20% based on the Company’s leverage ratio, as defined in the agreement to the facility. Additionally, the Company pays an annual fee of 0.1% of the amount of total capacity of the unsecured credit facility. The credit facility matures in August 2010 and has a one-year extension option, which is at the Company’s election, for an outside maturity date of August 2011. At June 30, 2009, the outstanding borrowings of $202,500 under the unsecured credit facility had a weighted average interest rate of 1.37%. The Company has received extension commitments from lenders representing 100% of the unsecured credit facility amount. The commitments provide that the unsecured facility will be converted over an 18-month period into a secured facility, and that the maturity of the facility will be extended from August 2011 to April 2014. The conversion of the unsecured facility to a secured facility will take place as the Company uses availability under the unsecured facility to retire several non-recourse, property-specific commercial mortgage-backed securities mortgages that mature in 2009, 2010 and 2011. The Company intends to retire these mortgages at their scheduled maturity dates in order to avoid any prepayment fees. The real estate assets securing these mortgages will then be pledged as collateral to secure the facility. The Company anticipates closing on the extension and modification of the line of credit in the third quarter of 2009.
20
Unsecured Term Facilities
In April 2008, the Company entered into an unsecured term facility with total capacity of $228,000 that bears interest at LIBOR plus a margin of 1.50% to 1.80% based on the Company’s leverage ratio, as defined in the agreement to the facility. At June 30, 2009, the outstanding borrowings of $228,000 under the unsecured term facility had a weighted average interest rate of 2.02%. The facility matures in April 2011 and has two one-year extension options, which are at the Company’s election, for an outside maturity date of April 2013.
The Company has an unsecured term facility that was obtained for the exclusive purpose of acquiring certain properties from the Starmount Company or its affiliates. At June 30, 2009, the outstanding borrowings of $209,494 under this facility had a weighted average interest rate of 1.56%. The Company completed its acquisition of the properties in February 2008 and, as a result, no further draws can be made against the facility. The unsecured term facility bears interest at LIBOR plus a margin of 0.95% to 1.40% based on the Company’s leverage ratio, as defined in the agreement to the facility. Net proceeds from a sale, or the Company’s share of excess proceeds from any refinancings, of any of the properties originally purchased with borrowings from this unsecured term facility must be used to pay down any remaining outstanding balance. The facility matures in November 2010 and has two one-year extension options, which are at the Company’s election, for an outside maturity date of November 2012.
Secured Lines of Credit
The Company has four secured lines of credit that are used for construction, acquisition and working capital purposes, as well as issuances of letters of credit. Each of these lines is secured by mortgages on certain of the Company’s operating properties. Borrowings under the secured lines of credit bear interest at LIBOR plus a margin ranging from 0.80% to 0.95% and had a weighted average interest rate of 3.70% at June 30, 2009. The Company also pays a fee based on the amount of unused availability under its largest secured credit facility at a rate of 0.125%. The following summarizes certain information about the secured lines of credit as of June 30, 2009:
|
|
|
|
|
|
|
|
Total |
|
Total |
|
Maturity Date |
|
||
|
|
|
|||||
$ |
105,000 |
|
$ |
— |
|
June 2011 |
|
|
524,850 |
|
|
489,850 |
|
February 2010 |
|
|
20,000 |
|
|
20,000 |
|
March 2010 |
|
|
17,200 |
|
|
5,200 |
|
April 2010 |
|
|
|
|
|
||||
$ |
667,050 |
|
$ |
515,050 |
|
|
|
|
|
|
|
The agreements to the Company’s $560,000 unsecured line of credit, the $524,850 secured line of credit and the unsecured term facilities with balances of $209,494 and $228,000 as of June 30, 2009, each with the same lender, contain default provisions customary for transactions of this nature and also contain cross-default provisions.
The Company has received commitments from lenders representing 98% of the capacity on its $524,850 secured line of credit. The commitments reflect an extension of the $524,850 secured facility from February 2010 to February 2012, with an option to extend the maturity for one additional year to February 2013 (subject to continued compliance with the terms of the facility).
Letters of Credit
At June 30, 2009, the Company had additional secured and unsecured lines of credit with a total commitment of $38,410 that can only be used for issuing letters of credit. The letters of credit outstanding under these lines of credit totaled $17,574 at June 30, 2009.
21
Covenants and Restrictions
The secured and unsecured line of credit agreements contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum net worth requirements, and limitations on cash flow distributions. Additionally, certain property-specific mortgage notes payable require the maintenance of debt service coverage ratios on their respective properties. The Company was in compliance with all covenants and restrictions at June 30, 2009.
Forty-two malls/open-air centers, nine associated centers, three community centers and the corporate office building are owned by special purpose entities that are included in the Company’s consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities 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.
Scheduled Principal Maturities
As of June 30, 2009, the scheduled principal maturities of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other notes payable, including construction loans and lines of credit, are as follows:
|
|
|
|
|
2009 |
|
$ |
154,394 |
|
2010 |
|
|
1,659,573 |
|
2011 |
|
|
644,399 |
|
2012 |
|
|
595,604 |
|
2013 |
|
|
453,358 |
|
Thereafter |
|
|
2,169,998 |
|
|
|
|
||
|
|
|
5,677,326 |
|
Net unamortized premiums |
|
|
11,276 |
|
|
|
|
||
|
|
$ |
5,688,602 |
|
|
|
|
Of the $154,394 of scheduled principal maturities in 2009, maturities representing $101,612 have extensions available at the Company’s option, leaving a maturity of $52,782 in 2009 that must be retired or refinanced. The $52,782 represents a non-recourse, property-specific commercial mortgage-backed securities loan that matures in December 2009. The Company intends to pay off this loan with availability on its $560,000 unsecured credit facility.
Interest Rate Hedge Instruments
Effective January 1, 2009, the Company adopted SFAS No. 161. SFAS No. 161 improves financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. In accordance with SFAS No. 133, the Company records its derivative instruments on its condensed consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting.
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses
22
interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.
The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in Accumulated Other Comprehensive Loss and is subsequently
reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2009, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.
As of June 30, 2009, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
|
|
|
|
|
|
|
|
Interest Rate Derivative |
|
Number of |
|
Notional |
|
||
|
|
|
|||||
Interest Rate Swaps |
|
|
4 |
|
$ |
527,500 |
|
Interest Rate Cap |
|
|
1 |
|
$ |
80,000 |
|
The Company has an $80,000 interest rate cap agreement to hedge the risk of changes in cash flows on a letter of credit supporting certain municipal bonds equal to the then-outstanding cap notional. The interest rate cap protects the Company from increases in the hedged cash flows attributable to overall changes in the USD-SIFMA Municipal Swap Index above the strike rate of the cap on the debt. The strike rate associated with the interest rate cap is 4.00%. The interest rate cap had a nominal fair value as of June 30, 2009 and December 31, 2008 and matures on December 3, 2010.
The Company has a $40,000 pay fixed/receive variable interest rate swap agreement to hedge the interest rate risk exposure on the borrowings of one of its operating properties equal to the swap notional amount. This interest rate swap hedges the risk of changes in cash flows on the Company’s designated forecasted interest payments attributable to changes in 1-month LIBOR, the designated benchmark interest rate being hedged, thereby reducing exposure to variability in cash flows relating to interest payments on the variable-rate debt. The interest rate swap effectively fixes the interest payments on the portion of debt principal corresponding to the swap notional amount at 5.175%. The fair value of the swap was $(740) and $(772) as of June 30, 2009 and December 31, 2008, respectively, and matures on November 7, 2010.
The Company has an $87,500 pay fixed/receive variable interest rate swap agreement to hedge the interest rate risk exposure on the borrowings of one of its operating properties equal to the swap notional amount. This interest rate swap hedges the risk of changes in cash flows on the Company’s designated forecasted interest payments attributable to changes in 1-month LIBOR, the designated benchmark interest rate being hedged, thereby reducing exposure to variability in cash flows relating to interest payments on the variable-rate debt. The interest rate swap effectively fixes the interest payments on the portion of debt principal corresponding to the swap notional amount at 5.85%. The fair value of the swap was $(3,195) and $(3,787) as of June 30, 2009 and December 31, 2008, respectively, and matures on September 23, 2010.
The Company has a $150,000 pay fixed/receive variable interest rate swap agreement to hedge the interest rate risk exposure on an amount of borrowings on its largest secured line of credit equal to the swap notional amount. This interest rate swap hedges the risk of changes in cash flows on the Company’s designated forecasted interest payments attributable to changes in 1-month LIBOR, the designated benchmark interest rate being hedged, thereby reducing exposure to variability in cash flows relating to interest payments on the
23
variable-rate debt. The interest rate swap effectively fixes the interest payments on the portion of debt principal corresponding to the swap notional amount at 4.353%. The fair value of the swap was $(2,364) and $(3,989) as of June 30, 2009 and December 31, 2008, respectively, and matures on December 30, 2009.
The Company has a $250,000 pay fixed/receive variable interest rate swap agreement to hedge the interest rate risk exposure on an amount of borrowings on its largest secured line of credit equal to the swap notional amount. This interest rate swap hedges the risk of changes in cash flows on the Company’s designated forecasted interest payments attributable to changes in 1-month LIBOR, the designated benchmark interest rate being hedged, thereby reducing exposure to variability in cash flows
relating to interest payments on the variable-rate debt. The interest rate swap effectively fixes the interest payments on the portion of debt principal corresponding to the swap notional amount at 4.505%. The fair value of the swap was $(4,132) and $(7,022) as of June 30, 2009 and December 31, 2008, respectively, and matures on December 30, 2009.
The above interest rate swaps’ total fair value of $(10,431) and $(15,570) as of June 30, 2009 and December 31, 2008, respectively, is included in Accounts Payable and Accrued Liabilities in the accompanying condensed consolidated balance sheets.
In January 2009, the Company entered into a $129,000 interest rate cap agreement to hedge the risk of changes in cash flows on the construction loan of one of its properties equal to the then-outstanding cap notional. The interest rate cap protects the Company from increases in the hedged cash flows attributable to overall changes in 1-month LIBOR above the strike rate of the cap on the debt. The strike rate associated with the interest rate cap is 3.25%. The Company did not designate this cap as a hedge because it did not meet the hedge accounting requirements of SFAS No. 133. Changes in the fair value of this cap are recorded directly in earnings and totaled $1 and $72 for the three and six month periods ended June 30, 2009, respectively. The interest rate cap had a nominal fair value as of June 30, 2009 and matures on July 12, 2010
Note 6 – Discontinued Operations
As of March 31, 2008, the Company determined that 19 of the community center and office properties originally acquired during the fourth quarter of 2007 from the Starmount Company met the criteria to be classified as held-for-sale. In conjunction with their classification as held-for-sale, the results of operations from the properties were reclassified to discontinued operations.
In April 2008, the Company completed the sale of five of the community centers located in Greensboro, NC to three separate buyers. In June 2008, the Company completed the sale of one of the office properties. The Company completed the sale of an additional community center located in Greensboro, NC in August 2008. In December 2008, we completed the sale of an additional office property and adjacent, vacant development land located in Greensboro, NC. The results of operations of these properties are included in discontinued operations for the three and six month periods ended June 30, 2008.
As of December 31, 2008, the Company determined that the properties that had not been sold during the year no longer met the held-for-sale criteria due to the improbability of additional sales related to the depressed real estate market. The results of operations from these remaining properties have been reclassified to continuing operations for all periods presented.
During June 2008, the Company sold Chicopee Marketplace III in Chicopee, MA. The results of operations of this property are included in discontinued operations for the three and six month periods ended June 30, 2008.
Total revenues of the centers described above that are included in discontinued operations were $1,533 and $3,436 during the three and six month periods ended June 30, 2008. Discontinued operations during the three and six month periods ended June 30, 2009 and 2008 also include true-ups of estimated expenses to actual amounts for properties sold during previous years.
Note 7 – Segment Information
The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type 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 the Company’s reportable segments is presented as follows:
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009 |
|
Malls |
|
Associated |
|
Community |
|
All Other (2) |
|
Total |
|
|||||
|
|
|
|
|
|
|||||||||||
Revenues |
|
$ |
241,001 |
|
$ |
10,304 |
|
$ |
3,687 |
|
$ |
11,532 |
|
$ |
266,524 |
|
Property operating expenses (1) |
|
|
(80,258 |
) |
|
(2,459 |
) |
|
(1,005 |
) |
|
6,502 |
|
|
(77,220 |
) |
Interest expense |
|
|
(61,721 |
) |
|
(2,173 |
) |
|
(996 |
) |
|
(7,952 |
) |
|
(72,842 |
) |
Other expense |
|
|
(2 |
) |
|
— |
|
|
— |
|
|
(5,912 |
) |
|
(5,914 |
) |
Gain on sales of real estate assets |
|
|
4 |
|
|
— |
|
|
9 |
|
|
59 |
|
|
72 |
|
|
|
|
|
|
|
|
||||||||||
Segment profit |
|
$ |
99,024 |
|
$ |
5,672 |
|
$ |
1,695 |
|
$ |
4,229 |
|
|
110,620 |
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,793 |
) |
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,893 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,362 |
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
25,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Capital expenditures (3) |
|
$ |
47,996 |
|
$ |
2,641 |
|
$ |
429 |
|
$ |
23,352 |
|
$ |
74,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2008 |
|
Malls |
|
Associated |
|
Community |
|
All Other (2) |
|
Total |
|
|||||
|
|
|
|
|
|
|||||||||||
Revenues |
|
$ |
245,828 |
|
$ |
10,775 |
|
$ |
5,250 |
|
$ |
10,630 |
|
$ |
272,483 |
|
Property operating expenses (1) |
|
|
(86,277 |
) |
|
(2,846 |
) |
|
(1,506 |
) |
|
7,634 |
|
|
(82,995 |
) |
Interest expense |
|
|
(62,768 |
) |
|
(2,301 |
) |
|
(1,040 |
) |
|
(10,346 |
) |
|
(76,455 |
) |
Other expense |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,541 |
) |
|
(6,541 |
) |
Gain on sales of real estate assets |
|
|
2,260 |
|
|
29 |
|
|
394 |
|
|
1,586 |
|
|
4,269 |
|
|
|
|
|
|
|
|
||||||||||
Segment profit |
|
$ |
99,043 |
|
$ |
5,657 |
|
$ |
3,098 |
|
$ |
2,963 |
|
|
110,761 |
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73,064 |
) |
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,114 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,182 |
|
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(186 |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,838 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Capital expenditures (3) |
|
$ |
58,867 |
|
$ |
1,645 |
|
$ |
311 |
|
$ |
52,185 |
|
$ |
113,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009 |
|
Malls |
|
Associated |
|
Community |
|
All Other (2) |
|
Total |
|
|||||
|
|
|
|
|
|
|||||||||||
Revenues |
|
$ |
485,032 |
|
$ |
20,758 |
|
$ |
9,057 |
|
$ |
22,737 |
|
$ |
537,584 |
|
Property operating expenses (1) |
|
|
(164,350 |
) |
|
(5,513 |
) |
|
(3,072 |
) |
|
11,550 |
|
|
(161,385 |
) |
Interest expense |
|
|
(122,560 |
) |
|
(4,340 |
) |
|
(2,020 |
) |
|
(15,807 |
) |
|
(144,727 |
) |
Other expense |
|
|
(2 |
) |
|
— |
|
|
— |
|
|
(11,069 |
) |
|
(11,071 |
) |
Gain (loss) on sales of real estate assets |
|
|
(1 |
) |
|
— |
|
|
98 |
|
|
(164 |
) |
|
(67 |
) |
|
|
|
|
|
|
|
||||||||||
Segment profit |
|
$ |
198,119 |
|
$ |
10,905 |
|
$ |
4,063 |
|
$ |
7,247 |
|
|
220,334 |
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154,104 |
) |
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,372 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,943 |
|
Impairment of investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,706 |
) |
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,596 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(755 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
39,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total assets |
|
$ |
6,884,164 |
|
$ |
334,788 |
|
$ |
70,489 |
|
$ |
654,091 |
|
$ |
7,943,532 |
|
Capital expenditures (3) |
|
$ |
71,076 |
|
$ |
8,847 |
|
$ |
1,384 |
|
$ |
64,362 |
|
$ |
145,669 |
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008 |
|
Malls |
|
Associated |
|
Community |
|
All Other (2) |
|
Total |
|
|||||
|
|
|
|
|
|
|||||||||||
Revenues |
|
$ |
499,801 |
|
$ |
21,725 |
|
$ |
10,544 |
|
$ |
21,345 |
|
$ |
553,415 |
|
Property operating expenses (1) |
|
|
(178,654 |
) |
|
(5,490 |
) |
|
(3,111 |
) |
|
13,873 |
|
|
(173,382 |
) |
Interest expense |
|
|
(125,837 |
) |
|
(4,607 |
) |
|
(2,175 |
) |
|
(24,060 |
) |
|
(156,679 |
) |
Other expense |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,540 |
) |
|
(13,540 |
) |
Gain on sales of real estate assets |
|
|
5,351 |
|
|
29 |
|
|
413 |
|
|
1,552 |
|
|
7,345 |
|
|
|
|
|
|
|
|
||||||||||
Segment profit |
|
$ |
200,661 |
|
$ |
11,657 |
|
$ |
5,671 |
|
$ |
(830 |
) |
|
217,159 |
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(148,144 |
) |
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,645 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,909 |
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
793 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
46,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total assets |
|
$ |
6,857,666 |
|
$ |
346,367 |
|
$ |
209,214 |
|
$ |
679,654 |
|
$ |
8,092,901 |
|
Capital expenditures (3) |
|
$ |
111,348 |
|
$ |
1,912 |
|
$ |
22,744 |
|
$ |
153,368 |
|
$ |
289,372 |
|