Edgar Filing: CBL & ASSOCIATES PROPERTIES INC

CBL-3.31.2015-10Q

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UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

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 (CBL & ASSOCIATES PROPERTIES, INC.)

COMMISSION FILE NO. 333-182515-01 (CBL & ASSOCIATES LIMITED PARTNERSHIP)

______________

CBL & ASSOCIATES PROPERTIES, INC.

CBL & ASSOCIATES LIMITED PARTNERSHIP

(Exact Name of registrant as specified in its charter)

______________



DELAWARE (CBL & ASSOCIATES PROPERTIES, INC.)		62-1545718
DELAWARE (CBL & ASSOCIATES LIMITED PARTNERSHIP)		62-1542285
(State or other jurisdiction of incorporation or organization)		(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)

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.



CBL & Associates Properties, Inc.	Yes x	No o
CBL & Associates Limited Partnership	Yes x	No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



CBL & Associates Properties, Inc.	Yes x	No o
CBL & Associates Limited Partnership	Yes x	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.



CBL & Associates Properties, Inc.
Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller Reporting Company o
CBL & Associates Limited Partnership
Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



CBL & Associates Properties, Inc.	Yes o	No x
CBL & Associates Limited Partnership	Yes o	No x

As of May 4, 2015, there were 170,494,794 shares of CBL & Associates Properties, Inc.'s common stock, par value $0.01 per share, outstanding.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2015 of CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. The terms "we," "us" and "our" refer to the Company or the Company and the Operating Partnership collectively, as the context requires.

The Company is a real estate investment trust ("REIT") whose stock is traded on the New York Stock Exchange. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2015, 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 an 84.3% limited partner interest for a combined interest held by the Company of 85.3%.

As the sole general partner of the Operating Partnership, the Company's subsidiary, CBL Holdings I, Inc., has exclusive control of the Operating Partnership's activities. Management operates the Company and the Operating Partnership as one business. The management of the Company consists of the same individuals that manage the Operating Partnership. The Company's only material asset is its indirect ownership of partnership interests of the Operating Partnership. As a result, the Company conducts substantially all its business through the Operating Partnership as described in the preceding paragraph. The Company also issues public equity from time to time and guarantees certain debt of the Operating Partnership. The Operating Partnership holds all of the assets and indebtedness of the Company and, through affiliates, retains the ownership interests in the Company's joint ventures. Except for the net proceeds of offerings of equity by the Company, which are contributed to the Operating Partnership in exchange for partnership units on a one-for-one basis, the Operating Partnership generates all remaining capital required by the Company's business through its operations and its incurrence of indebtedness.

We believe that combining the two quarterly reports on Form 10-Q for the Company and the Operating Partnership provides the following benefits:


•	enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;


•	eliminates duplicative disclosure and provides a more streamlined and readable presentation, since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and


•	creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate condensed consolidated financial statements for the Company and the Operating Partnership. Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the condensed consolidated financial statements of the Company and those of the Operating Partnership. A single set of notes to condensed consolidated financial statements is presented that includes separate discussions for the Company and the Operating Partnership, when applicable. A combined Management's Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents combined information and discrete information related to each entity, as applicable.

In order to highlight the differences between the Company and the Operating Partnership, this report includes the following sections that provide separate financial information for the Company and the Operating Partnership:


•	condensed consolidated financial statements;


•	certain accompanying notes to condensed consolidated financial statements, including Note 5 - Unconsolidated Affiliates, Redeemable Interests, Noncontrolling Interests and Cost Method Investments; Note 6 - Mortgage and Other Indebtedness; Note 7 - Comprehensive Income; and Note 11 - Earnings Per Share and Earnings Per Unit;


•	controls and procedures in Item 4 of Part I of this report; and


•	certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31.1 through 32.4.

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CBL & Associates Properties, Inc.

CBL & Associates Limited Partnership

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PART I	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1

CBL & Associates Properties, Inc.
	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	1

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014	2

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	4

	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2015 and 2014	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	7

CBL & Associates Limited Partnership
	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	9

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014	10

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	12

	Condensed Consolidated Statements of Capital for the Three Months Ended March 31, 2015 and 2014	13

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	15

CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership
	Notes to Unaudited Condensed Consolidated Financial Statements	17
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54

PART II	OTHER INFORMATION	55

Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55

	SIGNATURES	56

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PART I – FINANCIAL INFORMATION

ITEM 1: Financial Statements

CBL & Associates Properties, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)



ASSETS	March 31, 2015			December 31, 2014
Real estate assets:
Land	$	849,076		$	847,829
Buildings and improvements	7,228,732			7,221,387
	8,077,808			8,069,216
Accumulated depreciation	(2,284,224		)	(2,240,007		)
	5,793,584			5,829,209
Developments in progress	105,120			117,966
Net investment in real estate assets	5,898,704			5,947,175
Cash and cash equivalents	37,978			37,938
Receivables:
Tenant, net of allowance for doubtful accounts of $1,829 and $2,368 in 2015 and 2014, respectively	81,052			81,338
Other, net of allowance for doubtful accounts of $1,239 and $1,285 in 2015 and 2014, respectively	21,440			22,577
Mortgage and other notes receivable	19,609			19,811
Investments in unconsolidated affiliates	280,971			281,449
Intangible lease assets and other assets	203,846			226,011
	$	6,543,600		$	6,616,299

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgage and other indebtedness	$	4,669,711		$	4,700,460
Accounts payable and accrued liabilities	314,979			328,352
Total liabilities	4,984,690			5,028,812
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests	37,468			37,559
Shareholders' equity:
Preferred stock, $.01 par value, 15,000,000 shares authorized:
7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding	18			18
6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding	7			7
Common stock, $.01 par value, 350,000,000 shares authorized, 170,492,985 and 170,260,273 issued and outstanding in 2015 and 2014, respectively	1,705			1,703
Additional paid-in capital	1,958,570			1,958,198
Accumulated other comprehensive income	607			13,411
Dividends in excess of cumulative earnings	(577,024		)	(566,785		)
Total shareholders' equity	1,383,883			1,406,552
Noncontrolling interests	137,559			143,376
Total equity	1,521,442			1,549,928
	$	6,543,600		$	6,616,299

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Properties, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)

	Three Months Ended March 31,
	2015			2014
REVENUES:
Minimum rents	$	169,081		$	169,277
Percentage rents	4,137			3,606
Other rents	5,171			5,282
Tenant reimbursements	72,133			72,218
Management, development and leasing fees	2,778			3,135
Other	7,609			7,725
Total revenues	260,909			261,243

OPERATING EXPENSES:
Property operating	38,904			40,011
Depreciation and amortization	76,266			69,083
Real estate taxes	22,785			21,347
Maintenance and repairs	14,216			16,165
General and administrative	17,230			14,773
Loss on impairment	—			17,150
Other	6,476			6,545
Total operating expenses	175,877			185,074
Income from operations	85,032			76,169
Interest and other income	5,274			1,528
Interest expense	(59,157		)	(60,506		)
Gain on extinguishment of debt	—			42,660
Gain on investment	16,560			—
Equity in earnings of unconsolidated affiliates	3,823			3,684
Income tax (provision) benefit	916			(397		)
Income from continuing operations before gain on sales of real estate assets	52,448			63,138
Gain on sales of real estate assets	757			1,154
Income from continuing operations	53,205			64,292
Operating loss of discontinued operations	—			(499		)
Loss on discontinued operations	—			(17		)
Net income	53,205			63,776
Net income attributable to noncontrolling interests in:
Operating Partnership	(6,172		)	(7,651		)
Other consolidated subsidiaries	(869		)	(831		)
Net income attributable to the Company	46,164			55,294
Preferred dividends	(11,223		)	(11,223		)
Net income attributable to common shareholders	$	34,941		$	44,071

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CBL & Associates Properties, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) (Continued)

	Three Months Ended March 31,
	2015		2014
Basic per share data attributable to common shareholders:
Income from continuing operations, net of preferred dividends	$	0.21	$	0.26
Discontinued operations	0.00		0.00
Net income attributable to common shareholders	$	0.21	$	0.26
Weighted-average common shares outstanding	170,420		170,196

Diluted per share data attributable to common shareholders:
Income from continuing operations, net of preferred dividends	$	0.20	$	0.26
Discontinued operations	0.00		0.00
Net income attributable to common shareholders	$	0.20	$	0.26
Weighted-average common and potential dilutive common shares outstanding	170,510		170,196

Amounts attributable to common shareholders:
Income from continuing operations, net of preferred dividends	$	34,941	$	44,511
Discontinued operations	—		(440		)
Net income attributable to common shareholders	$	34,941	$	44,071

Dividends declared per common share	$	0.265	$	0.245

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2015			2014
Net income	$	53,205		$	63,776

Other comprehensive income (loss):
Unrealized holding gain on available-for-sale securities	242			1,001
Reclassification to net income of realized gain on available-for-sale securities	(16,560		)	—
Unrealized gain (loss) on hedging instruments	883			(144		)
Reclassification of hedging effect on earnings	(523		)	548
Total other comprehensive income (loss)	(15,958		)	1,405

Comprehensive income	37,247			65,181
Comprehensive income attributable to noncontrolling interests in:
Operating Partnership	(3,018		)	(7,627		)
Other consolidated subsidiaries	(869		)	(831		)
Comprehensive income attributable to the Company	$	33,360		$	56,723

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Equity

(In thousands, except share data)

(Unaudited)



				Equity
				Shareholders' Equity
	Redeemable Noncontrolling Interests			Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income		Dividends in Excess of Cumulative Earnings			Total Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance, January 1, 2014	$	34,639		$	25	$	1,700	$	1,967,644		$	6,325	$	(570,781	)	$	1,404,913		$	155,021		$	1,559,934
Net income	1,146			—		—		—			—		55,294			55,294			7,336			62,630
Other comprehensive income (loss)	(1		)	—		—		—			1,429		—			1,429			(23		)	1,406
Dividends declared - common stock	—			—		—		—			—		(41,716		)	(41,716		)	—			(41,716		)
Dividends declared - preferred stock	—			—		—		—			—		(11,223		)	(11,223		)	—			(11,223		)
Issuances of 238,693 shares of common stock and restricted common stock	—			—		3		540			—		—			543			—			543
Cancellation of 20,631 shares of restricted common stock	—			—		—		(347		)	—		—			(347		)	—			(347		)
Amortization of deferred compensation	—			—		—		1,467			—		—			1,467			—			1,467
Distributions to noncontrolling interests	(1,593		)	—		—		—			—		—			—			(8,778		)	(8,778		)
Adjustment for noncontrolling interests	756			—		—		(1,350		)	—		—			(1,350		)	594			(756		)
Adjustment to record redeemable noncontrolling interests at redemption value	(66		)	—		—		16			—		—			16			51			67
Balance, March 31, 2014	$	34,881		$	25	$	1,703	$	1,967,970		$	7,754	$	(568,426	)	$	1,409,026		$	154,201		$	1,563,227

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CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Equity

(In thousands, except share data)

(Unaudited)

(Continued)



				Equity
				Shareholders' Equity
	Redeemable Noncontrolling Interests			Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Dividends in Excess of Cumulative Earnings			Total Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance, January 1, 2015	$	37,559		$	25	$	1,703	$	1,958,198		$	13,411		$	(566,785	)	$	1,406,552		$	143,376		$	1,549,928
Net income	1,111			—		—		—			—			46,164			46,164			5,930			52,094
Other comprehensive loss	(382		)	—		—		—			(12,804		)	—			(12,804		)	(2,772		)	(15,576		)
Performance stock units	—			—		—		156			—			—			156			—			156
Redemption of redeemable noncontrolling preferred joint venture interest	—			—		—		—			—			—			—			(286		)	(286		)
Dividends declared - common stock	—			—		—		—			—			(45,180		)	(45,180		)	—			(45,180		)
Dividends declared - preferred stock	—			—		—		—			—			(11,223		)	(11,223		)	—			(11,223		)
Issuances of 269,929 shares of common stock and restricted common stock	—			—		2		539			—			—			541			—			541
Cancellation of 37,217 shares of restricted common stock	—			—		—		(725		)	—			—			(725		)	—			(725		)
Amortization of deferred compensation	—			—		—		1,847			—			—			1,847			—			1,847
Contributions from noncontrolling interests	—			—		—		—			—			—			—			(37		)	(37		)
Distributions to noncontrolling interests	(1,640		)	—		—		—			—			—			—			(9,276		)	(9,276		)
Adjustment for noncontrolling interests	674			—		—		(1,398		)	—			—			(1,398		)	724			(674		)
Adjustment to record redeemable noncontrolling interests at redemption value	146			—		—		(47		)	—			—			(47		)	(100		)	(147		)
Balance, March 31, 2015	$	37,468		$	25	$	1,705	$	1,958,570		$	607		$	(577,024	)	$	1,383,883		$	137,559		$	1,521,442

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Properties, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

	Three Months Ended March 31,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	53,205		$	63,776
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	76,266			69,083
Net amortization of deferred finance costs and debt premiums	1,577			2,234
Net amortization of intangible lease assets and liabilities	(175		)	129
Gain on sales of real estate assets	(757		)	(1,154		)
Gain on investment	(16,560		)	—
Loss on discontinued operations	—			17
Write-off of development projects	125			1
Share-based compensation expense	2,488			1,974
Loss on impairment	—			17,150
Loss on impairment from discontinued operations	—			681
Gain on extinguishment of debt	—			(42,660		)
Equity in earnings of unconsolidated affiliates	(3,823		)	(3,684		)
Distributions of earnings from unconsolidated affiliates	4,538			3,035
Provision for doubtful accounts	1,372			1,206
Change in deferred tax accounts	507			449
Changes in:
Tenant and other receivables	51			6,444
Other assets	(8,692		)	(6,931		)
Accounts payable and accrued liabilities	(4,388		)	(24,804		)
Net cash provided by operating activities	105,734			86,946

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets	(43,324		)	(53,091		)
Reductions to restricted cash	4,955			7,669
Proceeds from sales of real estate assets	11,261			2,127
Payments received on mortgage and other notes receivable	202			224
Net proceeds from sales of available-for-sale securities	20,755			—
Additional investments in and advances to unconsolidated affiliates	(3,629		)	(3,449		)
Distributions in excess of equity in earnings of unconsolidated affiliates	5,156			5,414
Changes in other assets	(3,336		)	(1,702		)
Net cash used in investing activities	(7,960		)	(42,808		)

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CBL & Associates Properties, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) (Continued)

	Three Months Ended March 31,
	2015			2014
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other indebtedness	$	82,133		$	219,836
Principal payments on mortgage and other indebtedness	(112,215		)	(208,752		)
Additions to deferred financing costs	(120		)	(62		)
Prepayment fees on extinguishment of debt	—			(1,249		)
Proceeds from issuances of common stock	52			35
Purchase of noncontrolling interest in the Operating Partnership	(286		)	—
Contributions from noncontrolling interests	(31		)	—
Distributions to noncontrolling interests	(10,925		)	(10,371		)
Dividends paid to holders of preferred stock	(11,223		)	(11,223		)
Dividends paid to common shareholders	(45,119		)	(41,662		)
Net cash used in financing activities	(97,734		)	(53,448		)

NET CHANGE IN CASH AND CASH EQUIVALENTS	40			(9,310		)
CASH AND CASH EQUIVALENTS, beginning of period	37,938			65,500
CASH AND CASH EQUIVALENTS, end of period	$	37,978		$	56,190

SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	47,874		$	53,722

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Limited Partnership

Condensed Consolidated Balance Sheets

(In thousands, except unit data)

(Unaudited)



ASSETS	March 31, 2015			December 31, 2014
Real estate assets:
Land	$	849,076		$	847,829
Buildings and improvements	7,228,732			7,221,387
	8,077,808			8,069,216
Accumulated depreciation	(2,284,224		)	(2,240,007		)
	5,793,584			5,829,209
Developments in progress	105,120			117,966
Net investment in real estate assets	5,898,704			5,947,175
Cash and cash equivalents	37,962			37,926
Receivables:
Tenant, net of allowance for doubtful accounts of $1,829 and $2,368 in 2015 and 2014, respectively	81,052			81,338
Other, net of allowance for doubtful accounts of $1,239 and $1,285 in 2015 and 2014, respectively	21,440			22,577
Mortgage and other notes receivable	19,609			19,811
Investments in unconsolidated affiliates	281,532			282,009
Intangible lease assets and other assets	203,726			225,891
	$	6,544,025		$	6,616,727

LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL
Mortgage and other indebtedness	$	4,669,711		$	4,700,460
Accounts payable and accrued liabilities	314,979			328,267
Total liabilities	4,984,690			5,028,727
Commitments and contingencies (Note 12)
Redeemable interests:
Redeemable noncontrolling interests	6,157			6,455
Redeemable common units	31,311			31,104
Total redeemable interests	37,468			37,559
Partners' capital:
Preferred units	565,212			565,212
Common units:
General partner	9,657			9,789
Limited partners	941,548			953,349
Accumulated other comprehensive income (loss)	(2,393		)	13,183
Total partners' capital	1,514,024			1,541,533
Noncontrolling interests	7,843			8,908
Total capital	1,521,867			1,550,441
	$	6,544,025		$	6,616,727

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Limited Partnership Condensed Consolidated Statements of Operations (In thousands, except per unit data) (Unaudited)

	Three Months Ended March 31,
	2015			2014
REVENUES:
Minimum rents	$	169,081		$	169,277
Percentage rents	4,137			3,606
Other rents	5,171			5,282
Tenant reimbursements	72,133			72,218
Management, development and leasing fees	2,778			3,135
Other	7,609			7,725
Total revenues	260,909			261,243

OPERATING EXPENSES:
Property operating	38,904			40,011
Depreciation and amortization	76,266			69,083
Real estate taxes	22,785			21,347
Maintenance and repairs	14,216			16,165
General and administrative	17,230			14,773
Loss on impairment	—			17,150
Other	6,476			6,545
Total operating expenses	175,877			185,074
Income from operations	85,032			76,169
Interest and other income	5,274			1,528
Interest expense	(59,157		)	(60,506		)
Gain on extinguishment of debt	—			42,660
Gain on investment	16,560			—
Equity in earnings of unconsolidated affiliates	3,823			3,684
Income tax (provision) benefit	916			(397		)
Income from continuing operations before gain on sales of real estate assets	52,448			63,138
Gain on sales of real estate assets	757			1,154
Income from continuing operations	53,205			64,292
Operating loss of discontinued operations	—			(499		)
Loss on discontinued operations	—			(17		)
Net income	53,205			63,776
Net income attributable to noncontrolling interests	(869		)	(831		)
Net income attributable to the Operating Partnership	52,336			62,945
Distributions to preferred unitholders	(11,223		)	(11,223		)
Net income attributable to common unitholders	$	41,113		$	51,722

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CBL & Associates Limited Partnership Condensed Consolidated Statements of Operations (In thousands, except per unit data) (Unaudited) (Continued)

	Three Months Ended March 31,
	2015		2014
Basic per unit data attributable to common unitholders:
Income from continuing operations, net of preferred distributions	$	0.21	$	0.26
Discontinued operations	0.00		0.00
Net income attributable to common unitholders	$	0.21	$	0.26
Weighted-average common units outstanding	199,681		199,741

Diluted per unit data attributable to common unitholders:
Income from continuing operations, net of preferred distributions	$	0.21	$	0.26
Discontinued operations	0.00		0.00
Net income attributable to common unitholders	$	0.21	$	0.26
Weighted-average common and potential dilutive common units outstanding	199,771		199,741

Amounts attributable to common unitholders:
Income from continuing operations, net of preferred distributions	$	41,113	$	52,162
Discontinued operations	—		(440		)
Net income attributable to common unitholders	$	41,113	$	51,722

Distributions declared per common unit	$	0.273	$	0.253

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Limited Partnership

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2015			2014
Net income	$	53,205		$	63,776

Other comprehensive income (loss):
Unrealized holding gain on available-for-sale securities	242			1,003
Reclassification to net income of realized gain on available-for-sale securities	(16,560		)	—
Unrealized gain (loss) on hedging instruments	883			(144		)
Reclassification of hedging effect on earnings	(523		)	548
Total other comprehensive income (loss)	(15,958		)	1,407

Comprehensive income	37,247			65,183
Comprehensive income attributable to noncontrolling interests	(869		)	(831		)
Comprehensive income of the Operating Partnership	$	36,378		$	64,352

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Limited Partnership

Condensed Consolidated Statements of Capital

(in thousands)

(Unaudited)



	Redeemable Interests									Number of						Common Units
	Redeemable Noncontrolling Interests			Redeemable Common Units			Total Redeemable Interests			Preferred Units	Common Units		Preferred Units			General Partner			Limited Partners			Accumulated Other Comprehensive Income		Total Partners' Capital			Noncontrolling Interests			Total Capital
Balance, January 1, 2014	$	5,883		$	28,756		$	34,639		25,050	199,593		$	565,212		$	9,866		$	961,175		$	4,923	$	1,541,176		$	19,179		$	1,560,355
Net income	742			404			1,146			—	—		11,223			526			50,792			—		62,541			89			62,630
Other comprehensive income (loss)	—			(1		)	(1		)	—	—		—			—			—			1,408		1,408			—			1,408
Distributions declared - common units	—			(1,143		)	(1,143		)	—	—		—			(493		)	(48,953		)	—		(49,446		)	—			(49,446		)
Distributions declared - preferred units	—			—			—			—	—		(11,223		)	—			—			—		(11,223		)	—			(11,223		)
Issuances of common units	—			—			—			—	240		—			5			538			—		543			—			543
Cancellation of restricted common stock	—			—			—			—	(21	)	—			—			(347		)	—		(347		)	—			(347		)
Amortization of deferred compensation	—			—			—			—	—		—			—			1,467			—		1,467			—			1,467
Distributions to noncontrolling interests	(450		)	—			(450		)	—	—		—			—			—			—		—			(1,060		)	(1,060		)
Allocation of partners' capital	—			756			756			—	—		—			(20		)	(684		)	—		(704		)	—			(704		)
Adjustment to record redeemable interests at redemption value	279			(345		)	(66		)	—	—		—			1			66			—		67			—			67
Balance, March 31, 2014	$	6,454		$	28,427		$	34,881		25,050	199,812		$	565,212		$	9,885		$	964,054		$	6,331	$	1,545,482		$	18,208		$	1,563,690

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CBL & Associates Limited Partnership

Condensed Consolidated Statements of Capital

(in thousands)

(Unaudited)

(Continued)




	Redeemable Interests									Number of						Common Units
	Redeemable Noncontrolling Interests			Redeemable Common Units			Total Redeemable Interests			Preferred Units	Common Units		Preferred Units			General Partner			Limited Partners			Accumulated Other Comprehensive Income (Loss)			Total Partners' Capital			Noncontrolling Interests			Total Capital
Balance, January 1, 2015	$	6,455		$	31,104		$	37,559		25,050	199,532		$	565,212		$	9,789		$	953,349		$	13,183		$	1,541,533		$	8,908		$	1,550,441
Net income	782			329			1,111			—	—		11,223			419			40,365			—			52,007			87			52,094
Other comprehensive loss	—			(382		)	(382		)	—	—		—			—			—			(15,576		)	(15,576		)	—			(15,576		)
Performance stock units	—			—			—			—	—		—			2			154			—			156			—			156
Distributions declared - common units	—			(1,126		)	(1,126		)	—	—		—			(533		)	(52,808		)	—			(53,341		)	—			(53,341		)
Distributions declared - preferred units	—			—			—			—	—		(11,223		)	—			—			—			(11,223		)	—			(11,223		)
Issuances of common units	—			—			—			—	270		—			—			541			—			541			—			541
Redemptions of common units	—			—			—			—	(15	)	—			—			(285		)	—			(285		)	—			(285		)
Cancellation of restricted common stock	—			—			—			—	(37	)	—			—			(725		)	—			(725		)	—			(725		)
Amortization of deferred compensation	—			—			—			—	—		—			19			1,828			—			1,847			—			1,847
Contributions from noncontrolling interests	—			—			—			—	—		—			—			—			—			—			(37		)	(37		)
Distributions to noncontrolling interests	(514		)	—			(514		)	—	—		—			—			—			—			—			(1,115		)	(1,115		)
Allocation of partners' capital	—			674			674			—	—		—			(37		)	(727		)	—			(764		)	—			(764		)
Adjustment to record redeemable interests at redemption value	(566		)	712			146			—	—		—			(2		)	(144		)	—			(146		)	—			(146		)
Balance, March 31, 2015	$	6,157		$	31,311		$	37,468		25,050	199,750		$	565,212		$	9,657		$	941,548		$	(2,393	)	$	1,514,024		$	7,843		$	1,521,867

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Limited Partnership Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

	Three Months Ended March 31,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	53,205		$	63,776
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	76,266			69,083
Net amortization of deferred finance costs and debt premiums	1,577			2,234
Net amortization of intangible lease assets and liabilities	(175		)	129
Gain on sales of real estate assets	(757		)	(1,154		)
Gain on investment	(16,560		)	—
Loss on discontinued operations	—			17
Write-off of development projects	125			1
Share-based compensation expense	2,488			1,974
Loss on impairment	—			17,150
Loss on impairment from discontinued operations	—			681
Gain on extinguishment of debt	—			(42,660		)
Equity in earnings of unconsolidated affiliates	(3,823		)	(3,684		)
Distributions of earnings from unconsolidated affiliates	4,538			3,035
Provision for doubtful accounts	1,372			1,206
Change in deferred tax accounts	507			449
Changes in:
Tenant and other receivables	51			6,444
Other assets	(8,692		)	(6,931		)
Accounts payable and accrued liabilities	(4,392		)	(24,812		)
Net cash provided by operating activities	105,730			86,938

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets	(43,324		)	(53,091		)
Reductions to restricted cash	4,955			7,669
Proceeds from sales of real estate assets	11,261			2,127
Payments received on mortgage and other notes receivable	202			224
Proceeds from sales of investments and available-for-sale securities	20,755			—
Additional investments in and advances to unconsolidated affiliates	(3,629		)	(3,449		)
Distributions in excess of equity in earnings of unconsolidated affiliates	5,156			5,414
Changes in other assets	(3,336		)	(1,702		)
Net cash used in investing activities	(7,960		)	(42,808		)

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CBL & Associates Limited Partnership Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) (Continued)

	Three Months Ended March 31,
	2015			2014
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other indebtedness	$	82,133		$	219,836
Principal payments on mortgage and other indebtedness	(112,215		)	(208,752		)
Additions to deferred financing costs	(120		)	(62		)
Prepayment fees on extinguishment of debt	—			(1,249		)
Proceeds from issuances of common units	52			35
Redemption of common units	(286		)	—
Contributions from noncontrolling interests	(31		)	—
Distributions to noncontrolling interests	(10,925		)	(1,510		)
Distributions to preferred unitholders	(11,223		)	(11,223		)
Distributions to common unitholders	(45,119		)	(50,523		)
Net cash used in financing activities	(97,734		)	(53,448		)

NET CHANGE IN CASH AND CASH EQUIVALENTS	36			(9,318		)
CASH AND CASH EQUIVALENTS, beginning of period	37,926			65,486
CASH AND CASH EQUIVALENTS, end of period	$	37,962		$	56,168

SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	47,874		$	53,722

The accompanying notes are an integral part of these condensed consolidated statements.

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CBL & Associates Properties, Inc.

CBL & Associates Limited Partnership

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except per share and per unit 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, outlet centers, associated centers, community centers and office properties. Its properties are located in 27 states, 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”). 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 ("VIE"). As of March 31, 2015, the Operating Partnership owned interests in the following properties:



	Malls ⁽¹⁾	Associated Centers	Community Centers	Office Buildings⁽²⁾	Total
Consolidated properties	72	25	7	8	112
Unconsolidated properties ⁽³⁾	10	4	4	5	23
Total	82	29	11	13	135


(1)	Category consists of regional malls, open-air centers and outlet centers (including one mixed-use center).


(2)	Includes CBL's corporate office building.


(3)	The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights.

At March 31, 2015, the Operating Partnership had interests in the following properties under development:



	Consolidated Properties		Unconsolidated Properties
	Malls	Community Centers	Malls
Development	—	1	—
Expansions	3	—	1
Redevelopments	5	—	1

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 March 31, 2015, 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 an 84.3% limited partner interest for a combined interest held by CBL of 85.3%.

As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.

The noncontrolling interest in the Operating Partnership is held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which 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, and by various third parties. At March 31, 2015, CBL’s Predecessor owned a 9.1% limited partner interest and third parties owned a 5.6% limited partner interest in the Operating Partnership. CBL's Predecessor also owned 3.5 million shares of CBL’s common stock at March 31, 2015, for a total combined effective interest of 10.9% in the Operating Partnership.

The Operating Partnership conducts the Company’s property management and development activities through its wholly-owned subsidiary, CBL & Associates Management, Inc. (the “Management Company”), to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

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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 Securities and Exchange Commission ("SEC"). 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. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2015 are not necessarily indicative of the results to be obtained for the full fiscal year.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2014.

Note 2 – Recent Accounting Pronouncements

Accounting Guidance Not Yet Effective

In February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-02, Consolidation - Amendments to the Consolidation Analysis ("ASU 2015-02"). The guidance modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the evaluation of fee arrangements and related party relationships in the primary beneficiary determination. For public companies, ASU 2015-02 is effective for annual periods beginning after December 15, 2015 and interim periods within those years using either a retrospective or a modified retrospective approach. Early adoption is permitted. The Company is evaluating the impact that this update may have on its consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board jointly issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The objective of this converged standard is to enable financial statement users to better understand and analyze revenue by replacing current transaction and industry-specific guidance with a more principles-based approach to revenue recognition. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that the entity expects to be entitled to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other guidance such as lease and insurance contracts. For public companies, ASU 2014-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those years using one of two retrospective application methods. Early adoption is not permitted. The Company is evaluating the impact that this update may have on its consolidated financial statements.

Note 3 – Fair Value Measurements

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosure, ("ASC 820") 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 liabili