Cousins Properties Incorporated 2006 Annual Report - SNL Financial

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Other Matters. The events of September 11, 2001 adversely affected the pricing and availability of property insurance. In particular, premiums increased and terrorism insurance coverage became harder to obtain. The availability of coverage has improved and, at this time, management believes that the Company and its unconsolidated joint ventures are adequately insured on all of their assets. While the Company’s cost of property insurance coverage has increased, management believes the costs are currently reasonable and should not have a material impact on the Company’s financial condition or results of operations in 2007. There can be no assurance that this situation will continue beyond 2007. Off Balance Sheet Arrangements. The Company has a number of off balance sheet joint ventures with varying structures. At December 31, 2006, the Company’s joint ventures had aggregate outstanding indebtedness to third parties of approximately $408.7 million of which the Company’s share was $172.1 million. These loans are generally mortgage loans or construction loans that are non-recourse to the Company. One of the Company’s ventures, CF Murfreesboro, has a $131 million construction loan that matures on July 20, 2010, of which the venture has drawn approximately $21 million. In July 2006, the Company formed CF Murfreesboro, a 50-50 joint venture between the Company and an affiliate of Faison Associates, to develop The Avenue Murfreesboro, an 810,000 square foot retail center in suburban Nashville, Tennessee. Upon formation, the joint venture acquired approximately 100 acres of land for approximately $25 million, obtained a construction loan and commenced construction of the center. The Company guarantees 20% of the amount outstanding under the construction loan, which equals $4.3 million at December 31, 2006. The retail center serves as collateral against the construction loan, and the Company is liable for 20% of any difference between the proceeds from the sale of the retail center and the amounts due under the loan in the event of default. The Company has not recorded a liability as of December 31, 2006, as it estimates no obligation is or will be required. Several of these ventures are involved in the active acquisition and development of real estate. As capital is required to fund the acquisition and development of this real estate, the Company must fund its share of the costs not funded by operations or outside financing. Based on the nature of the activities conducted in these ventures, management cannot estimate with any degree of accuracy amounts that the Company may be required to fund in the short or long-term. However, management does not believe that additional funding of these ventures will have an adverse effect on its financial condition. The Company does not expect to make significant capital contributions to any of its remaining joint ventures. Item 7A. Quantitative and Qualitative Disclosure about Market Risk Much of the Company’s debt obligations have fixed interest rates which limit the risk of fluctuating interest rates. The Company is exposed to the impact of interest rate changes through its variable rate credit and construction facilities. As of December 31, 2006 and 2005, $122.2 million and $298.2 million of the total outstanding debt was fixed-rate debt and $192.9 million and $169.3 million was variable-rate debt, respectively. Based on the Company’s variable rate debt balances as of December 31, 2006, interest expense, before capitalization to projects under development, would have increased by approximately $2.0 million in 2006 if short-term interest rates were 1% higher. The following table summarizes the Company’s market risk associated with notes payable as of December 31, 2006. The information presented below should be read in conjunction with Note 4 of the consolidated financial statements included in this Annual Report on Form 10-K. The Company did not have a significant level of notes receivable at either December 31, 2006 or 2005, and the table does not include information related to notes 53
eceivable. The table presents scheduled principal repayments and related weighted average interest rates by expected year of maturity. Expected Year of Maturity 2007 2008 2009 2010 2011 Thereafter Total Fair Value ($ in thousands) Notes Payable: Fixed Rate . . $24,675 $13,240 $5,211 $ 23,829 $39,161 $16,133 $122,249 $120,168 Average Interest Rate ..... 7.75% 7.27% 8.29% 8.17% 7.10% 5.66% 7.32% — Variable Rate ..... $ — $ — $ — $192,900 $ — $ — $192,900 $192,900 Average Interest Rate(1) . . . — — — 6.12% — — 6.12% — (1) Interest rates on variable rate notes payable are equal to the variable rates in effect on December 31, 2006. Item 8. Financial Statements and Supplementary Data The Consolidated Financial Statements, Notes to Consolidated Financial Statements and Reports of Independent Registered Public Accounting Firm are incorporated herein on pages F-1 through F-43. The following Selected Quarterly Financial Information (Unaudited) for the years ended December 31, 2006 and 2005 should be read in conjunction with the Consolidated Financial Statements and notes thereto included herein ($ in thousands, except per share amounts): Quarters First Second Third Fourth (Unaudited) 2006: Revenues ......................................... $44,886 $49,922 $ 33,104 $41,949 Income from unconsolidated joint ventures .............. 12,123 8,404 142,355 10,201 Gain on sale of investment properties, net of applicable income tax provision .............................. 805 61 244 1,902 Income from continuing operations .................... 11,440 2,319 123,456 9,019 Discontinued operations ............................. 768 (1,990) 54,811 32,868 Net income ....................................... 12,208 329 178,267 41,887 Net income (loss) available to common stockholders ....... 8,395 (3,483) 174,455 38,074 Basic income (loss) from continuing operations per common share .......................................... 0.15 (0.03) 2.36 0.10 Basic net income (loss) per common share ............... 0.17 (0.07) 3.45 0.74 Diluted income (loss) from continuing operations per common share ................................... 0.15 (0.03) 2.28 0.10 Diluted net income (loss) per common share ............. 0.16 (0.07) 3.33 0.72 54
Page 1 and 2:
Outstanding Performance Cousins Pro
Page 3 and 4: FORWARD-LOOKING STATEMENTS Certain
Page 5 and 6: Had significant leasing activity, n
Page 7 and 8: Certain environmental laws impose l
Page 9 and 10: Environmental issues. Environmental
Page 11 and 12: Financing Risks If interest rates o
Page 13 and 14: eceive less cash than the amount of
Page 15 and 16: income, Cousins is subject to tax o
Page 17 and 18: 16 Description and Location Year De
Page 19 and 20: 18 Lease Expirations — Office As
Page 21 and 22: 20 Description and Location Year De
Page 23 and 24: Lease Expirations — Industrial As
Page 25 and 26: Additional Information Related to O
Page 27 and 28: (3) Total Project GLA includes anch
Page 29 and 30: Description Year Commenced Estimate
Page 31 and 32: Description and Location(1) Zoned U
Page 33 and 34: Mr. DuPree rejoined the Company in
Page 35 and 36: Performance Graph The following gra
Page 37 and 38: General and Administrative Expenses
Page 39 and 40: For the foreseeable future, the Com
Page 41 and 42: collectibility of unit purchase pri
Page 43 and 44: Decrease of approximately $1.2 mill
Page 45 and 46: The vesting period for stock option
Page 47 and 48: esidential lot development and land
Page 49 and 50: Stock-Based Compensation. The Compa
Page 51 and 52: capitalization at December 31, 2006
Page 53: Cash Flows from Investing Activitie
Page 57 and 58: Item 9. Changes in and Disagreement
Page 59 and 60: We have also audited, in accordance
Page 61 and 62: 10(a)(v)* Form of Restricted Stock
Page 63 and 64: SIGNATURES Pursuant to the requirem
Page 65 and 66: Cousins Properties Incorporated IND
Page 67 and 68: COUSINS PROPERTIES INCORPORATED AND
Page 73 and 74: fair values at the date of acquisit
Page 75 and 76: Income Taxes COUSINS PROPERTIES INC
Page 77 and 78: outstanding. The income amounts use
Page 89 and 90: Company and 28% to GDL, after each
Page 99 and 100: The following supplemental pro form
Page 105 and 106:
COUSINS PROPERTIES INCORPORATED AND
Page 107 and 108:
14. PROFIT SHARING/401(K) PLAN The
Page 109 and 110:
S-2 Description Encumbrances COUSIN
Page 111 and 112:
S-4 Description Encumbrances COUSIN
Page 113 and 114:
COUSINS PROPERTIES INCORPORATED STA
Page 115 and 116:
Subsidiary State of Incorporation C
Page 117 and 118:
I, Thomas D. Bell, Jr., certify tha
Page 119 and 120:
Exhibit 32.1 CERTIFICATION PURSUANT
Page 121 and 122:
Shareholder Information INDEPENDENT
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