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Catellus Announces Third Quarter 2004 Results
SAN FRANCISCO, Nov. 3 /PRNewswire-FirstCall/ -- Catellus Development
Corporation (NYSE:CDX) today reported earnings per fully diluted share ("EPS")
for the third quarter of 2004 of $0.29, compared to $0.20 for the same period
in 2003. EPS for the nine months ended September 30, 2004, was $0.93, compared
to $0.63 for the same period in 2003.
Net income for the third quarter of 2004 was $29.8 million, compared to $20.9
million for the same period in 2003. Net income for the nine months ended
September 30, 2004, was $97.2 million, compared to $63.6 million for the same
period in 2003.
The increase in net income for the third quarter of 2004 is due primarily to a
reduced tax expense resulting from the company's conversion to a real estate
investment trust, effective January 1, 2004, and gain from the sale of an
industrial building.
"We are pleased with our performance during and subsequent to the quarter,
particularly with regard to our non-core assets," noted Nelson C. Rising,
chairman and CEO of Catellus. "Our core development business is on track for
the year, we have significantly expanded our foothold in northern New Jersey,
one of the country's largest distribution markets, and we have sold or placed
under contract for sale a substantial portion of our non-core portfolio, well
ahead of our original schedule."
Rental Portfolio
-- For the third quarter of 2004, rental revenue less property operating
costs, including equity in earnings from operating joint ventures and
before adjustments for discontinued operations, was $54.7 million,
compared to $52.8 million for the same period in 2003. For the nine
months ended September 30, 2004, rental revenue less property operating
costs, including equity in earnings from operating joint ventures and
before adjustments for discontinued operations, was $173.0 million,
compared to $166.8 million for the same period in 2003.
-- At September 30, 2004, the rental portfolio totaled 40.7 million square
feet, 90.0 percent of which is industrial property. The approximate
700,000 square foot decrease from June 30, 2004, was due primarily to
the sale of an industrial building in Stockton, California, to a tenant
exercising a purchase option.
-- The total rental portfolio's occupancy rate at quarter end was
94.2 percent, compared to 95.7 percent at June 30, 2004, and 95.3
percent at September 30, 2003. The decline in occupancy was due, in
part, to the anticipated vacancy of a 500,000 square foot industrial
building in Stockton, California, and a 423,000 square foot industrial
building in Texas.
-- The industrial portfolio's occupancy rate at quarter end was
94.8 percent, compared to 96.6 percent at June 30, 2004, and 96.4
percent at September 30, 2003.
Development and Investment Activity
-- At September 30, 2004, Core Segment construction in progress was
3.5 million square feet: 1.4 million square feet will be added to
Catellus' rental portfolio upon completion; one million square feet is
development for fee; 791,000 square feet is build-to-suit-for-sale; and
338,000 square feet is included in a joint venture. (See below for a
definition of Core Segment.)
-- For the 1.4 million square feet of space under construction that will
be added to Catellus' rental portfolio upon completion, the projected
total cost of development is approximately $98.1 million. These
buildings are 16 percent preleased and, when fully leased, are
projected to yield a return on cost of approximately 10.9 percent.
-- During the quarter, construction commenced on 1.3 million square feet
in four projects: a 456,000 square foot build-to-suit-for-sale in
Minooka, Illinois; a 428,000 square foot warehouse facility in Atlanta,
Georgia; a 335,000 square foot build-to-suit-for-sale in Fontana,
California; and a 49,000 square foot build-to-suit-for-lease in
Glenview, Illinois.
-- During the quarter, Catellus acquired 290 acres of land in Woodbridge,
New Jersey, expanding its presence in the northern New Jersey
distribution market. The site is approved for up to 3.25 million
square feet of industrial space. Development is expected to occur over
five to seven years, with a projected total investment, at completion,
of approximately $175 million.
-- Catellus continues to work with the City of Austin, Texas, on the
Master Development Agreement for the redevelopment of Robert Mueller
Municipal Airport, which is expected to be executed by year end 2004.
Under the proposed agreement, Catellus would act as the master
developer, consistent with its long-term strategy to pursue select
opportunities to apply its broad set of land development skills to
multiple kinds of development projects.
Urban, Residential & Other
-- During the quarter, the company announced the sale of land capable of
supporting 508,000 square feet of commercial space at Mission Bay in
San Francisco, California, to Alexandria Real Estate Equities, Inc.
-- During the quarter, the company announced it has entered into contracts
to sell residential land at Mission Bay, to multiple developers, for
approximately $200 million.
-- Subsequent to quarter end, Catellus announced the closing of a second
transaction with Alexandria Real Estate Equities, Inc. for land capable
of supporting up to 935,000 square feet of commercial space at Mission
Bay.
-- Subsequent to quarter end, Catellus and a joint venture partner entered
into a contract to sell the leasehold interest in Mission Place at
Mission Bay. Catellus will continue to own fee interest in the land
and collect ground rent. The buyer will have an option to purchase the
land in 2009 for approximately $61.5 million.
-- Subsequent to quarter end, Catellus announced it was in negotiations
with the University of California to ground lease to the university a
9.65-acre site at Mission Bay capable of supporting up to one million
square feet of commercial space.
-- Catellus is in negotiations to sell to a financial investor
substantially all of the remaining land and entitlements at Mission
Bay; the remaining land at Santa Fe Depot in San Diego, California;
West Bluffs, a 114-unit residential development in the
Westchester-Playa del Rey area of Los Angeles, California; and Bayport,
a 485-unit residential development in Alameda, California.
Supplemental Reporting Measure
-- The company provides a supplemental performance measure of Funds From
Operations ("FFO"), as defined by the National Association of Real
Estate Investment Trusts ("NAREIT"), which Catellus believes provides a
useful measure, along with GAAP net income, of its operating
performance. (Reconciliation of FFO to net income is provided on pages
8 and 9 of this document.)
-- Additionally, the company provides FFO in two segments: Core Segment
and Urban, Residential, and Other Segment. The first segment, or Core
Segment, reflects that part of Catellus' business it expects will be
ongoing and central to its future operations.
-- The second segment, or Urban, Residential, and Other Segment, reflects
the company's urban and residential businesses, including residential
lot development, urban development, and desert land sales, which the
company intends to transition out of over time. This segment also
includes REIT conversion costs, certain of which will continue for
approximately three years after January 1, 2004. These costs include
third party costs, and the effects of the stock option exchange offer
in 2003.
-- In presenting FFO prior to beginning operations as a REIT (effective
January 1, 2004), Catellus includes "hypothetical tax savings"
(including the tax effects of the REIT conversion) that would have
occurred had it been a REIT during the prior periods presented.
-- FFO, including both segments as defined above, for the third quarter of
2004 was $39.4 million, compared to $45.2 million for the same period
in 2003. FFO, including both segments as defined above, for the nine
months ended September 30, 2004, was $140.7 million, compared to $131.5
million for the same period in 2003.
-- Core Segment FFO for the third quarter of 2004 was $34.1 million,
compared to $32.7 million for the same period in 2003. On a fully
diluted basis, Core Segment FFO per share for the third quarter of 2004
was $0.33, compared to $0.32 for the same period in 2003. Core Segment
FFO for the nine months ended September 30, 2004, was $120.6 million,
compared to $109.6 million for the same period in 2003. On a fully
diluted basis, Core Segment FFO per share for the nine months ended
September 30, 2004, was $1.16, compared to $1.08 for the same period in
2003.
Catellus Development Corporation will host a conference call on Thursday,
November 4 at 9:00 a.m. Pacific Time (10:00 a.m. Mountain, 11:00 a.m. Central,
and Noon Eastern) to discuss third quarter results. Catellus will release
financial results for the third quarter on Wednesday, November 3, 2004, after
the close of the day's trading on the New York Stock Exchange. To participate
in the conference call, free of charge, dial 800-510-0219 (domestic) or
617-614-3451 (international) and enter access code 84518863 prior to the
beginning of the call. Access the live webcast of the conference call from the
Investor Relations section of Catellus' website at http://www.catellus.com/.
You may also access the live webcast through http://www.streetevents.com/. The
telephonic replay will be available until 2:00 p.m. Eastern Time on November
18, 2004, at 888-286-8010 (domestic) or 617-801-6888 (international) with the
access code 91468081. The webcast replay will be available through November 4,
2005, from the Investor Relations section of Catellus' website at
http://www.catellus.com/ or at http://www.streetevents.com/.
The third quarter 2004 Supplemental Financial Package will be available from
the Home Page and the Investor Relations section of our website at
http://www.catellus.com/. These materials are also available by contacting
Investor Relations at 415-974-4500 or by sending an email to .
Catellus Development Corporation is a publicly traded real estate development
company that began operating as a real estate investment trust effective
January 1, 2004. The company owns and operates approximately 40.7 million
square feet of predominantly industrial property in many of the country's major
distribution centers and transportation corridors. Catellus' principal
objective is sustainable, long-term growth in earnings, which it seeks to
achieve by applying its strategic resources: a lower-risk/higher- return
rental portfolio, a focus on expanding that portfolio through development, and
the deployment of its proven land development skills to select opportunities
where it can generate profits to recycle back into its business. More
information on the company is available at http://www.catellus.com/.
Except for historical matters, the matters discussed in this release are
forward-looking statements that involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements about
plans, opportunities, and development. We caution you not to place undue
reliance on these forward-looking statements, which reflect our current beliefs
and are based on information currently available to us. We do not undertake any
obligation to publicly revise these forward-looking statements to reflect
future events or changes in circumstances, except as may be required by law.
These forward-looking statements are subject to risks and uncertainties that
could cause our actual results, performance, or achievements to differ
materially from those expressed in or implied by these statements. In
particular, among the factors that could cause actual results to differ
materially are: changes in the real estate market or in general economic
conditions, including a worsening economic slowdown or recession; non-renewal
of leases by tenants or renewal at lower than expected rates; difficulties in
identifying properties to acquire and in effecting acquisitions on advantageous
terms and the failure of acquisitions to perform as we expect; our failure to
divest of properties on advantageous terms or to timely reinvest proceeds from
any such divestitures; our failure to qualify and maintain our status as a real
estate investment trust under the Internal Revenue Code of 1986; product and
geographical concentration; industry competition; availability of financing and
changes in interest rates and capital markets; changes in insurance markets;
losses in excess of our insurance coverage; discretionary government decisions
affecting the use of land, including the issuance of permits, and delays
resulting therefrom; changes in the management team; weather conditions and
other natural occurrences that may affect construction or cause damage to
assets; changes in income taxes or tax laws; environmental uncertainties,
including liability for environmental remediation and changes in environmental
laws and regulations; failure or inability of third parties to fulfill their
commitments or to perform their obligations under agreements; failure of
parties to reach agreement on definitive terms or to close transactions;
increases in the cost of land and construction materials and availability of
properties for future development; limitations on, or challenges to, title to
our properties; risks related to the financial strength of joint venture
projects and co-owners; changes in policies and practices of organized labor
groups; shortages or increased costs of electrical power; risks and
uncertainties affecting property development and renovation (including
construction delays and cost overruns); other risks inherent in the real estate
business; and acts of war, other geopolitical events and terrorists activities
that could adversely affect any of the above factors. For further
information, including more detailed risk factors, you should refer to Catellus
Development Corporation's annual report on Form 10-K for the fiscal year ended
December 31, 2003, and its report on Form 10-Q for the quarter ended June 30,
2004, filed with the Securities and Exchange Commission.
Contact:
Margan Mitchell
Catellus Development Corporation
415-974-4616
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
September 30, December 31,
2004 2003
-------------- -------------
Assets
Properties $2,635,367 $2,498,015
Less accumulated depreciation (486,288) (446,872)
-------------- -------------
2,149,079 2,051,143
Other assets and deferred charges,
net 270,065 292,312
Notes receivable, less allowance 84,519 119,202
Accounts receivable, less allowance 21,857 19,752
Assets held for sale 6,778 2,352
Restricted cash and investments 12,646 64,617
Cash and cash equivalents 23,855 45,931
-------------- -------------
Total $2,568,799 $2,595,309
============== =============
Liabilities and stockholders' equity
Mortgage and other debt $1,353,941 $1,378,054
Accounts payable and accrued expenses 125,668 157,036
Deferred credits and other
liabilities 300,867 291,530
Liabilities associated with assets
held for sale 72 2,296
Deferred income taxes 50,461 56,712
-------------- -------------
Total liabilities 1,831,009 1,885,628
-------------- -------------
Stockholders' equity
Common stock -- 104,339 and 103,822
shares issued, and 103,039 and 102,724
shares outstanding at September 30,
2004 and December 31, 2003,
respectively 1,043 1,039
Paid-in capital 500,578 489,143
Unearned value of restricted stock
and restricted stock units (1,300
and 1,098 shares at September 30, 2004
and December 31, 2003, respectively) (19,845) (22,720)
Accumulated earnings 256,014 242,219
-------------- -------------
Total stockholders' equity 737,790 709,681
-------------- -------------
Total $2,568,799 $2,595,309
============== =============
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
-------- ------- -------- --------
Revenue
Rental revenue $76,548 $74,079 $229,373 $219,907
Sales revenue 39,487 45,515 84,477 78,425
Management, development and other
fees 394 2,954 2,851 9,901
-------- ------- -------- --------
116,429 122,548 316,701 308,233
-------- ------- -------- --------
Costs and expenses
Property operating costs (21,775) (22,760) (63,037) (61,568)
Cost of sales (23,144) (27,171) (51,108) (50,424)
Selling, general and
administrative expenses (13,619) (15,365) (39,181) (35,423)
Depreciation and amortization (20,344) (17,721) (56,980) (51,311)
-------- ------- -------- --------
(78,882) (83,017) (210,306) (198,726)
-------- ------- -------- --------
Operating income 37,547 39,531 106,395 109,507
-------- ------- -------- --------
Other income
Equity in (losses) earnings of
operating joint ventures, net (802) 540 3,991 5,199
Equity in earnings of development
joint ventures, net 1,204 7,553 5,822 16,834
Gain on non-strategic asset sales -- 928 16,441 8,285
Interest income 2,143 1,745 7,381 5,458
Other 1,166 581 2,423 2,530
-------- ------- -------- --------
3,711 11,347 36,058 38,306
-------- ------- -------- --------
Other expenses
Interest expense (15,763) (15,583) (47,821) (48,778)
REIT transition costs -- (1,416) (420) (4,779)
Other (1,693) (411) (3,942) (607)
-------- ------- -------- --------
(17,456) (17,410) (52,183) (54,164)
-------- ------- -------- --------
Income before income taxes and
discontinued operations 23,802 33,468 90,270 93,649
Income tax expense (5,905) (12,456) (7,818) (34,842)
-------- ------- -------- --------
Income from continuing operations 17,897 21,012 82,452 58,807
-------- ------- -------- --------
Discontinued operations, net of
income tax:
Gain (loss) from disposal of
discontinued operations 11,617 (201) 13,631 4,218
Income from discontinued
operations 299 138 1,155 589
-------- ------- -------- --------
Net gain (loss) from
discontinued operations 11,916 (63) 14,786 4,807
-------- ------- -------- --------
Net income $29,813 $20,949 $97,238 $63,614
-------- ------- -------- --------
Income per share from continuing
operations
Basic $0.17 $0.21 $0.80 $0.59
-------- ------- -------- --------
Assuming dilution $0.17 $0.20 $0.79 $0.58
-------- ------- -------- --------
Income per share from discontinued
operations
Basic $0.12 $-- $0.14 $0.05
-------- ------- -------- --------
Assuming dilution $0.12 $-- $0.14 $0.05
-------- ------- -------- --------
Net income per share
Basic $0.29 $0.21 $0.94 $0.64
-------- ------- -------- --------
Assuming dilution $0.29 $0.20 $0.93 $0.63
-------- ------- -------- --------
Average number of common shares
outstanding -- basic 103,053 100,879 102,974 99,064
-------- ------- -------- --------
Average number of common shares
outstanding -- diluted 104,424 102,994 104,272 101,737
-------- ------- -------- --------
Dividends declared per share $0.27 $-- $0.81 $--
-------- ------- -------- --------
CATELLUS DEVELOPMENT CORPORATION
Reconciliation of Net Income to Funds from Operations
(In thousands, except per share data)
(Unaudited)
Three Months ended
September 30, 2004
-------------------------------
Urban/Res.
Core & Other
Segment Segment Consolidated
------- ------- ------------
Net income $24,691 $5,122 $29,813
Add depreciation 21,099 174 21,273
Less gain on rental property sales (11,656) -- (11,656)
------- ------- ------------
FFO $34,134 $5,296 $39,430
======= ======= ============
FFO per share:
Basic $0.33 $0.05 $0.38
======= ======= ============
Assuming dilution $0.33 $0.05 $0.38
======= ======= ============
Average number of common shares
outstanding-basic 103,053 103,053 103,053
======= ======= ============
Average number of common shares
outstanding-diluted 104,424 104,424 104,424
======= ======= ============
Three Months ended
September 30, 2003
-------------------------------
Urban/Res.
Core & Other
Segment Segment Consolidated
------- ------- ------------
Net income $8,843 $12,106 $20,949
Add depreciation 18,091 429 18,520
Add loss on rental property sales 301 -- 301
------- ------- ------------
FFO 27,235 12,535 39,770
Hypothetical tax savings 5,452 -- 5,452
------- ------- ------------
FFO as adjusted for hypothetical tax
savings $32,687 $12,535 $45,222
======= ======= ============
FFO as adjusted for hypothetical tax
savings per share:
Basic $0.32 $0.13 $0.45
======= ======= ============
Assuming dilution $0.32 $0.12 $0.44
======= ======= ============
Average number of common shares
outstanding-basic 100,879 100,879 100,879
======= ======= ============
Average number of common shares
outstanding-diluted 102,994 102,994 102,994
======= ======= ============
CATELLUS DEVELOPMENT CORPORATION
Reconciliation of Net Income to Funds from Operations
(In thousands, except per share data)
(Unaudited)
Nine Months ended
September 30, 2004
-------------------------------
Urban/Res.
Core & Other
Segment Segment Consolidated
------- -------- ------------
Net income $77,638 $19,600 $97,238
Add depreciation 58,981 539 59,520
Less gain on rental property sales (16,023) -- (16,023)
------- -------- ------------
FFO $120,596 $20,139 $140,735
======== ======== ============
FFO per share:
Basic $1.17 $0.20 $1.37
======== ======== ============
Assuming dilution $1.16 $0.19 $1.35
======== ======== ============
Average number of common shares
outstanding-basic 102,974 102,974 102,974
======== ======== ============
Average number of common shares
outstanding-diluted 104,272 104,272 104,272
======== ======== ============
Nine Months ended
September 30, 2003
-------------------------------
Urban/Res.
Core & Other
Segment Segment Consolidated
------- -------- ------------
Net income $42,239 $21,375 $63,614
Add depreciation 52,004 429 52,433
Less gain on rental property sales (7,152) -- (7,152)
------- -------- ------------
FFO 87,091 21,804 108,895
Hypothetical tax savings 22,558 -- 22,558
------- -------- ------------
FFO as adjusted for hypothetical tax
savings $109,649 $21,804 $131,453
======== ======== ============
FFO as adjusted for hypothetical tax
savings per share:
Basic $1.11 $0.22 $1.33
======== ======== ============
Assuming dilution $1.08 $0.21 $1.29
======== ======== ============
Average number of common shares
outstanding-basic 99,064 99,064 99,064
======== ======== ============
Average number of common shares
outstanding-diluted 101,737 101,737 101,737
======== ======== ============
CATELLUS DEVELOPMENT CORPORATION
(In thousands and unaudited)
Rental revenue less property operating costs (including the portion from
discontinued operations) includes equity in earnings of operating
joint ventures, net (as reflected in the accompanying statements of
operations). Rental revenue less property operating costs is commonly
used by stockholders, company management and industry analysts as a
measurement of operating performance of the company's rental portfolio
and is calculated as follows:
Three Months ended Nine Months ended
September 30, September 30,
------------------ -----------------
2004 2003 2004 2003
------- ------- -------- --------
Rental revenue $76,548 $74,079 $229,373 $219,907
Property operating costs (21,775) (22,760) (63,037) (61,568)
Equity in (losses) earnings of
operating joint ventures, net (802) 540 3,991 5,199
Rental revenue from discontinued
operations 995 1,258 3,346 4,613
Property operating costs from
discontinued operations (239) (342) (676) (1,314)
------- ------- -------- --------
Rental revenue less property
operating costs ("net operating
income") $54,727 $52,775 $172,997 $166,837
======= ======= ======== ========
DATASOURCE: Catellus Development Corporation
CONTACT: Margan Mitchell of Catellus Development Corporation,
+1-415-974-4616
Web site: http://www.catellus.com/