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| The Rouse Company Reports Strong Second Quarter Results
COLUMBIA, Md.--(BUSINESS WIRE)--July 29, 2003--The Rouse Company (NYSE:RSE) today released financial results for the second quarter and first half of 2003. Total segment revenues were $345.6 million for the second quarter of 2003 compared to $277.4 million for 2002's second quarter (an increase of 25%), while the six-month figures were $682.3 million for 2003 and $543.8 million for 2002 (an increase of 26%). BizVantage – Beyond the news: when knowing counts. Net Earnings were $138.1 million ($1.50 per share) for 2003's second quarter compared to $98.1 million ($1.04 per share) for 2002's similar period, while for the first half, Net Earnings were $162.2 million ($1.75 per share) for 2003 versus $112.9 million ($1.24 per share) for the first six months of 2002. Funds From Operations (in accordance with the guidelines of the National Association of Real Estate Investment Trusts) were $100.6 million ($1.05 per share) for the second quarter of 2003, compared to $65.0 million ($.69 per share) for the same period a year ago. For the six-month period, Funds From Operations were $177.2 million ($1.87 per share) compared to $115.6 million ($1.26 per share) for 2002's first half. The per share results represented increases of 52% for the quarter and 48% for the six months. "These strong results were driven by the outstanding performance of our retail centers and our community development operations," said Anthony W. Deering, Chairman and CEO. Net Operating Income from retail centers was $124.2 million, ahead 18% for the second quarter, and was $253.7 million, up 27%, for the six months. These increases were primarily the result of acquisitions of premier centers from both Rodamco North America, NV and from other partners in 2002. Comparable properties also performed very well, recording increases in Net Operating Income of 7% during the second quarter and 5% for the six months - largely due to higher rents as a result of successful re-leasing activity and lower bad debt expenses. "This success of our retail portfolio offers clear confirmation of the appropriateness of the Company's strategy to focus on high quality projects located in affluent, major metropolitan areas," said Deering. The Company's portfolio of office and other properties reported Net Operating Income that was up slightly in the second quarter, but down slightly for the six months. "This was excellent performance given the generally depressed office markets around the United States," reported Deering. Community development activities, which include Summerlin, Nevada and Columbia and Fairwood in Maryland, recorded another very strong quarter in 2003. Net Operating Income was $27.2 million for the second quarter and $55.8 million for the six months, compared to $15.6 million and $35.3 million, respectively for the same periods of 2002. "Summerlin, the Company's master-planned community on Las Vegas' western border, is having an absolutely fantastic year," said Deering. "Net Operating Income from Summerlin activities for the six months is more than double last year's first half and is more than 90% of 2002's full year results. Summerlin's success is partly due to growth in the Las Vegas valley and to low mortgage rates, but is also clearly the result of the superior community environment that the Company has created. People are attracted to Summerlin because it's more than residential tract development. Summerlin has a wide variety of homes, jobs, schools, shopping, cultural and entertainment facilities and recreational opportunities. It is simply a great place to live." "Obviously, we are very pleased with these outstanding results, and we believe the Company is well positioned to perform well in the future, particularly if the national economic environment continues to improve," concluded Deering. Headquartered in Columbia, Md., The Rouse Company was founded in 1939 and became a public company in 1956. A premier real estate development and management company, The Rouse Company, through its numerous affiliates, operates more than 150 properties encompassing retail, office, research and development and industrial space in 22 states. The Company is also the developer of the planned communities of Columbia, Md., and Summerlin, along the western edge of Las Vegas, Nev. This release includes forward-looking statements, which reflect the Company's current view with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical or anticipated results. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Rouse Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a discussion of certain factors that could cause actual results to differ materially from historical or anticipated results, including real estate investment risks, development risks and changes in the economic climate, see Exhibit 99.1 of The Rouse Company's Form 10-K for the year ended December 31, 2002. The Rouse Company
FINANCIAL HIGHLIGHTS
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Operating Results Data
(note 1)
Segment revenues $345,643 $277,365 $682,322 $543,827
Segment expenses 171,340 132,562 330,505 260,954
-------- -------- -------- --------
Net operating income
(note 1) 174,303 144,803 351,817 282,873
Fixed charges, net (note 2) (72,980) (71,138) (151,829) (138,265)
-------- -------- -------- --------
Funds From Operations
from Recurring
Activities (note 3) 101,323 73,665 199,988 144,608
Deferred income taxes (13,817) (7,168) (22,466) (12,626)
Other provisions and
losses, net:
Pension plans
curtailment loss --- --- (10,212) ---
Provision for
organizational
changes, including
early retirement and
related costs (8,078) --- (14,330) ---
Net gains (losses) on
early extinguishment
of debt 21,163 (588) 21,163 (5,919)
Impairment loss of
MerchantWired --- (10,169) --- (11,623)
Gain on foreign
exchange derivative --- 9,296 --- 1,134
Net other --- --- 3,040 ---
-------- -------- -------- --------
Funds From Operations
(note 3) 100,591 65,036 177,183 115,574
Depreciation and
amortization (53,832) (42,255) (106,557) (79,204)
Net gains on operating
properties 91,333 75,368 91,606 76,482
-------- -------- -------- --------
Net earnings $138,092 $98,149 $162,232 $112,852
======== ======== ======== ========
Per Share Data
Diluted per share
information
Net earnings $1.50 $1.04 $1.75 $1.24
======== ======== ======== ========
Funds From
Operations $1.05 $.69 $1.87 $1.26
======== ======== ======== ========
Dividends
Common $.42 $.39 $.84 $.78
======== ======== ======== ========
Preferred $.75 $.75 $1.50 $1.50
======== ======== ======== ========
June 30, December 31,
2003 2002
---------- ----------
Balance Sheet Data
Assets
Total property $5,055,325 $5,429,186
Investments in and advances to
unconsolidated real estate ventures 475,289 442,405
Other assets 403,516 440,841
Cash, cash equivalents and marketable
securities 87,214 73,736
---------- ----------
Total $6,021,344 $6,386,168
========== ==========
Liabilities and Shareholders' Equity
Property debt not carrying a Parent
Company guarantee of repayment $2,873,811 $3,271,437
Parent Company debt and debt carrying a
Parent Company guarantee of repayment 1,070,285 1,170,040
---------- ----------
Total debt 3,944,096 4,441,477
Accounts payable and accrued expenses 175,586 231,341
Other liabilities 544,672 464,926
Company-obligated mandatorily redeemable
preferred securities 126,590 136,340
Shareholders' equity 1,230,400 1,112,084
---------- ----------
Total $6,021,344 $6,386,168
========== ==========
The accompanying notes are an integral part of these highlights.
The Rouse Company
FINANCIAL HIGHLIGHTS, Continued
(Unaudited, in thousands)
Note 1 - Segment operating data are presented in accordance with
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information." As required
by the Statement, segment data are reported using the performance
measure and accounting policies followed by the Company for internal
reporting to management which differ, in certain respects, from those
used for reporting under accounting principles generally accepted in
the United States of America (GAAP). The performance measure used by
the Company is Net Operating Income (NOI). The Company defines NOI as
segment revenues (exclusive of corporate interest income) less segment
operating expenses (including provisions for bad debts, certain
current income taxes, gains (losses) on marketable securities and net
losses (gains) on sales of properties developed for sale, but
excluding fixed charges, as defined below, and real estate
depreciation and amortization). The accounting policies used to
calculate NOI and other operating results data are the same as those
used by the Company in its condensed consolidated financial statements
prepared in accordance with GAAP, except that real estate ventures in
which the Company has joint interest and control and certain other
unconsolidated ventures are accounted for using the proportionate
share method rather than the equity method, and the Company's share of
FFO of other unconsolidated ventures is included in revenues. Also,
discontinued operations and minority interests are included in NOI
rather than separately presented. These segment accounting policies
affect only the reported revenues and expenses of the segments and
have no net effect on our reported NOI or net earnings.
Note 2 - Fixed charges include interest expense, distributions on
Company-obligated mandatorily redeemable preferred securities and
other subsidiary preferred stock and ground rent expense, net of
interest income earned on corporate investments.
Note 3 - The Company also uses Funds From Operations (FFO) in
addition to net earnings to report its operating results. Historical
cost accounting for real estate assets implicitly assumes that the
value of real estate assets diminishes over time as reflected through
depreciation and amortization expenses. The Company believes that the
value of real estate assets does not diminish predictably over time,
as historical cost accounting implies, and instead fluctuates due to
market and other conditions. Accordingly, the Company believes FFO
provides investors with useful information about our operating
performance because it excludes depreciation and amortization
expenses. In addition, FFO was created and is used by the real estate
industry as a supplemental performance measure. Effective January 1,
2003, the Company began using the definition of FFO adopted by the
National Association of Real Estate Investment Trusts (NAREIT).
Accordingly, FFO is defined as net earnings (computed in accordance
with accounting principles generally accepted in the United States of
America), excluding gains (losses) on depreciated operating properties
and depreciation and amortization expenses. The Company's calculation
of FFO may not be comparable to similarly titled measures reported by
other companies because all companies do not calculate FFO in the same
manner. FFO is not a liquidity measure and should not be considered as
an alternative to cash flows or indicative of cash available for
distributions. It also should not be considered an alternative to net
earnings, as determined in accordance with GAAP, as an indication of
the Company's financial performance. Prior to January 1, 2003, the
Company used Funds From Operations From Recurring Activities as a
supplemental performance measure. The Company is presenting this
measure solely to assist investors in understanding the differences
between FFO and the supplemental performance measure reported in prior
periods.
Note 4 - Noncomparable properties consist of projects which, in
2003 or 2002, were acquired, disposed of, expanded, opened or prepared
for disposition. Such properties include the following: Cherry Hill
Mall, Christiana Mall, Echelon Mall, Exton Square, Fashion Show,
Franklin Park, The Gallery at Market East, Lakeside Mall, Moorestown
Mall, North Star, Oakbrook Center, Plymouth Meeting, Randhurst, The
Streets at Southpoint, Water Tower Place, Village of Merrick Park, the
Village Centers in Columbia, Maryland, additional interests acquired
in Collin Creek, Perimeter Mall, Ridgedale Center, Southland Center
and Willowbrook, an interest in Westin New York (a hotel in New York
City that began operations in October 2002), an office building in
Columbia, Maryland, an office building in Hunt Valley, Maryland and
seven office buildings in Prince George's County, Maryland.
Noncomparable properties also include South Street Seaport due to the
ongoing effects of the terrorist attacks of September 11, 2001.
The Rouse Company
FINANCIAL HIGHLIGHTS
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Operating Results Data
(see notes)
Segment Revenues
Retail centers
Comparable $119,388 $115,605 $237,566 $230,268
Noncomparable 87,433 64,571 185,612 109,919
-------- -------- -------- --------
Total retail centers 206,821 180,176 423,178 340,187
-------- -------- -------- --------
Office and other
properties
Comparable 46,549 47,220 92,839 95,034
Noncomparable 3,821 3,037 7,378 5,457
-------- -------- -------- --------
Total office and
other properties 50,370 50,257 100,217 100,491
-------- -------- -------- --------
Community development 88,452 46,932 158,927 103,149
-------- -------- -------- --------
345,643 277,365 682,322 543,827
-------- -------- -------- --------
Segment Expenses, excluding
fixed charges and
depreciation and
amortization
Retail centers
Comparable 45,612 46,846 92,544 91,671
Noncomparable 37,026 28,141 76,928 48,307
-------- -------- -------- --------
Total retail centers 82,638 74,987 169,472 139,978
-------- -------- -------- --------
Office and other
properties
Comparable 17,795 18,152 35,654 36,542
Noncomparable 1,698 1,392 3,806 2,351
-------- -------- -------- --------
Total office and
other properties 19,493 19,544 39,460 38,893
-------- -------- -------- --------
Community development 61,286 31,369 103,174 67,877
Commercial development 3,047 3,348 7,975 6,713
Corporate 4,876 3,314 10,424 7,493
-------- -------- -------- --------
171,340 132,562 330,505 260,954
-------- -------- -------- --------
Net Operating Income
Retail centers
Comparable 73,776 68,759 145,022 138,597
Noncomparable 50,407 36,430 108,684 61,612
-------- -------- -------- --------
Total retail centers 124,183 105,189 253,706 200,209
-------- -------- -------- --------
Office and other
properties
Comparable 28,754 29,068 57,185 58,492
Noncomparable 2,123 1,645 3,572 3,106
-------- -------- -------- --------
Total office and
other properties 30,877 30,713 60,757 61,598
-------- -------- -------- --------
Community development 27,166 15,563 55,753 35,272
Commercial development (3,047) (3,348) (7,975) (6,713)
Corporate (4,876) (3,314) (10,424) (7,493)
-------- -------- -------- --------
Net Operating Income 174,303 144,803 351,817 282,873
Fixed charges (note 2) (72,980) (71,138) (151,829) (138,265)
-------- -------- -------- --------
Funds From Operations
from Recurring
Activities 101,323 73,665 199,988 144,608
Deferred income taxes (13,817) (7,168) (22,466) (12,626)
Other provisions and
losses, net:
Pension plans
curtailment loss --- --- (10,212) ---
Provision for
organizational
changes, including
early retirement and
related costs (8,078) --- (14,330) ---
Net gains (losses) on
early extinguishment
of debt 21,163 (588) 21,163 (5,919)
Impairment loss of
MerchantWired --- (10,169) --- (11,623)
Gain on foreign
exchange derivatives --- 9,296 --- 1,134
Net other --- --- 3,040 ---
-------- -------- -------- --------
Funds From Operations 100,591 65,036 177,183 115,574
Depreciation and
amortization (53,832) (42,255) (106,557) (79,204)
Net gains on operating
properties 91,333 75,368 91,606 76,482
-------- -------- -------- --------
Net earnings $138,092 $98,149 $162,232 $112,852
======== ======== ======== ========
Net earnings applicable to
common shareholders $135,054 $95,111 $156,156 $106,776
======== ======== ======== ========
Per Share Data
Diluted Per Share
Information
Net earnings $1.50 $1.04 $1.75 $1.24
======== ======== ======== ========
Funds From Operations $1.05 $.69 $1.87 $1.26
======== ======== ======== ========
Dividends
Common $.42 $.39 $.84 $.78
======== ======== ======== ========
Preferred $.75 $.75 $1.50 $1.50
======== ======== ======== ========
The accompanying notes are an integral part of these highlights.
Reconciliations of Segment Operating Data to Condensed Consolidated
Financial Statements
(Unaudited, in thousands)
Reconciliations of the revenues and expenses reported in the schedule
of segment operating results to the related amounts in the condensed
consolidated financial statements are summarized as follows:
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues
Total reported for segments $345,643 $277,365 $682,322 $543,827
Share of revenues of
proportionate share
ventures (33,717) (22,810) (65,295) (44,605)
Share of Funds From
Operations of other
minority interest ventures (3,859) (2,891) (7,171) (5,079)
Revenues of discontinued
operations (13,025) (26,487) (41,728) (57,146)
Other 37 --- 87 495
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $295,079 $225,177 $568,215 $437,492
======== ======== ======== ========
Operating expenses, exclusive
of provision for bad debts,
depreciation and
amortization
Total reported for segments $171,340 $132,562 $330,505 $260,954
Distributions on Company-
obligated mandatorily
redeemable preferred
securities and other
subsidiary preferred stock 3,544 3,598 7,139 6,816
Ground rent expense 1,701 1,721 3,417 3,525
Share of operating expenses
of proportionate share
ventures (12,633) (8,528) (25,252) (15,631)
Provision for bad debts (1,578) (2,950) (2,752) (4,698)
Certain current income taxes (2,307) 450 (3,759) (2,976)
Operating expenses of
discontinued operations (6,947) (12,556) (19,964) (26,764)
Other 5,276 559 4,391 711
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $158,396 $114,856 $293,725 $221,937
======== ======== ======== ========
Interest expense
Total fixed charges reported $72,980 $71,138 $151,829 $138,265
Corporate interest income 570 1,196 1,161 2,417
Distributions on Company-
obligated mandatorily
redeemable preferred
securities and other
subsidiary preferred stock (3,544) (3,598) (7,139) (6,816)
Ground rent expense (1,701) (1,721) (3,417) (3,525)
Share of fixed charges of
proportionate share
ventures (9,342) (6,177) (16,956) (13,862)
Fixed charges of
discontinued operations (3,086) (7,048) (9,887) (14,834)
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $55,877 $53,790 $115,591 $101,645
======== ======== ======== ========
Depreciation and amortization
Total reported $53,832 $42,255 $106,557 $79,204
Share of depreciation and
amortization of
unconsolidated ventures (8,820) (3,963) (15,977) (6,799)
Depreciation and
amortization of
discontinued operations (1,612) (4,842) (6,145) (10,516)
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $43,400 $33,450 $84,435 $61,889
======== ======== ======== ========
Other provisions and losses
(gains), net
Total reported $(13,085) $1,461 $339 $16,408
Share of losses of
unconsolidated ventures --- (378) --- (378)
Gains (losses) of
discontinued operations 26,896 (210) 26,896 (5,346)
Certain current income taxes --- --- (506) ---
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $13,811 $873 $26,729 $10,684
======== ======== ======== ========
Income taxes, primarily
deferred
Total deferred income taxes
reported $13,817 $7,168 $22,466 $12,626
Current income taxes 2,307 (450) 4,265 2,976
Income taxes of discontinued
operations (108) (77) (143) 1,282
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $16,016 $6,641 $26,588 $16,884
======== ======== ======== ========
Net gains on operating
properties
Total reported $91,333 $75,368 $91,606 $76,482
Gains related to
discontinued operations (69,760) (27,658) (69,802) (27,658)
-------- -------- -------- --------
Total in condensed
consolidated financial
statements $21,573 $47,710 $21,804 $48,824
======== ======== ======== ========
Calculation of Earnings Per Share (EPS) and Funds From Operations Per
Share (FFOPS)
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
----------------- ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Earnings Per Share (Basic)
Net earnings $138,092 $98,149 $162,232 $112,852
Dividends on unvested common
stock awards and other (165) (230) (343) (461)
Dividends on convertible
Preferred stock (3,038) (3,038) (6,076) (6,076)
-------- -------- -------- --------
Adjusted net earnings $134,889 $94,881 $155,813 $106,315
======== ======== ======== ========
Weighted-average shares
outstanding 87,628 85,906 87,180 83,630
======== ======== ======== ========
Earnings Per Share (Diluted)
Net earnings $138,092 $98,149 $162,232 $112,852
Dividends on unvested common
stock awards and other (108) (134) (343) (293)
Dividends on convertible
Preferred stock (3,038) --- (6,076) (6,076)
Interest on convertible
property debt --- 456 --- 1,011
-------- -------- -------- --------
Adjusted net earnings $134,946 $98,471 $155,813 $107,494
======== ======== ======== ========
Weighted-average shares
outstanding 87,628 85,906 87,180 83,630
Dilutive securities:
Options, unvested common
stock awards and other 2,432 2,123 1,918 1,784
Convertible Preferred stock --- 5,310 --- ---
Convertible property debt --- 1,324 --- 1,400
-------- -------- -------- --------
Adjusted weighted-average
shares used in EPS
computation 90,060 94,663 89,098 86,814
======== ======== ======== ========
Funds From Operations Per Share
(Basic)
Funds From Operations $100,591 $65,036 $177,183 $115,574
Dividends on unvested common
stock awards and other (165) (230) (343) (461)
Dividends on convertible
Preferred stock (3,038) (3,038) (6,076) (6,076)
-------- -------- -------- --------
Adjusted Funds From
Operations $97,388 $61,768 $170,764 $109,037
======== ======== ======== ========
Weighted-average shares
outstanding 87,628 85,906 87,180 83,630
======== ======== ======== ========
Funds From Operations Per Share
(Diluted)
Funds From Operations $100,591 $65,036 $177,183 $115,574
Dividends on unvested common
stock awards and other (108) (134) (244) (293)
Interest on convertible
property debt --- 456 --- 1,011
-------- -------- -------- --------
Adjusted Funds From
Operations $100,483 $65,358 $176,939 $116,292
======== ======== ======== ========
Weighted-average shares
outstanding 87,628 85,906 87,180 83,630
Dilutive securities:
Options, unvested common
stock awards and other 2,432 2,123 2,036 1,784
Convertible Preferred stock 5,310 5,310 5,310 5,310
Convertible property debt --- 1,324 --- 1,400
-------- -------- -------- --------
Adjusted weighted-average
shares used in FFOPS
computation 95,370 94,663 94,526 92,124
======== ======== ======== ========
Earnings per share of common
stock
Basic:
Earnings before
discontinued operations
and cumulative effect
of change in accounting
principle $ .42 $ .76 $ .62 $ .93
Discontinued operations 1.12 .34 1.17 .34
-------- -------- -------- --------
Total $1.54 $1.10 $1.79 $1.27
======== ======== ======== ========
Diluted:
Earnings before
discontinued operations
and cumulative effect
of change in accounting
principle $ .41 $ .73 $ .60 $ .91
Discontinued operations 1.09 .31 1.15 .33
-------- -------- -------- --------
Total $1.50 $1.04 $1.75 $1.24
======== ======== ======== ========
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