CBL-3.31.2015-10Q
Table of Contents

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
Or
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.


Table of Contents


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.


Table of Contents

CBL & Associates Properties, Inc.
CBL & Associates Limited Partnership
Table of Contents
PART I
FINANCIAL INFORMATION
 
 
 
CBL & Associates Properties, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CBL & Associates Limited Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 


Table of Contents

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.

1

Table of Contents

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

 
 
 
 

2

Table of Contents

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.


3

Table of Contents

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.


4

Table of Contents

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





5

Table of Contents

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.


6

Table of Contents


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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Table of Contents

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.


8

Table of Contents

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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Table of Contents


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

 
 
 
 

10

Table of Contents

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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Table of Contents

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.


12

Table of Contents

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





13

Table of Contents

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.


14

Table of Contents


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
)

15

Table of Contents

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.


16

Table of Contents

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”).

17

Table of Contents

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 liability.