Cogdell Spencer Inc. Reports Second Quarter 2009 Financial Results

CHARLOTTE, N.C., Aug. 6 /PRNewswire-FirstCall/ -- Cogdell Spencer Inc. (NYSE:CSA), a real estate investment trust (REIT) that invests in specialty office buildings, including medical offices and ambulatory surgery and diagnostic centers, and provides strategic planning and design and construction services for the medical profession, announces financial results for the quarter ended June 30, 2009. Second Quarter 2009 Results For the second quarter of 2009, Cogdell Spencer Inc. reports Funds from Operations Modified (FFOM) of $6.4 million, or $0.19 per share and operating partnership unit, excluding an after-tax, debt extinguishment and interest rate derivative charge of ($1.5 million), or ($0.05) per share and operating partnership unit, related to a $50.0 million repayment and amendment to the Term Loan (as defined below). FFOM including the debt extinguishment and interest rate derivative charge described above was $4.9 million, or $0.14 per share and operating partnership unit, for the second quarter of 2009. During the same period in 2008, FFOM was $7.3 million, or $0.30 per share and operating partnership unit. FFOM adds back to traditionally defined Funds from Operations (FFO) non-cash amortization of non-real estate related intangible assets associated with purchase accounting. FFO for the second quarter of 2009 was $5.6 million, or $0.16 per share and operating partnership unit, excluding the debt extinguishment and interest rate derivative charge described above. FFO including the debt extinguishment and interest rate derivative charge described above was $4.1 million, or $0.12 per share and operating partnership unit, for the second quarter of 2009. During the same period in 2008, FFO was $4.8 million, or $0.20 per share and operating partnership unit. Net income (loss) attributable to Cogdell Spencer Inc. for the second quarter of 2009 was ($1.0 million), or ($0.04) per share, excluding the debt extinguishment and interest rate derivative charge described above. Net income (loss) attributable to Cogdell Spencer Inc. including the debt extinguishment and interest rate derivative charge described above was ($2.3 million), or ($0.09) per share, for the second quarter of 2009. During the same period in 2008, net income (loss) was ($1.8 million), or ($0.12) per share. As of June 30, 2009, the Company's portfolio consisted of 62 consolidated wholly-owned and joint venture properties, comprising a total of approximately 3.3 million net rentable square feet. The overall percentage of leased space at the Company's 62 in-service, consolidated properties as of June 30, 2009, was 90.9%. In addition, the Company has three unconsolidated joint venture properties comprising a total of approximately 0.2 million net rentable square feet and manages 50 properties for third party clients comprising a total of approximately 2.2 million net rentable square feet. Results for the Six Months Ended June 30, 2009 FFOM for the six months ended June 30, 2009, was $14.5 million, or $0.47 per share and operating partnership unit, excluding after-tax charges totaling ($103.3 million), or ($3.35) per share and operating partnership unit, related to asset impairment, debt extinguishment and interest rate derivative (see additional description below). FFOM for the six months ended June 30, 2009, including the charges described above, was ($88.8 million), or ($2.88) per share and operating partnership unit. During the same period in 2008, FFOM was $13.1 million, or $0.59 per share and operating partnership unit. FFO for the six months ended June 30, 2009, was $12.1 million, or $0.39 per share and operating partnership unit, excluding the charges described above. FFO including the charges described above was ($91.2 million), or ($2.96) per share and operating partnership unit, for the six months ended June 30, 2009. During the same period in 2008, FFO was $9.9 million, or $0.45 per share and operating partnership unit. Net income (loss) attributable to Cogdell Spencer Inc. for the six months ended June 30, 2009, was ($1.4 million), or ($0.06) per share, excluding the charges described above. Net income (loss) attributable to Cogdell Spencer Inc. including the charges described above was ($72.5 million), or ($3.21) per share, for the six months ended June 30, 2009. During the same period in 2008, net income (loss) was ($3.6 million), or ($0.24) per share. During the six months ended June 30, 2009, the Company recorded a pre-tax, non-cash impairment charge of ($120.9 million), or ($4.47) per share and operating partnership unit, and the Company recognized a non-cash income tax benefit related to the charge of $19.2 million, or $0.71 per share and operating partnership unit, resulting in an after-tax impairment charge of ($101.7 million), or ($3.76) per share and operating partnership unit. The charge was recorded during the first quarter of 2009. No impairment charge was recorded during the second quarter of 2009. Debt Extinguishment and Interest Rate Derivative Charge During the second quarter of 2009, the Company repaid $50.0 million of the $100.0 million outstanding under the Erdman senior secured term loan agreement ("Term Loan"). In connection with this repayment, the Term Loan interest rate and financial covenants were amended. As a result of the amendment, all unamortized Term Loan deferred finance costs and costs paid to the lenders that were party to the amendment were expensed during the second quarter of 2009. The second quarter charge to debt extinguishment and interest rate derivative expense was approximately $0.9 million, before income tax benefit. The Company recorded an income tax benefit of approximately $0.4 million related to this charge. The Company previously entered into a $100.0 million interest rate swap agreement that fixed the floating rate portion of the $100.0 million Term Loan. Due to the repayment and the amendment to the Term Loan, approximately $1.6 million related to swap derivative hedge ineffectiveness was charged to debt extinguishment and interest rate derivative expense during the second quarter of 2009. The non-cash charge represents the portion of the mark to market fair value liability of the interest rate swap agreement for which there are no more future interest payments under the Term Loan. The Company recorded an income tax benefit of approximately $0.6 million related to this charge, resulting in after-tax charge of approximately $1.0 million. The Company has not terminated the $100.0 million interest rate swap agreement. The $100.0 million interest rate swap agreement will be used to fix the floating rate portion on $50.0 million outstanding on the Term Loan and $50.0 million outstanding under the secured revolving Credit Facility. Capital Transactions In May 2009, the Company refinanced the Roper MOB mortgage note payable. The principal amount was increased from $9.1 million to $9.5 million and the additional proceeds were used for working capital purposes. The note payable matures in June 2019 and requires monthly principal and interest payments based on a 25-year amortization. The interest rate is fixed at 7.1%. In June 2009, the Company issued 23.0 million shares of common stock, resulting in net proceeds to the Company of $76.5 million. The net proceeds were used to fund the $50.0 million repayment under the Term Loan, to reduce borrowings under the Company's secured revolving credit facility, and for working capital purposes. In June 2009, the Company obtained mortgage financing for the Lancaster Rehabilitation Hospital property. The $9.7 million note payable matures in June 2014 and requires monthly principal and interest payments based on a 25-year amortization. The interest rate is fixed at 6.71%. Proceeds were used to reduce borrowings under the secured revolving credit facility and for working capital purposes. Build to Suit Development The Company began construction on a 50,575 square foot medical office building in Brandon, Mississippi to serve the communities of the Jackson, Mississippi metro area. The $13.9 million University Physicians-Grants Ferry project is 100% pre-leased and scheduled for completion during the second quarter of 2010. The Company will own 100% of the project and the Company's subsidiary, Erdman, will perform the development and design-build services. The Company obtained a $10.4 million construction loan on the medical office building. The loan provides for interest-only payments during the construction period at a rate of one-month LIBOR plus 2.25%. In October 2010, the loan converts to an amortizing loan with monthly payments based on a 25-year amortization schedule at an interest rate of one-month LIBOR plus 2.25%. The Company has entered into a forward starting interest rate swap agreement that effectively fixes the interest rate at 5.95% after the construction period through maturity. The loan matures in April 2019. The Company began construction on a 60,000 square foot facility in St. Cloud, Minnesota. The $20.2 million HealthPartners Central Minnesota Clinic is 85% pre-leased and scheduled for completion during the second quarter of 2010. The Company will own 100% of the facility and the Company's subsidiary, Erdman, will perform the development and design-build services. The Company obtained a $14.0 million construction loan on the facility. The loan provides for interest-only payments during the construction period at a rate of one-month LIBOR plus 3.25%, but not less than 6.0%. In December 2010, the loan converts to an amortizing loan with monthly payments based on a 22.5-year amortization schedule at an interest rate of one-month LIBOR plus 3.25%, but not less than 6.0%. The loan matures in November 2014. Dividend On June 12, 2009, the Company announced that its Board of Directors had declared a quarterly dividend of $0.10 per share and operating partnership unit that was paid in cash on July 22, 2009 to holders of record on June 25, 2009. The dividend covered the Company's second quarter of 2009. Outlook The Company's management team expects that FFOM per share and operating partnership unit, for the year ending December 31, 2009, will be between $0.63 and $0.69, excluding the impairment charges and debt extinguishment charges described above. Management has updated the outlook to reflect a decrease in the debt extinguishment charge estimate from $2.1 million to $1.5 million. The debt extinguishment charge for the second quarter of 2009 is discussed above. A reconciliation of the range of projected net income (loss) to projected FFO and FFOM for the year ending December 31, 2009 is set forth below: Guidance Range for the Year Ending December 31, 2009 ------------------- Low High --- ---- (In thousands, except per share and operating partnership unit data) Net loss $(107,900) -- $(105,650) Plus real estate related depreciation and amortization 27,500 -- 27,500 Less noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization (800) -- (800) ---- ---- Funds from Operations (FFO) (81,200) -- (78,950) Plus amortization of intangibles related to purchase accounting, net of income tax benefit 4,000 -- 4,000 ----- ----- Funds from Operations Modified (FFOM) (77,200) -- (74,950) Impairment charges, net of income tax benefit 101,700 -- 101,700 ------- ------- FFOM, excluding impairment charges 24,500 -- 26,750 Debt extinguishment charge, net of income tax benefit 1,500 -- 1,500 ----- ----- FFOM, excluding impairment charges and debt extingushment charges $26,000 -- $28,250 ======= ======= FFO per share and unit - diluted $(1.98) -- $(1.93) FFOM per share and unit - diluted $(1.89) -- $(1.83) FFOM per share and unit - diluted, excluding impairment charges $0.60 -- $0.65 FFOM per share and unit - diluted, excluding impairment charges and debt extingushment charges $0.63 -- $0.69 Weighted average shares and units outstanding - basic and diluted 40,950 -- 40,950 Supplemental operating and financial data are available in the Investor Relations section of the Company's Web site at http://www.cogdellspencer.com/. The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the three months ended June 30, 2009. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made. FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of real estate companies. FFOM adds back to traditionally defined FFO non-cash amortization of non-real estate related intangible assets associated with purchase accounting. The Company presents FFO and FFOM because it considers them important supplemental measures of operational performance. The Company believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. The Company believes that FFOM allows securities analysts, investors and other interested parties in evaluating current period results to results prior to the Erdman transaction. FFO and FFOM are intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and FFOM excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing a perspective not immediately apparent from net income. The Company computes FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. The Company adjusts the NAREIT definition to add back noncontrolling interests in consolidated real estate partnerships before real estate related depreciation and amortization. Further, FFO and FFOM do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO and FFOM should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of the Company's performance, nor are they indicative of funds available to fund its cash needs, including its ability to pay dividends or make distributions. A reconciliation from GAAP net loss to FFO and FFOM is included as an attachment to this press release. Conference Call Cogdell Spencer Inc. invites you to attend the Company's Second Quarter 2009 Conference Call on Friday, August 7, 2009 at 10:00 a.m. (Eastern Daylight Time). The number to call for this teleconference is (800) 860-2442 (domestic) or (412) 858-4600 (international), and no passcode is required. In addition, the conference call can be accessed via the Internet at http://www.cogdellspencer.com/ through the "Q2 2009 Cogdell Spencer Earnings Conference Call" link on the Investor Relations page. A playback will be available until August 24, 2009 at 9:00 a.m (Eastern Daylight Time). To access the playback, please dial (877) 344-7529 (domestic) or (412) 317-0088 (international) and enter the passcode: 432285. The replay can also be accessed via the Internet at http://www.cogdellspencer.com/ through the "Q2 2009 Cogdell Spencer Earnings Conference Call" link on the Investor Relations page. About Cogdell Spencer Inc. Charlotte-based Cogdell Spencer Inc. (NYSE:CSA) is a fully-integrated, self-administered, and self-managed real estate investment trust that invests in specialty office buildings for the medical profession, including medical offices and ambulatory surgery and diagnostic centers. The Company focuses on the ownership, delivery, acquisition, and management of strategically located medical office buildings and other healthcare related facilities in the United States of America. The Company has been built around understanding and addressing the full range of specialized real estate needs of the healthcare industry. Learn more about Cogdell Spencer Inc. and its subsidiaries at http://www.cogdellspencer.com/. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements reflect the Company's views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ materially. Factors that may contribute to these differences include, but are not limited to the following: our business strategy; our ability to comply with financial covenants in our debt instruments; our ability to obtain future financing arrangements; estimates relating to our future distributions; our understanding of our competition; our ability to renew our ground leases; changes in the reimbursement available to our tenants by government or private payors; our tenants' ability to make rent payments; defaults by tenants; Erdman's customers' access to financing; delays in project starts and cancellations by Erdman customers; the timing of capital expenditures by healthcare systems and providers; market trends; and projected capital expenditures. For a further list and description of such risks and uncertainties, see the reports filed by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2008. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be realized. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Cogdell Spencer Inc. Condensed Consolidated Balance Sheets (In thousands) (unaudited) June 30, December 31, 2009 2008 Assets Real estate properties: Operating real estate properties $535,291 $531,932 Less: Accumulated depreciation (81,612) (69,285) ------- ------- Total operating real estate properties, net 453,679 462,647 Construction in progress 36,419 15,314 ------ ------ Total real estate properties, net 490,098 477,961 Cash and cash equivalents 13,408 34,668 Restricted cash 13,082 12,964 Tenant and accounts receivable, net 30,318 43,523 Goodwill 108,683 180,435 Trade names and trademarks 41,240 75,969 Intangible assets, net 24,542 45,363 Other assets 29,597 29,207 ------ ------ Total assets $750,968 $900,090 ======== ======== Liabilities and equity Mortgage notes payable $255,622 $240,736 Revolving credit facility 80,000 124,500 Term loan 50,000 100,000 Accounts payable 17,504 22,090 Billings in excess of costs and estimated earnings on uncompleted contracts 21,556 17,025 Deferred income taxes 13,706 34,176 Payable to prior Erdman shareholders 18,002 18,002 Other liabilities 46,069 60,567 ------ ------ Total liabilities 502,459 617,096 Commitments and contingencies Equity: Cogdell Spencer Inc. stockholders' equity: Preferred stock, $0.01 par value; 50,000 shares authorized, none issued or outstanding - - Common stock, $0.01 par value, 200,000 shares authorized, 42,526 and 17,699 shares issued and outstanding in 2009 and 2008, respectively 425 177 Additional paid-in capital 369,483 275,380 Accumulated other comprehensive loss (2,221) (5,106) Accumulated deficit (158,598) (77,438) -------- ------- Total Cogdell Spencer Inc. stockholders' equity 209,089 193,013 Noncontrolling interests: Real estate partnerships 5,442 4,657 Operating partnership 33,978 85,324 ------ ------ Total noncontrolling interests 39,420 89,981 ------ ------ Total equity 248,509 282,994 ------- ------- Total liabilities and equity $750,968 $900,090 ======== ======== Cogdell Spencer Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) For the Three For the Six Months Ended Months Ended ------------- ------------------ June 30, June 30, June 30, June 30, 2009 2008 2009 2008 --------- --------- --------- --------- Revenues: Rental revenue $19,662 $19,300 $39,328 $37,991 Design-Build contract revenue and other sales 36,712 78,021 83,101 101,956 Property management and other fees 863 835 1,713 1,672 Development management and other income 227 110 3,027 129 --- --- ----- --- Total revenues 57,464 98,266 127,169 141,748 Expenses: Property operating and management 7,884 7,841 15,812 15,040 Design-Build contracts and development management 31,242 66,286 71,407 87,330 Selling, general, and administrative 6,675 8,488 13,342 12,789 Depreciation and amortization 8,978 12,380 19,089 21,404 Impairment charges - - 120,920 - --- --- ------- --- Total expenses 54,779 94,995 240,570 136,563 ----- ----- -------- ----- Income (loss) from operations before other income (expense) 2,685 3,271 (113,401) 5,185 Other income (expense): Interest and other income 139 218 295 473 Interest expense (5,594) (6,857) (11,620) (11,952) Debt extinguishment and interest rate derivative expense (2,490) - (2,490) - Equity in earnings of unconsolidated partnerships 2 5 8 7 --- --- --- --- Total other income (expense) (7,943) (6,634) (13,807) (11,472) ------ ------ -------- ------ Loss from operations before income tax benefit (5,258) (3,363) (127,208) (6,287) Income tax benefit 2,208 383 21,834 740 ----- --- ------ --- Net loss (3,050) (2,980) (105,374) (5,547) Net loss (income) attributable to the noncontrolling interest in: Real estate partnerships (48) 48 (141) 62 Operating partnership 783 1,089 32,982 1,841 --- ----- ------ ----- Net loss attributable to Cogdell Spencer Inc. $(2,315) $(1,843) $(72,533) $(3,644) ======= ======= ======== ======= Net loss per share attributable to Cogdell Spencer Inc. - basic and diluted $(0.09) $(0.12) $(3.21) $(0.24) ====== ====== ====== ====== Weighted average common shares - basic and diluted 27,084 15,393 22,565 14,879 ====== ====== ====== ====== Cogdell Spencer Inc. Business Segment Reporting (In thousands) (unaudited) Design- Un- Build Interseg- allocat- Three months ended and ment ed June 30, 2009: Property Develop- Elimina- and Operations ment tions Other Total ---------- ------- ------- ------- ----- Revenues: Rental revenue $19,685 $- $(23) $- $19,662 Design-Build contract revenue and other sales - 42,009 (5,297) - 36,712 Property management and other fees 863 - - - 863 Development management and other income - 1,434 (1,207) - 227 ------ ------ ------ ----- ------ Total revenues 20,548 43,443 (6,527) - 57,464 Certain operating expenses: Property operating and management 7,884 - - - 7,884 Design-Build contracts and development management - 35,948 (4,706) - 31,242 Selling, general, and administrative - 4,122 (23) - 4,099 ------ ------ ------ ----- ------ Total certain operating expenses 7,884 40,070 (4,729) - 43,225 ------ ------ ------ ----- ------ 12,664 3,373 (1,798) - 14,239 Interest and other income 129 2 - 8 139 Corporate general and administrative expenses - - - (2,576) (2,576) Interest expense - - - (5,594) (5,594) Debt extinguishment and interest rate derivative expense - - - (2,490) (2,490) Benefit from income taxes applicable to funds from operations modified - - - 1,670 1,670 Non-real estate related depreciation and amortization - (196) - (57) (253) Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization 4 - - - 4 Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization (224) - - - (224) ------ ------ ------ ----- ------ Funds from operations modified (FFOM) 12,573 3,179 (1,798) (9,039) 4,915 Amortization of intangibles related to purchase accounting, net of income tax benefit (42) (1,338) - 538 (842) ------ ------ ------ ----- ------ Funds from operations (FFO) 12,531 1,841 (1,798) (8,501) 4,073 Real estate related depreciation and amortization (7,347) - - - (7,347) Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization 224 - - - 224 ------ ------ ------ ----- ------ Net income (loss) 5,408 1,841 (1,798) (8,501) (3,050) Net loss (income) attributable to the noncontrolling interest in: Real estate partnerships (48) - - - (48) Operating partnership - - - 783 783 ------ ------ ------ ----- ------ Net income (loss) attributable to Cogdell Spencer Inc. $5,360 $1,841 $(1,798) $(7,718) $(2,315) ====== ====== ======= ======= ======= Cogdell Spencer Inc. Business Segment Reporting (In thousands) (unaudited) Design- Un- Build Interseg- allocat- Six months ended and ment ed June 30, 2009: Property Develop- Elimina- and Operations ment tions Other Total ---------- ------- ------- ------- ----- Revenues: Rental revenue $39,375 $- $(47) $- $39,328 Design-Build contract revenue and other sales 93,169 (10,068) - 83,101 Property management and other fees 1,713 - - - 1,713 Development management and other income - 5,070 (2,043) - 3,027 ------ ------ ------ ----- ------ Total revenues 41,088 98,239 (12,158) - 127,169 Certain operating expenses: Property operating and management 15,812 - - - 15,812 Design-Build contracts and development management - 81,066 (9,659) - 71,407 Selling, general, and administrative - 8,660 (47) - 8,613 Impairment charges - 120,920 - - 120,920 ------ ------ ------ ----- ------ Total certain operating expenses 15,812 210,646 (9,706) - 216,752 ------ ------- ------ - ------- 25,276 (112,407) (2,452) - (89,583) Interest and other income 270 4 - 21 295 Corporate general and administrative expenses - - - (4,729) (4,729) Interest expense - - - (11,620) (11,620) Debt extinguishment and interest rate derivative expense - - - (2,490) (2,490) Benefit from income taxes applicable to funds from operations modified - - - 20,311 20,311 Non-real estate related depreciation and amortization - (390) - (111) (501) Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization 14 - - - 14 Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization (470) - - - (470) ------ ------ ------ ----- ------ Funds from operations modified (FFOM) 25,090 (112,793) (2,452) 1,382 (88,773) Amortization of intangibles related to purchase accounting, net of income tax benefit (85) (3,820) - 1,523 (2,382) ------ ------ ------ ----- ------ Funds from operations (FFO) 25,005 (116,613) (2,452) 2,905 (91,155) Real estate related depreciation and amortization (14,689) - - - (14,689) Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization 470 - - - 470 ------ ------ ------ ----- ------ Net income (loss) 10,786 (116,613) (2,452) 2,905 (105,374) Net loss (income) attributable to the noncontrolling interest in: Real estate partnerships (141) - - - (141) Operating partnership - - - 32,982 32,982 - - - ------ ------ Net income (loss) attributable to Cogdell Spencer Inc. $10,645 $(116,613) $(2,452) $35,887 $(72,533) ======= ========= ======= ======= ======== Cogdell Spencer Inc. Reconciliation of Net Loss to Funds from Operations Modified (FFOM) (1) (In thousands, except per share and unit amounts) (unaudited) For the Three For the Six Months Ended Months Ended -------------------- -------------------- June 30, June 30, June 30, June 30, 2009 2008 2009 2008 -------- -------- -------- -------- Net loss $(3,050) $(2,980) $(105,374) $(5,547) Add: Real estate related depreciation and amortization: Wholly-owned and consolidated properties 7,344 7,826 14,684 15,615 Unconsolidated Real estate partnerships 3 3 5 6 Less: Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization (224) (74) (470) (152) ------ ------ ------ ------ Funds from Operations (FFO) (1) 4,073 4,775 (91,155) 9,922 Amortization of intangibles related to purchase accounting, net of income tax benefit 842 2,551 2,382 3,204 ------ ------ ------ ------ Funds from Operations Modified (FFOM)(1) $4,915 $7,326 $(88,773) $13,126 ====== ====== ======== ======= FFO per share and unit - basic and diluted $0.12 $0.20 $(2.96) $0.45 FFOM per share and unit - basic and diluted $0.14 $0.30 $(2.88) $0.59 Weighted average shares and units outstanding - basic and diluted 34,653 24,486 30,844 22,234 (1) FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of real estate companies. FFOM adds back to traditionally defined FFO non-cash amortization of non-real estate related intangible assets associated with purchase accounting. The Company presents FFO and FFOM because it considers them important supplemental measures of operational performance. The Company believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing a perspective not immediately apparent from net income. The Company computes FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. The Company adjusts the NAREIT definition to add back noncontrolling interests in consolidated real estate partnerships before real estate related depreciation and amortization. Further, FFO and FFOM do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO and FFOM should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of the Company's performance, nor are they indicative of funds available to fund its cash needs, including its ability to pay dividends or make distributions. DATASOURCE: Cogdell Spencer Inc. CONTACT: General Inquiries: Frank C. Spencer, President and Chief Executive Officer, +1-704-940-2926, ; Financial Inquiries: Charles M. Handy, Chief Financial Officer, +1-704-940-2914, ; Media Contact: Dana Crothers, Marketing Director, +1-704-940-2904, , all of Cogdell Spencer Inc. Web Site: http://www.cogdellspencer.com/