SECURITIES AND EXCHANGE COMMISSION











SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549




FORM 8-K


CURRENT REPORT


Pursuant to Section 13 or 15(d) of the


Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):  November 3, 2003




Stratus Properties Inc.

(Exact name of registrant as specified in its charter)


                   Delaware                                                             0-19989                                                     72-1211572

  (State or other

    

            (Commission

(IRS Employer

  jurisdiction of

            File Number)

Identification

  incorporation or

                     Number)

  organization)


98 San Jacinto Blvd., Suite 220

Austin, Texas 78701

(address of principal executive offices)


Registrant's telephone number, including area code:  (512) 478-5788






Item 12. Results of Operations and Financial Condition


Stratus Properties Inc. issued a press release dated November 3, 2003 announcing its third-quarter and nine months 2003 results and certain recent developments (Exhibit 99.1).  




SIGNATURE

------------------


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Stratus Properties Inc.



By:  \s\ C. Donald Whitmire, Jr.  

        - -------------------------------------

         C. Donald Whitmire, Jr.

                    Vice President - Controller

      (authorized signatory and

     Principal Accounting Officer)


Date:  November 3, 2003




Stratus Properties Inc.

 

      Exhibit Index


Exhibit

Number

  99.1

Press Release dated November 3, 2003 “Stratus Properties Inc. Reports Third-Quarter And Nine Months 2003 Results And Recent Developments”.

    



<U>FMPO


 


 

NEWS RELEASE

NASDAQ Symbol: "STRS"

Stratus Properties Inc.

Financial and Media Contact:

98 San Jacinto Blvd. Suite 220

William H. Armstrong

Austin, Texas  78701

(512) 478-5788


 

STRATUS PROPERTIES INC. REPORTS

THIRD-QUARTER AND NINE MONTHS 2003 RESULTS

AND RECENT DEVELOPMENTS  


 


 

HIGHLIGHTS

*

On August 1, 2003, Stratus sold all of its 142 acres of residential real estate within the Lantana development in southwest Austin for $4.6 million.

*

In July 2003, Barton Creek Municipal Utility District No. 4 issued $5.0 million in revenue bonds, of which Stratus received approximately $3.8 million as reimbursement for a portion of Stratus' previous infrastructure work within the Barton Creek community.

*

During the third quarter, Stratus sold a 1.5-acre retail tract at its Circle C development for $1.2 million and sold two residential estate lots at the Mirador subdivision within the Barton Creek community for $0.5 million.

   

SUMMARY FINANCIAL RESULTS

Third Quarter

   

Nine Months

   

2003

   

2002

   

2003

   

2002

 
 

(In thousands, except per share amounts)

Revenues

$

7,622

 

$

4,579

 

$

11,817

 

$

9,900

 

Operating income (loss)

 

1,855

   

(88

)

 

662

   

(176

)

Net income (loss)

 

2,220

   

(89

)

 

719

   

653

 

Discount on purchase of mandatorily redeemable preferred stock

 


    -

   

 

       -

   

 

    -

   

 

2,367

 

Net income (loss) applicable to common stock

 

   2,220

   

(89

)

 

719

   

3,020

 
                         

Diluted net income (loss) per share

$

0.30

 

$

(0.01

)

$

0.10

 

$

0.41

 
                         

Diluted average shares outstanding

 

7,346

   

7,116

   

7,297

   

7,442

 
                         


 


 


 

AUSTIN, TX, November 3 , 2003 - Stratus Properties Inc. (NASDAQ:STRS) reported net income of $2.2 million, $0.30 per share, for the third quarter of 2003 compared to a net loss of $0.1 million, $0.01 per share, for the third quarter of 2002.   For the nine months ended September 30, 2003, Stratus reported net income of $0.7 million, $0.10 per share, compared with net income applicable to common stock of $3.0 million, $0.41 per share, for the nine months ended September 30, 2002.  Net income applicable to common stock for the nine months ended September 30, 2002, included a $2.4 million discount on the repurchase of Stratus' $10.0 million of mandatorily redeemable preferred stock in February 2002.  The discount, which was recorded as capital-in-excess of par value in Stratus' balance sheet, is required to be considered in the determination of earnings per share under accounting standards.


 

Revenues.  Stratus' revenues for the third quarter of 2003 totaled $7.6 million, which included $4.6 million for the sale of its entire 142 acres of residential real estate within the Lantana development in southwest Austin, $1.2 million for the sale of a 1.5-acre retail tract within the Circle C development, $1.0 million of rental income associated with Stratus' three office buildings and $0.5 million for the sale of two residential estate lots at the Mirador subdivision within the Barton Creek community.  During the third quarter of 2003, Stratus had other revenue totaling $0.3 million, which included management fees and sales commissions totaling $0.1 million and the sale to third parties of $0.2 million of development fee credits, which were granted to Stratus by the City of Austin (the City) in August 2002 in accordance with the Circle C Development Agreement.  In July 2003, Barton Creek Municipal Utility District No. 4 issued $5.0 million in bonds, of which Stratus received approximately $3.8 million during the third quarter of 2003 representing a partial reimbursement of its previous infrastructure expenditures within the Barton Creek community.  


 

  Stratus' revenues for the third quarter of 2002 totaled $4.6 million.  These revenues included the sale of 11 acres of commercial real estate in Houston, Texas, for $1.4 million; the sale of a 9-acre tract within the Circle C community to the City for the construction of a fire station for $0.7 million; two residential estate lot sales at the Mirador subdivision and one residential estate lot sale at the Escala Drive subdivision within the Barton Creek community for $1.6 million and management fees and sales commissions totaling $0.1 million.  Stratus also received rental income of $0.8 million associated with its two 7000 West office buildings in the Lantana project in southwest Austin.  


 

Development Activities.    During the third quarter of 2003, Stratus began construction of four condominium units at Calera Court, the initial phase of the "Calera Drive" subdivision within the Barton Creek community. The Calera Court condominium project includes 17 courtyard homes on 19 acres.  The second phase of Calera Drive, consisting of 53 single-family lots, has received final plat and construction permit approval.  Construction of the lots, many of which adjoin the Fazio Canyons Golf Course, is expected to begin in 2004.  Development of the last phase of Calera Drive, which will include approximately 70 single-family lots, is not expected to commence until after 2004.  Funding for the construction of condominium units at Calera Court will be provided by a new $2.0 million project loan, which Stratus finalized with Comerica Bank-Texas in October 2003.  The project loan, which matures in November 2005, is secured by the condominium units at Calera Court.


 

Stratus also has commenced development activities in the Circle C development based on the entitlements set forth in its 2002 Circle C Development Agreement with the City.  The preliminary plan has been filed and approved for Meridian, an 800-lot residential development at Circle C.  Stratus is processing a final plat and construction plan for the first phase of homesites at Meridian.  In addition, several retail site plans at Circle C are currently proceeding through the approval process, and some have already received final City approval.  The 2002 Circle C Development Agreement permits development of approximately one million square feet of commercial space, 900 multi-family units, and 830 single-family residential lots.


 

Stratus is a diversified real estate company engaged in the acquisition, development, management and sale of commercial, multi-family and residential real estate properties located in the Austin, Texas area.

____________________________

CAUTIONARY STATEMENT:  This press release contains certain forward-looking statements regarding sales and development and expected reimbursements of infrastructure expenditures.  Important factors that might cause future results to differ from those projections include refinancing agreements, regulatory approvals and environmental regulations as described in more detail in Stratus' 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission.  

A copy of this release is available on our web site at http://www.stratusproperties.com.

#

#

#




STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2003

 

2002

 

2003

 

2002

 
 

(In Thousands, Except Per Share Amounts)

 

Revenues:

            

Real estate

$

6,305

 

$

3,626

 

$

7,640

 

$

7,266

 

Rental income a

 

951

  

817

  

2,799

  

1,731

 

Other

 

366

  

136

  

1,378

  

903

 

 Total revenues

 

7,622

  

4,579

  

11,817

  

9,900

 

Cost of sales:

            

Real estate, net

 

3,860

  

2,759

  

5,335

  

4,932

 

Rental a

 

626

  

606

  

1,775

  

1,159

 

Depreciation and amortization a

 

329

  

244

  

978

  

571

 

 Total cost of sales

 

4,815

  

3,609

  

8,088

  

6,662

 

General and administrative expenses

 

952

  

1,058

  

3,067

  

3,414

 

   Total costs and expenses

 

5,767

 

 

4,667

 

 

11,155

 

 

10,076

 

Operating income (loss)

 

1,855

  

(88

)

 

662

  

(176

)

Interest expense, net

 

(202

)

 

(167

)

 

(674

)

 

(379

)

Interest income

 

567

b

 

166

b

 

702

b

 

550

b

Equity in unconsolidated affiliates’ income

 

-

  

   - 

  

29

  

372

c

Other income

 

-

  

-    

  

-    

  

286

d

Net income (loss)

$

2,220

 

$

(89

)

$

719

 

$

653

 
             

Reconciliation of net income (loss) to net income (loss) applicable to common stock:

            

Net income (loss)

$

2,220

 

$

(89

)

$

719

 

$

653

 

Discount on purchase of mandatorily redeemable preferred stock

 

-

  

-    

  

-    

  

2,367

e

Net income (loss) applicable to common stock

$

2,220

 

$

(89

)

$

719

 

$

3,020

 
             

Net income (loss) per share of common stock:

            

     Basic

 

$0.31

  

$(0.01

)

 

$0.10

  

$0.42

 

     Diluted

 

$0.30

  

$(0.01

)

 

$0.10

  

$0.41

 
             

Weighted average shares outstanding:

            

     Basic

 

7,123

  

7,116

  

7,123

  

7,116

 

     Diluted

 

7,346

  

7,116

  

7,297

  

7,442

 
             

a.

Results include the income and expenses for the two office buildings in which Stratus acquired Olympus Real Estate Corporation’s interest in February 2002, as well as for the 7500 Rialto Drive office building, where construction was substantially completed during the third quarter of 2002 and rent was first received in the first quarter of 2003.

b.

Includes interest on Municipal Utility District reimbursements totaling $0.5 million in the third quarter of 2003, $0.1 million in the third quarter of 2002, $0.6 million during the first nine months of 2003 and $0.2 million during the first nine months of 2002.

c.

Primarily reflects income associated with the Schramm Ranch tract sales at the Lakeway Project.  

d.

Represents the gain on the sale of Stratus’ 49.9 percent interest in the Walden Partnership to Olympus in February 2002.

e.

In connection with the transactions that concluded its relationship with Olympus, Stratus purchased its $10.0 million of mandatorily redeemable preferred stock held by Olympus for $7.6 million.  Accounting standards require that this amount be included in net income applicable to common stock.

 

STRATUS PROPERTIES INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)


   

September 30,

  

December 31,

 
   

2003

  

2002

 
   

(In Thousands)

 

ASSETS

        

Current assets:

        

Cash and cash equivalents (including restricted cash

   of $0.2 million at September 30, 2003 and $0.4 million at

   December 31, 2002)

 

$

2,040

  

$

1,361

 

Accounts receivable

  

110

   

654

 

Current portion of notes receivable from property sales

  

503

   

60

 

Prepaid expenses

  

312

  

 

146

 

        Total current assets

  

2,965

   

2,221

 

Real estate and facilities, net

  

112,082

   

110,761

 

Rental properties, net

  

22,308

   

22,422

 

Other assets

  

1,944

   

1,742

 

Notes receivable from property sales, net of current portion

  

174

   

2,103

 

Investments in and advances to unconsolidated affiliates

  

-    

   

191

 

Total assets

 

$

139,473

  

$

139,440

 
          

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Accounts payable and accrued liabilities

 

$

2,009

  

$

1,663

 

Accrued interest, property taxes and other

  

2,992

   

3,067

 

Current portion of borrowings outstanding

  

434

   

2,316

 

Total current liabilities

  

5,435

   

7,046

 

Long-term debt

  

43,322

   

42,483

 

Other liabilities

  

3,294

   

3,292

 

Stockholders' equity

 

 

87,422

  

 

86,619

 

Total liabilities and stockholders' equity

 

$

139,473

  

$

139,440

 
          


STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


  

Nine Months Ended

 
  

September 30,

 
  

2003

  

2002

 
  

(In Thousands)

 

Cash flow from operating activities:

        

Net income

 

$

719

  

$

653

 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  

978

   

571

 

Cost of real estate sold

  

4,494

   

2,950

 

Equity in unconsolidated affiliates’ income

  

(29

)

  

(372

)

Gain on sale of Stratus’ interest in Walden Partnership

  

-    

   

(286

)

Amortization of deferred compensation

  

88

   

32

 

(Increase) decrease in working capital:

        

Accounts receivable and other

  

383

   

2

 

Accounts payable and accrued liabilities

  

266

   

(400

)

Long-term receivable and other

  

1,280

   

3,362

 

Distribution of unconsolidated affiliates’ income

  

29

   

278

 

Net cash provided by operating activities

 

 

8,208

  

 

6,790

 
         

Cash flow from investing activities:

        

Real estate and facilities, net of municipal utility district reimbursements

  

(6,680

)

  

(9,845

)

Net cash acquired from Barton Creek and 7000 West Joint Ventures

  

-    

   

1,067

 

Proceeds from the sale of Stratus’ interest in the Walden Partnership

  

-    

   

3,141

 

Acquisition of Olympus’ interest in the Barton Creek and 7000 West Joint Ventures

  

-    

   

(3,858

)

Distributions from Lakeway Project

  

191

   

1,239

 

Net cash used in investing activities

 

 

(6,489

)

 

 

(8,256

)

         

Cash flow from financing activities:

        

Borrowings under revolving credit facility, net

  

1,145

   

1,453

 

Borrowings on term loan component of credit facility

  

-    

   

4,645

 

Payments on term loan portion of credit facility

  

(777

)

  

(1,497

)

(Payments on) proceeds from 7500 Rialto project loan

  

(693

)

  

1,966

 

Payments on 7000 West project loan

  

(719

)

  

(127

)

Repurchase of mandatorily redeemable preferred stock

  

-    

   

(7,633

)

Exercise of stock options and other

  

4

   

47

 

Net cash used in financing activities

 

 

(1,040

)

 

 

(1,146

)

Net increase (decrease) in cash and cash equivalents

  

679

   

(2,612

)

Cash and cash equivalents at beginning of year

 

 

1,361

  

 

3,705

 

Cash and cash equivalents at end of period

  

2,040

   

1,093

 

Less cash restricted as to use

  

(224

)

  

(234

)

Unrestricted cash and cash equivalents at end of period

 

$

1,816

  

$

859