FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-11002
CONSOLIDATED CAPITAL PROPERTIES IV
(Exact name of registrant as specified in its charter)
California 94-2768742
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
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. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, December 31,
1999 1998
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 6,435 $ 13,241
Receivables and deposits 1,662 2,246
Restricted escrows 2,101 2,743
Other assets 1,530 1,459
Investment properties:
Land 12,491 12,491
Buildings and related personal property 122,124 121,741
134,615 134,232
Less accumulated depreciation (104,302) (103,250)
30,313 30,982
$ 42,041 $ 50,671
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 282 $ 379
Tenant security deposit liabilities 558 568
Accrued property taxes 737 1,309
Other liabilities 1,211 1,045
Mortgage notes payable 70,666 70,775
73,454 74,076
Partners' Deficit
General partner (6,496) (6,175)
Limited partners (342,773 units issued
and outstanding at March 31, 1999
and December 31, 1998) (24,917) (17,230)
(31,413) (23,405)
$ 42,041 $ 50,671
Note: The balance sheet at December 31, 1998, has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1999 1998
Revenues:
Rental income $7,088 $6,845
Other income 463 511
Casualty gain -- 227
Total revenues 7,551 7,583
Expenses:
Operating 2,718 3,073
General and administrative 761 420
Depreciation 1,052 1,148
Interest 1,421 1,472
Property taxes 463 489
Total expenses 6,415 6,602
Net income $1,136 $ 981
Net income allocated to general partners (4%) $ 45 $ 39
Net income allocated to limited partners (96%) 1,091 942
$1,136 $ 981
Net income per limited partnership unit $ 3.18 $ 2.75
Distributions per limited partnership unit $25.61 $ 6.16
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited Total
Partnership General Limited Partners'
Units Partner Partners Deficit
Original capital contributions 343,106 $ 1 $171,553 $171,554
Partners' deficit at
December 31, 1997 342,773 $(6,174) $(17,204) $(23,378)
Net income for the three months
ended March 31, 1998 -- 39 942 981
Distribution to partners -- (93) (2,112) (2,205)
Partners' deficit at
March 31, 1998 342,773 $(6,228) $(18,374) $(24,602)
Partners' deficit at
December 31, 1998 342,773 $(6,175) $(17,230) $(23,405)
Net income for the three months
ended March 31, 1999 -- 45 1,091 1,136
Distribution to partners -- (366) (8,778) (9,144)
Partners' deficit at
March 31, 1999 342,773 $(6,496) $(24,917) $(31,413)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net income $ 1,136 $ 981
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,052 1,148
Amortization of loan costs 79 79
Casualty gain -- (227)
Change in accounts:
Receivables and deposits 584 364
Other assets (150) 103
Accounts payable (97) 101
Tenant security deposit liabilities (10) 3
Accrued property taxes (572) (450)
Other liabilities 166 (21)
Net cash provided by operating activities 2,188 2,081
Cash flows from investing activities:
Property improvements and replacements (383) (683)
Net withdrawals from restricted escrows 642 15
Net insurance proceeds from casualty -- 150
Net cash provided by (used in)
investing activities 259 (518)
Cash flows from financing activities:
Payments on mortgage notes payable (109) (106)
Distribution to partners (9,144) (2,205)
Loan costs paid -- (17)
Net cash used in financing activities (9,253) (2,328)
Net decrease in cash and cash equivalents (6,806) (765)
Cash and cash equivalents at beginning of period 13,241 12,090
Cash and cash equivalents at end of period $ 6,435 $11,325
Supplemental Disclosures of Cash Flow Information and Non-Cash Activities:
Cash paid for interest was approximately $1,343,000 and $1,381,000 for the three
months ended March 31, 1999 and 1998, respectively.
At March 31, 1998, accounts payable and property improvements and replacements
were each adjusted by approximately $224,000 and receivables and deposits were
adjusted by approximately $77,000 for non-cash activity.
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties IV (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of ConCap Equities, Inc. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1999, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the fiscal year ended December
31, 1998.
Consolidation
The consolidated financial statements include the Partnership's majority
interest in a joint venture which owns South Port Apartments. The Partnership
has the ability to control the major operating and financial policies of the
joint venture. No minority interest has been reflected for the joint venture
because minority interests are limited to the extent of their equity capital,
and losses in excess of the minority interest equity capital are charged against
the Partnership's interest.
The Partnership's consolidated financial statements also include the accounts of
the Partnership, its wholly-owned partnerships and its 99% limited partnership
interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd.,
ConCap Rivers Edge Associates, Ltd., and ConCap Stratford Associates, Ltd. The
Partnership may remove the general partner of its 99%-owned partnerships;
therefore, these partnerships are controlled and consolidated by the
Partnership. All significant interpartnership balances have been eliminated.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 information to conform to
the 1999 presentation.
NOTE B - TRANSFER OF CONTROL
Upon the Partnership's formation in 1981, Consolidated Capital Equities
Corporation ("CCEC"), a Colorado corporation, was the corporate general partner
and Consolidated Capital Management Company ("CCMC"), a California general
partnership, was the non-corporate general partner. In 1988, through a series
of transactions, Southmark Corporation ("Southmark") acquired a controlling
interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter
11 of the United States Bankruptcy Code. In 1990, as part of its reorganization
plan, CEI acquired CCEC's general partner interests in the Partnership and in 15
other affiliated public limited partnerships (the "Affiliated Partnerships") and
CEI replaced CCEC as managing general partner in all 16 partnerships. The
selection of CEI as the sole managing general partner was approved by a majority
of the Limited Partners in the Partnership and in each of the affiliated
partnerships pursuant to a solicitation of the Limited Partners dated August 10,
1990. As part of this solicitation, the Limited Partners also approved an
amendment to the Partnership Agreement to limit changes of control of the
Partnership, and the conversion of CCMC from a general partner to a special
limited partner, thereby leaving CEI as the sole general partner of the
Partnership. On November 14, 1990, CCMC was dissolved and its special limited
partnership interest was divided among its former partners. All of CEI's
outstanding stock is owned by Insignia Properties Trust ("IPT").
In December 1994, the parent of GII Realty, Inc., entered into a transaction
(the "Insignia Transaction") in which an affiliate of Insignia Financial Group,
Inc. ("Insignia") (see discussion below) acquired an option (exercisable in
whole or in part from time to time) to purchase all of the stock of GII Realty,
Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that
stock. As a part of the Insignia Transaction, the affiliate also acquired all
of the outstanding stock of Partnership Services, Inc., an asset management
entity, and a subsidiary acquired all of the outstanding stock of Coventry
Properties, Inc., a property management entity. In addition, confidentiality,
non-competition, and standstill arrangements were entered into between certain
of the parties. Those arrangements, among other things, prohibit GII Realty's
former sole shareholder from purchasing Partnership Units for a period of three
years. On October 24, 1995, the affiliate exercised the remaining portion of
its option to purchase all of the remaining outstanding capital stock of GII
Realty, Inc.
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT merged into Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust,
with AIMCO being the surviving corporation (the "Insignia Merger"). As a
result, AIMCO acquired 100% ownership interest in the General Partner. The
General Partner does not believe that this transaction will have a material
effect on the affairs and operations of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and as reimbursements of certain expenses incurred by affiliates on
behalf of the Partnership. The following transactions with the General Partner
and/or its affiliates were charged to expense for the three months ended March
31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included
in operating expenses) $379 $359
Reimbursements for services of affiliates,
(included in investment properties and general
and administrative and operating expenses) (1) 137 164
Partnership management fee (included in general 555 190
and administrative expense)
(1) Included in "Reimbursements for services of affiliates" for the three
months ended March 31, 1998 is approximately $17,000 in reimbursements for
construction oversight costs. There were no construction oversight costs
paid to affiliates during the three months ended March 31, 1999.
During the three months ended March 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $379,000 and
$359,000 for the three months ended March 31, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $137,000 and $164,000 for the
three months ended March 31, 1999 and 1998, respectively.
The Partnership Agreement provides for a special management fee equal to 9% of
the total distributions made to the limited partners from cash flow provided by
operations to be paid to the General Partner for executive and administrative
management services. The Partnership paid approximately $555,000 and $190,000
under this provision of the Partnership Agreement to the General Partner during
the three months ended March 31, 1999 and 1998, respectively.
In addition to reimbursements for services of affiliates in 1998, the
Partnership paid an affiliate of the General Partner approximately $7,000 for
loan costs related to the 1997 refinancing of South Port Apartments. These
costs were capitalized and are included in other assets on the consolidated
balance sheets.
NOTE D - CONTINGENCIES
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of $500 per apartment unit owned by the
Partnership, or approximately $2,100,000. In the event expenditures are made
from these reserves, operating revenue shall be allocated to such reserves to
the extent necessary to maintain the foregoing level. Reserves, including cash
and cash equivalents totaling approximately $6,435,000 at March 31, 1999,
exceeded the Partnership's reserve requirements of approximately $2,100,000.
NOTE E - DISTRIBUTIONS
In January 1999, the General Partner declared and paid a distribution
attributable to cash flow from operations of approximately $6,422,000 ($17.99
per limited partnership unit) and approximately $2,722,000 ($7.62 per limited
partnership unit) representing a return of capital.
In March 1998, the General Partner declared and paid a distribution attributable
to cash flow from operations of approximately $2,205,000 ($6.16 per limited
partnership unit).
NOTE F - CASUALTY GAINS
In November 1997, Overlook Apartments had a fire which destroyed one apartment
unit and caused water and smoke damage in the remaining apartment units in the
building. Insurance proceeds of $150,000 were received during the three months
ended March 31, 1998 with approximately an additional $77,000 receivable from
the insurer. Repairs were made and the related costs were capitalized as a part
of the investment property. In accordance with generally accepted accounting
principles, the total insurance proceeds were recorded as a casualty gain of
approximately $227,000 during the three months ended March 31, 1998. Total
insurance proceeds received and receivable at March 31, 1998 approximated the
cost of replacement.
NOTE G - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties. The Partnership's residential property segment consists
of seventeen apartment complexes located in ten states in the southeastern,
western and mid-western United States. The Partnership rents apartment units to
tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on net income. The accounting policies of the reportable segment are the
same as those of the Partnership as described in the Partnership's annual report
on Form 10-K for the year ended December 31, 1998.
Factors management used to identify the Partnership's reportable segments: The
Partnership's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties are
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands). The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999
Residential Other Totals
Rental income $ 7,088 $ -- $ 7,088
Other income 396 67 463
Interest expense 1,421 -- 1,421
Depreciation 1,052 -- 1,052
General and administrative expense -- 761 761
Segment profit (loss) 1,830 (694) 1,136
Total assets 35,779 6,262 42,041
Capital expenditures for investment
properties 383 -- 383
1998
Residential Other Totals
Rental income $ 6,845 $ -- $ 6,845
Other income 383 128 511
Interest expense 1,472 -- 1,472
Depreciation 1,148 -- 1,148
General and administrative expense -- 420 420
Segment profit (loss) 1,273 (292) 981
Total assets 45,013 5,895 50,908
Capital expenditures for investment
properties 907 -- 907
NOTE H - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc. and
entities which were, at the time, affiliates of Insignia ("Insignia Affiliates")
of interests in certain general partner entities, past tender offers by Insignia
Affiliates to acquire limited partnership units, the management of partnerships
by Insignia Affiliates as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the General
Partner filed a motion seeking dismissal of the action. In lieu of responding
to the motion, the plaintiffs filed an amended complaint. The General Partner
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, will be material to the
Partnership's overall operations.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties, LLC. v.
Insignia Financial Group, Inc., et al. in the Superior Court of the State of
California, County of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
The Partnership's investment properties consist of seventeen apartment
complexes. The following table sets forth the average occupancy for each of its
properties for the three months ended March 31, 1999 and 1998:
Average Occupancy
1999 1998
The Apartments
Omaha, NE 94% 97%
Arbours of Hermitage Apartments
Nashville, TN 95% 97%
Briar Bay Racquet Club
Apartments
Miami, FL 96% 95%
Chimney Hill Apartments
Marietta, GA 94% 85%
Citadel Apartments
El Paso, TX 95% 95%
Citadel Village Apartments
Colorado Springs, CO 97% 96%
Foothill Place Apartments
Salt Lake City, UT 97% 95%
Knollwood Apartments
Nashville, TN 96% 94%
Lake Forest Apartments
Omaha, NE 86% 94%
Nob Hill Villa Apartments
Nashville, TN 93% 92%
Overlook Apartments
Memphis, TN 93% 89%
Point West Apartments
Charleston, SC 95% 96%
Post Ridge Apartments
Nashville, TN 98% 96%
Rivers Edge Apartments
Auburn, WA 96% 99%
South Port Apartments
Tulsa, OK 95% 94%
Stratford Place Apartments
Austin, TX 91% 93%
Village East Apartments
Cimarron Hills, CO 98% 94%
Occupancy for The Apartments decreased due to a number of unexpected move-outs
during the first quarter of 1999. The increase in occupancy at Chimney Hill
Apartments is attributable to a stronger local market, a more aggressive
marketing plan over the last six months, and the completion of extensive
renovations at the property in 1998. Lake Forest Apartments experienced a
decrease in occupancy due to a number of units temporarily lost due to mandated
structural repairs and to potential tenants lost to new home purchases as a
result of attractive mortgage interest rates. Occupancy at Overlook Apartments
has increased due to a more aggressive marketing plan. The decrease in
occupancy at River's Edge Apartments is primarily attributable to tougher local
market conditions resulting from recent layoffs by a major employer in the area.
A stronger marketing campaign combined with the offering of rental concessions
contributed to an increase in occupancy at Village East Apartments.
Results of Operations
The Partnership's net income for the three months ended March 31, 1999 totaled
approximately $1,136,000 as compared to net income of approximately $981,000 for
the corresponding period of 1998. The increase in net income is attributable to
a decrease in total expenses partially offset by a decrease in total revenues.
Total expenses decreased due to decreases in operating expenses and, to a lesser
extent, decreases in depreciation, interest, and property tax expenses. The
decrease in operating expenses is primarily attributable to a decrease in
insurance expense related to lower premiums obtained from a new insurance
carrier and to a decrease in maintenance expense. Decreases in landscaping
costs, interior improvements, including painting, and sewer repair costs at a
number of the Partnership's investment properties contributed to the decrease in
maintenance expense in 1999. Depreciation decreased in 1999 due to major assets
at several of the Partnership's investment properties becoming fully depreciated
during 1998. Interest expense decreased due to the pay off in 1998 of two
first-lien mortgages associated with a previously sold property and to the
expected increase in the amount of debt service payments applied to the
principal portion of the Partnership's debt rather than charged to interest.
Property tax expense decreased due to tax reductions in 1998 for several of the
Partnership's investment properties as a result of tax appeals during the
previous year. Partially offsetting these decreases in expense is an increase
in general and administrative expense primarily attributable to an increase in
the special 9% management fee related to distributions from operating cash flows
paid to the limited partners. Distributions from operations paid to the limited
partners increased by approximately $4,055,000 during the three months ended
March 31, 1999 as compared to the same period of 1998. Included in general and
administrative expenses at both March 31, 1999 and 1998, are reimbursements to
the General Partner allowed under the Partnership Agreement associated with its
management of the Partnership. In addition, costs associated with the quarterly
and annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
Total revenues decreased primarily due to the fact that no casualty gain was
recognized during the three months ended March 31, 1999 as was during the three
months ended March 31, 1998. Also contributing to the decrease in total revenues
is a decrease in other income attributable to lower average cash balances
maintained in interest-bearing accounts during the last twelve months.
Partially offsetting the non-recurring income item from 1998 and the decrease in
other income for 1999 is an increase in rental income. The increase in rental
income is attributable to increased rental rates at all of the Partnership's
investment properties accompanied by increased occupancy levels at a number of
the properties which more than offset occupancy decreases at other properties
(see occupancy discussion above).
During the three months ended March 31, 1998, a net casualty gain of
approximately $227,000 resulted from fire and smoke damage to Overlook
Apartments which occurred in November 1997. As of December 31, 1998, all repair
efforts had been completed and the related costs capitalized as a part of the
investment property.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 1999, the Partnership held cash and cash equivalents of
approximately $6,435,000 compared to approximately $11,325,000 at March 31,
1998. Cash and cash equivalents decreased approximately $6,806,000 for the
three months ended March 31, 1999 from the Partnership's year ended December 31,
1998. This net decrease was comprised of approximately $9,253,000 of net cash
used in financing activities, partially offset by net cash provided by operating
and investing activities of approximately $2,188,000 and $259,000, respectively.
Cash used in financing activities consisted primarily of distributions to
partners and, to a lesser extent, payments made on the mortgages encumbering the
Partnership's investment properties. Cash provided by investing activities
consisted of net withdrawals from escrow accounts maintained by mortgage
lenders, partially offset by property improvements and replacements. The
Partnership invests its working capital reserves in money market accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and meet other operating needs of the Partnership and to comply with
Federal, state, and local legal and regulatory requirements. Capital
improvements planned for each of the Partnership's properties are detailed
below.
The Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $11,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement. These improvements were funded
primarily from Partnership reserves. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $260,000 of capital improvements over
the near term. Capital improvements planned for 1999 include, but are not
limited to, carpet and vinyl replacement, air conditioning units, landscaping,
roof replacement, and other building improvements. These improvements are
expected to cost approximately $313,000.
Arbours of Hermitage Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $31,000 for capital improvements at the property, consisting
primarily of appliance replacement and carpet and flooring replacement. These
improvements were funded from the Partnership's operating cash flow. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the General Partner on interior
improvements, it is estimated that the property requires approximately $516,000
of capital improvements over the near term. Capital improvements planned for
1999 include, but are not limited to, carpet and vinyl replacement, air
conditioning units, landscaping, roof replacement, swimming pool repairs,
painting, structural and other building improvements. These improvements are
expected to cost approximately $560,000.
Briar Bay Racquet Club Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $23,000 for capital improvements at the property, consisting
primarily of parking lot repairs and plumbing upgrades. These improvements were
funded from Partnership reserves and operating cash flows. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $114,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, electrical upgrades,
landscaping, and parking lot improvements. These improvements are expected to
cost approximately $139,000.
Chimney Hill Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $53,000 for capital improvements at the property, consisting
primarily of floor covering and cabinet replacements and other building
improvements. These improvements were funded from the Partnership's operating
cash flow. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $180,000 of capital improvements over the near term.
Capital improvements planned for 1999 include, but are not limited to, interior
and exterior building improvements. These improvements are expected to cost
approximately $252,000.
Citadel Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $24,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements. These improvements were
funded from the Partnership's operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $227,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, air conditioning units,
electrical upgrades, landscaping, roof replacement, and parking lot
improvements. These improvements are expected to cost approximately $256,000.
Citadel Village Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $7,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements. These improvements were
funded from the Partnership's operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $301,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, roof replacement,
landscaping, and other improvements. These improvements are expected to cost
approximately $216,000.
Foothill Place Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $42,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements, and landscaping
improvements. These improvements were primarily funded from Partnership
reserves. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the General
Partner on interior improvements, it is estimated that the property requires
approximately $273,000 of capital improvements over the near term. Capital
improvements planned for 1999 include, but are not limited to, carpet and vinyl
replacement, electrical upgrades, landscaping, parking lot repairs, roof
replacement, appliance replacement, and structural improvements. These
improvements are expected to cost approximately $362,000.
Knollwood Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $23,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements. These improvements were
funded from the Partnership's operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $584,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, electrical upgrades,
parking lot repairs, roof replacement, and structural and other building
improvements. These improvements are expected to cost approximately $626,000.
Lake Forest Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $11,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement. These improvements were primarily
funded from the Partnership's replacement and capital reserves. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the General Partner on interior
improvements, it is estimated that the property requires approximately $267,000
of capital improvements over the near term. Capital improvements planned for
1999 include, but are not limited to, carpet and vinyl replacement, air
conditioning units, landscaping, parking lot repairs, and other improvements.
These improvements are expected to cost approximately $522,000.
Nob Hill Villa Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $36,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement and other
building improvements. These improvements were primarily funded from
Partnership reserves. Based on a report received from an independent third
party consultant analyzing necessary exterior improvements and estimates made by
the General Partner on interior improvements, it is estimated that the property
requires approximately $275,000 of capital improvements over the near term.
Capital improvements planned for 1999 include, but are not limited to, carpet
and vinyl replacement, air conditioning units, electrical upgrades, roof
replacement, and other improvements. These improvements are expected to cost
approximately $292,000.
Overlook Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $28,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements. These improvements were
funded from the Partnership's operating cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $557,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, roof replacement, and
other improvements. These improvements are expected to cost approximately
$238,000.
Point West Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $8,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement and maintenance equipment. These
improvements were funded from the Partnership's operating cash flow. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the General Partner on interior
improvements, it is estimated that the property requires approximately $132,000
of capital improvements over the near term. Capital improvements planned for
1999 include, but are not limited to carpet replacement and landscaping. These
improvements are expected to cost approximately $119,000.
Post Ridge Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $11,000 for capital improvements at the property, consisting
primarily of floor covering and roof replacements. These improvements were
primarily funded from Partnership reserves. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $345,000 of capital improvements over
the near term. Capital improvements planned for 1999 include, but are not
limited to, carpet and vinyl replacement, roof replacement, and parking lot
repairs. These improvements are expected to cost approximately $347,000.
Rivers Edge Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $9,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement, and
landscaping improvements. These improvements were funded from the Partnership's
reserves and operating cash flow. Based on a report received from an independent
third party consultant analyzing necessary exterior improvements and estimates
made by the General Partner on interior improvements, it is estimated that the
property requires approximately $115,000 of capital improvements over the near
term. Capital improvements planned for 1999 include, but are not limited to,
carpet replacement, appliance replacements, and landscaping. These improvements
are expected to cost approximately $129,000.
South Port Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $45,000 for capital improvements at the property, consisting
primarily of carpet and vinyl replacement, appliance replacement, and pool and
other structural upgrades. These improvements were primarily funded from
Partnership reserves. Based on a report received from an independent third
party consultant analyzing necessary exterior improvements and estimates made by
the General Partner on interior improvements, it is estimated that the property
requires approximately $222,000 of capital improvements over the near term.
Capital improvements planned for 1999 include, but are not limited to, carpet
and vinyl replacement, appliance replacements, landscaping, other structural
improvements, and fencing upgrades. These improvements are expected to cost
approximately $231,000.
Stratford Place Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $14,000 for capital improvements at the property, consisting
primarily of floor covering, appliance, and cabinet and countertop replacements.
These improvements were primarily funded from Partnership reserves. Based on a
report received from an independent third party consultant analyzing necessary
exterior improvements and estimates made by the General Partner on interior
improvements, it is estimated that the property requires approximately
$1,077,000 of capital improvements over the near term. Capital improvements
planned for 1999 include, but are not limited to, landscaping, plumbing
upgrades, and other structural improvements. These improvements are expected to
cost approximately $579,000.
Village East Apartments
During the three months ended March 31, 1999, the Partnership expended
approximately $7,000 for capital improvements at the property, consisting
primarily of floor covering and appliance replacements, and outdoor lighting.
These improvements were funded from Partnership reserves. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $156,000 of capital
improvements over the near term. Capital improvements planned for 1999 include,
but are not limited to, carpet and vinyl replacement, parking lot repairs, and
roof replacement. These improvements are expected to cost approximately
$181,000.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are currently thought to be sufficient for any near-
term needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $70,666,000 matures at various dates between 1999
and 2005. The mortgage note payable on Overlook Apartments matured in March
1999, however, the Partnership negotiated an extension of the note until
September 1, 1999. Should the Partnership not be able to obtain permanent
financing or obtain additional extensions, the lender may choose to foreclose on
the property. Since the note is non-recourse and the mortgage balance exceeds
the book value of the property, no loss is expected. The General Partner will
attempt to refinance such remaining indebtedness and/or sell the properties
prior to such maturity dates. If the properties cannot be refinanced or sold
for a sufficient amount, the Partnership will risk losing such properties
through foreclosure.
Cash distributions from operations of approximately $6,422,000 ($17.99 per
limited partnership unit) and approximately $2,722,000 ($7.62 per limited
partnership unit) representing a return of capital were declared and paid during
the three months ended March 31, 1999. During the three months ended March 31,
1998, the General Partner declared and paid a distribution attributable to cash
flow from operations totaling approximately $2,205,000 ($6.16 per limited
partnership unit). The Partnership's distribution policy will be reviewed on a
quarterly basis. Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, and the
timing of debt maturities, refinancings and/or property sales. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations, after planned capital improvement expenditures, to permit any
additional distributions to its partners in 1999 or subsequent periods.
Potential Tender Offer
On October 1, 1998, Insignia Financial Group, Inc. merged into Apartment
Investment and Management Company ("AIMCO"), a publicly-traded real estate
investment trust, whose Class A Common Shares are listed on the New York Stock
Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a
Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP")
acquired indirect control of the Managing General Partner. AIMCO and its
affiliates currently own 30.97% of the limited partnership interests in the
Partnership. AIMCO is presently considering whether it will engage in an
exchange offer for additional limited partnership interests in the Partnership.
There is a substantial likelihood that, within a short period of time, AIMCO OP
will offer to acquire limited partnership interests in the Partnership for cash
or preferred units or common units of limited partnership interests in AIMCO OP.
While such an exchange offer is possible, no definite plans exist as to when or
whether to commence such an exchange offer, or as to the terms of any such
exchange offer, and it is possible that none will occur.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-Q shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers, routers and
desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
March 31, 1999, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by July 31, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. Based on interest rates at March 31, 1999, a 1%
increase or decrease in market interest rate would not have a material impact on
the Partnership.
The following table summarizes the Partnership's debt obligations at December
31, 1998, the Partnership's latest fiscal year end. The interest rates
represent the weighted-average rates. The fair value of the debt obligations
approximated the recorded value as of December 31, 1998.
Long-term Debt
Principal amount by expected Fixed Rate Average
maturity: Debt Interest
Rate
(in thousands)
1999 $ 2,238 7.75%
2000 12,474 7.56%
2001 191 7.25%
2002 208 7.25%
2003 8,976 7.25%
Thereafter 46,688 7.23%
Total $70,775
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc. and
entities which were, at the time, affiliates of Insignia ("Insignia Affiliates")
of interests in certain general partner entities, past tender offers by Insignia
Affiliates to acquire limited partnership units, the management of partnerships
by Insignia Affiliates as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the General
Partner filed a motion seeking dismissal of the action. In lieu of responding
to the motion, the plaintiffs filed an amended complaint. The General Partner
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, will be material to the
Partnership's overall operations.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties, LLC. v.
Insignia Financial Group, Inc., et al. in the Superior Court of the State of
California, County of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1999.
SIGNATURES
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.
CONSOLIDATED CAPITAL PROPERTIES IV
By: CONCAP EQUITIES, INC.
General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
/s/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance
and Administration
Date: May 14, 1999