UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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: 333-42441
MID-AMERICA CAPITAL PARTNERS, L.P.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1717980
(State of Incorporation) (I.R.S. Employer Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class October 31, 2001
none
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets of Mid-America Capital Partners, L.P. (the
"Partnership") as of September 30, 2001 (Unaudited) and December
31, 2000
Statements of Operations of the Partnership for the three and
nine months ended September 30, 2001 and 2000 (Unaudited)
Statements of Cash Flows of the Partnership for the nine months
ended September 30, 2001 and 2000 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. Financial Information
ITEM 1.
Mid-America Capital Partners, L.P.
(a limited partnership)
Balance Sheets
September 30, 2001 (Unaudited) and December 31, 2000
(Dollars in thousands)
2001 2000
- -----------------------------------------------------------------------------------------------------
Assets:
Real estate assets:
Land $ 21,016 $ 21,305
Buildings and improvements 213,511 212,941
Furniture, fixtures and equipment 5,968 5,801
Construction in progress 4,077 1,431
- -----------------------------------------------------------------------------------------------------
244,572 241,478
Less accumulated depreciation (47,667) (40,512)
- -----------------------------------------------------------------------------------------------------
Real estate assets, net 196,905 200,966
Cash and cash equivalents 1,388 859
Restricted cash 36 35
Deferred financing costs, net 1,454 2,202
Other assets 777 501
- -----------------------------------------------------------------------------------------------------
Total assets $ 200,560 $ 204,563
- -----------------------------------------------------------------------------------------------------
Liabilities and partners' capital:
Liabilities:
Bonds payable $ 142,000 $ 142,000
Accounts payable 149 118
Accrued expenses and other liabilities 3,395 2,652
Due to affiliate 727 1,382
Security deposits 822 803
- -----------------------------------------------------------------------------------------------------
Total liabilities 147,093 146,955
Partners' capital:
General partner 2,546 2,504
Limited partner 89,483 85,412
Due from limited partner (38,562) (30,308)
- -----------------------------------------------------------------------------------------------------
Total partners' capital 53,467 57,608
- -----------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 200,560 $ 204,563
- -----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Operations
Three and nine months ended September 30, 2001 and 2000
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------- ------------------------------
2001 2000 2001 2000
--------------- ------------ -------------- --------------
Revenues:
Rental $ 10,316 $ 10,270 $ 30,820 $ 30,457
Other 146 95 677 322
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues 10,462 10,365 31,497 30,779
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Personnel 1,163 1,124 3,424 3,249
Building repairs and maintenance 494 556 1,399 1,453
Real estate taxes and insurance 1,142 992 3,306 3,011
Utilities 325 389 1,005 1,102
Landscaping 310 296 929 872
Other operating 429 461 1,339 1,301
Depreciation and amortization real estate assets 2,360 2,308 7,115 7,041
Depreciation and amortization non-real estate assets 8 8 24 24
General and administrative 431 431 1,290 1,343
Interest 2,268 2,272 6,805 6,809
Amortization of deferred financing costs 248 264 748 793
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 9,178 9,101 27,384 26,998
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,284 $ 1,264 $ 4,113 $ 3,781
- ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Cash Flows
Nine months ended September 30, 2001 and 2000
(Dollars in thousands)
(Unaudited)
2001 2000
------------- ------------
Cash flows from operating activities:
Net income $ 4,113 $ 3,781
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,887 7,858
Changes in assets and liabilities:
Restricted cash (1) (1)
Other assets (276) (705)
Accounts payable 31 (188)
Accrued expenses and other liabilities 759 369
Due to affiliate (655) (122)
Security deposits 19 32
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 11,877 11,024
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities - improvements to properties (3,094) (2,136)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in financing activities - due from limited partner (8,254) (11,510)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 529 (2,622)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, beginning of period 859 3,667
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 1,388 $ 1,045
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 6,805 $ 6,809
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001 and 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the accounting policies in effect as of December 31, 2000, as set forth in
the annual financial statements of Mid-America Capital Partners, L.P. (the
"Partnership"), as of such date. In the opinion of management, all adjustments
necessary for a fair presentation of the financial statements have been included
and all such adjustments were of a normal recurring nature. The results of
operations for the three and nine months ended September 30, 2001 are not
necessarily indicative of the results to be expected for the full year.
The Partnership is a special purpose Delaware limited partnership. The
Partnership was formed on November 24, 1997 for the sole purpose to own 26
apartment communities (the Mortgaged Properties) and manage, renovate, improve,
lease, sell, transfer, exchange, mortgage and otherwise deal with the Mortgaged
Properties. The sole limited partner of the Partnership is Mid-America
Apartments, L.P., a Tennessee limited partnership (MAALP), which is a
majority-owned subsidiary of Mid-America Apartment Communities, Inc. (MAAC).
MAAC owns, directly or through its subsidiaries, all of the outstanding units of
partnership interest. MAAC is a self-administered and self-managed umbrella
partnership real estate investment trust (REIT). MAAC conducts a substantial
portion of its operations through MAALP and subsidiaries of MAALP. The sole
general partner of the Partnership is MAACP, Inc., a Tennessee corporation
(MAACP), a wholly-owned subsidiary of MAAC. The term of the Partnership shall be
to December 31, 2020, unless terminated earlier as provided in the Partnership
Agreement or as otherwise provided by law.
2. Recent Accounting Pronouncements
In June 2000, FASB Statement 138, "Accounting for Derivative Instruments and
Hedging Activity-Deferral of Effective Date of FASB Statement 133", was issued.
This Statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Partnership has only limited involvement with
derivative financial instruments, and does not use them for trading purposes.
This new accounting statement did not have any impact on the Partnership's
financial statements.
3. Segment Information
At September 30, 2001, the Partnership owned and operated 26 apartment
communities from which it derives all significant sources of earnings and
operating cash flows. The Partnership's operational structure is organized on a
decentralized basis, with individual property managers having overall
responsibility and authority regarding the operations of their respective
properties. Each property manager individually monitors local and area trends in
rental rates, occupancy percentages, and operating costs. Property managers are
given the on-site responsibility and discretion to react to such trends in the
best interest of the Partnership. Management evaluates the performance of each
individual property based on its contribution of revenues and net operating
income ("NOI"), which is composed of property revenues less all operating costs
including insurance and real estate taxes. The Partnership's reportable segments
are its individual properties because each is managed separately and requires
different operating strategy and expertise based on the geographic location,
community structure and quality, population mix, and numerous other factors
unique to each community.
The revenues and profits for the aggregated communities are summarized as
follows (Dollars in thousands):
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2001 2000 2001 2000
-------------- --------------- --------------- --------------
Rental revenues $ 10,316 $ 10,270 $ 30,820 $ 30,457
Other property revenues 146 95 677 322
------------------------------- -------------------------------
Total Revenues 10,462 10,365 31,497 30,779
------------------------------- -------------------------------
Property net operating income 6,599 6,547 19,866 19,791
Interest expense 2,268 2,272 6,805 6,809
General and administrative expenses 431 431 1,290 1,343
Amortization of deferred financing costs 248 264 748 793
Depreciation and amortization 2,368 2,316 7,139 7,065
------------------------------- -------------------------------
Net income $ 1,284 $ 1,264 $ 4,113 $ 3,781
=============================== ===============================
There have been no material changes in segment assets during the period.
PART I. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The following is a discussion of the financial condition and results of
operations of the Partnership for the three and nine months ended September 30,
2001 and 2000. This discussion should be read in conjunction with the financial
statements included in this report. These financial statements include all
adjustments, which are, in the opinion of management, necessary to reflect a
fair statement of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature.
The total number of apartment units owned at September 30, 2001 and 2000 was
5,948 in 26 apartment communities. Average monthly rental per apartment unit
increased to $617 at September 30, 2001 from $602 at September 30, 2000. Overall
occupancy was 95.2% and 96.3% at September 30, 2001 and 2000, respectively.
RESULTS OF OPERATIONS (Dollars in 000's)
COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED SEPTEMBER 30, 2001 TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2000
Total revenues for the three months ended September 30, 2001 increased 0.9% from
the three months ended September 30, 2000. This increase is due to the increases
in the average rental rate as compared to the same period a year ago and was
partially offset by the decline in occupancy.
Property operating expenses for the three months ended September 30, 2001
increased by 1.2% as compared to the same period a year ago. Increases in real
estate taxes and insurance represented the majority of the increase. The
increase was partially offset by decreases in utilities, and building repairs
and maintenance.
COMPARISON OF THE PARTNERSHIP'S NINE MONTHS ENDED SEPTEMBER 30, 2001 TO THE NINE
MONTHS ENDED SEPTEMBER 30, 2000
Total revenues for the nine months ended September 30, 2001 increased 2.3% from
the nine months ended September 30, 2000. This increase is due to the increase
in the average rental rate as compared to the same period a year ago and was
partially offset by the decline in occupancy.
Property operating expenses for the nine months ended September 30, 2001
increased by 3.8% as compared to the same period a year ago. Increases in
personnel, and real estate taxes and insurance represented the majority of the
increase. The increase was partially offset by decreases in utilities, and
building repairs and maintenance.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased to $11,877 for the nine
months ended September 30, 2001 from $11,024 for the nine months ended September
30, 2000 mainly related to changes in operating assets and liabilities.
Net cash flow used in investing activities increased by $958 for the nine months
ended September 30, 2001 as compared to the same period a year earlier primarily
due to increased capital improvements to the properties.
Net cash used in financing activities decreased during the period due to
intercompany cash payments to the limited partner.
The Partnership believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements (including recurring capital expenditures at the
communities).
INSURANCE
In the opinion of management, property and casualty insurance is in place which
provides adequate coverage to provide financial protection against normal
insurable risks such that it believes that any loss experienced would not have a
significant impact on the Partnership's liquidity, financial position, or
results of operations.
INFLATION
Substantially all of the resident leases at the communities allow, at the time
of renewal, for adjustments in the rent payable thereunder, and thus may enable
the Partnership to seek rent increases. The substantial majority of these leases
are for one year or less. The short-term nature of these leases generally serves
to reduce the risk to the Partnership of the adverse effects of inflation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement 142.
Statement 142 will also require that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with FAS
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.
The Partnership is required to adopt the provisions of Statement 141
immediately, except with regard to business combinations initiated prior to July
1, 2001, which it expects to account for using the pooling-of-interests method,
and Statement 142 effective January 1, 2002. Furthermore, goodwill and
intangible assets determined to have an indefinite useful life acquired in a
purchase business combination completed after June 30, 2001, but before
Statement 142 is adopted in full will not be amortized, but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement 142
accounting literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized and
tested for impairment in accordance with the appropriate pre-Statement 142
accounting requirements prior to the adoption of Statement 142.
Statement 141 will require upon adoption of Statement 142, that the Partnership
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Partnership will be required
to reassess the useful lives and residual values of all intangible assets
acquired, and make any necessary amortization period adjustments by the end of
the first interim period after adoption. In addition, to the extent an
intangible asset is identified as having an indefinite useful life, the
Partnership will be required to test the intangible asset for impairment in
accordance with the provisions of Statement 142 within the first interim period.
Any impairment loss will be measured as of the date of adoption and recognized
as the cumulative effect of a change in accounting principle in the first
interim period.
As of the date of adoption, the Partnership expects to have no unamortized
goodwill which will be subject to the transition provisions of Statements 141
and 142.
In August 2001, FASB issued Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (Statement 144), which supersedes both FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
(Opinion 30), for the disposal of a segment of a business (as previously defined
in that Opinion). Statement 144 retains the fundamental provisions in Statement
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement 121. For example,
Statement 144 provides guidance on how a long-lived asset that is used as part
of a group should be evaluated for impairment, establishes criteria for when a
long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. Statement 144
retains the basic provisions of Opinion 30 on how to present discontinued
operations in the income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business). Unlike Statement
121, an impairment assessment under Statement 144 will not result in a
write-down of goodwill. Rather, goodwill is evaluated for impairment under
Statement No. 142, Goodwill and Other Intangible Assets.
The Partnership is required to adopt Statement 144 no later than the year
beginning after December 15, 2001, and plans to adopt its provisions for the
quarter ending March 31, 2002. Management does not expect the adoption of
Statement 144 for long-lived assets held for use to have a material impact on
the Partnership's financial statements because the impairment assessment under
Statement 144 is largely unchanged from Statement 121. The provisions of the
Statement for assets held for sale or other disposal generally are required to
be applied prospectively after the adoption date to newly initiated disposal
activities. Therefore, management cannot determine the potential effects that
adoption of Statement 144 will have on the Partnership's financial statements.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. These statements include the plans and
objectives of management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the apartment
communities. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Although the
Partnership believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Partnership or any other person that the objectives and plans of the Partnership
will be achieved.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
This information has been omitted as there have been no material changes in the
Partnership's market risk as disclosed in the 2000 Annual Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits or Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MID-AMERICA CAPITAL PARTNERS, L.P.
Date: 11/14/2001 /s/Simon R.C. Wadsworth
Simon R.C. Wadsworth
President and Director
(Principal Financial and Accounting Officer)