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 March 31, 2002
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 300
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 May 14, 2002
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 March 31, 2002 (Unaudited) and December
31, 2001
Statements of Operations of the Partnership for the three
months ended March 31, 2002 and 2001 (Unaudited)
Statements of Cash Flows of the Partnership for the three
months ended March 31, 2002 and 2001 (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
March 31, 2002 (Unaudited) and December 31, 2001
(Dollars in thousands)
2002 2001
------------- ---------------
Assets:
Real estate assets:
Land $ 20,727 $ 20,727
Buildings and improvements 217,418 217,299
Furniture, fixtures and equipment 6,551 6,457
Construction in progress 951 647
- -----------------------------------------------------------------------------------------------------
245,647 245,130
Less accumulated depreciation (52,514) (50,040)
- -----------------------------------------------------------------------------------------------------
Real estate assets, net 193,133 195,090
Cash and cash equivalents 1,602 1,446
Restricted cash 36 36
Deferred financing costs, net 941 1,197
Other assets 382 560
- -----------------------------------------------------------------------------------------------------
Total assets $ 196,094 $ 198,329
=====================================================================================================
Liabilities and partners' capital:
Liabilities:
Bonds payable $ 142,000 $ 142,000
Accounts payable 80 94
Accrued expenses and other liabilities 2,328 2,494
Due to affiliate 477 545
Security deposits 835 813
- -----------------------------------------------------------------------------------------------------
Total liabilities 145,720 145,946
Partners' capital:
General partner 2,562 2,554
Limited partner 91,143 90,312
Due from limited partner (43,331) (40,483)
- -----------------------------------------------------------------------------------------------------
Total partners' capital 50,374 52,383
- -----------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 196,094 $ 198,329
=====================================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Operations
Three months ended March 31, 2002 and 2001
(Dollars in thousands)
(Unaudited)
Three months ended
March 31,
-------------------------
2002 2001
----------- ------------
Revenues:
Rental $ 9,910 $ 10,184
Other 119 385
- --------------------------------------------------------------------------------------------------
Total revenues 10,029 10,569
- --------------------------------------------------------------------------------------------------
Expenses:
Personnel 1,242 1,118
Building repairs and maintenance 407 431
Real estate taxes and insurance 1,130 1,077
Utilities 291 359
Landscaping 304 306
Other operating 404 460
Depreciation and amortization real estate assets 2,466 2,392
Depreciation and amortization non-real estate assets 8 8
General and administrative 413 435
Interest 2,268 2,268
Amortization of deferred financing costs 257 257
- --------------------------------------------------------------------------------------------------
Total expenses 9,190 9,111
- --------------------------------------------------------------------------------------------------
Net income $ 839 $ 1,458
==================================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Cash Flows
Three months ended March 31, 2002 and 2001
(Dollars in thousands)
(Unaudited)
2002 2001
------------- ------------
Cash flows from operating activities:
Net income $ 839 $ 1,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,730 2,657
Changes in assets and liabilities:
Other assets 178 84
Accounts payable (14) (18)
Accrued expenses and other liabilities (166) (204)
Due to affiliate (68) (513)
Security deposits 22 10
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,521 3,474
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities - improvements to properties (517) (669)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in financing activities - due from limited partner (2,848) (2,957)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 156 (152)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, beginning of period 1,446 859
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 1,602 $ 707
=================================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,268 $ 2,268
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 2002 and 2001
(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, 2001, 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 months ended March 31, 2002 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 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 adopted the provisions of Statement 141 as of July 1, 2001,
except with regard to business combinations initiated prior to July 1, 2001. The
Partnership adopted the provisions of 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 Partnership's adoption on January 1, 2002, the Partnership had no
unamortized goodwill which is 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 adopted Statement 144 for the quarter ending March 31, 2002. The
adoption of Statement 144 for long-lived assets held for use did not have a
material impact on the Partnership's financial statements because the impairment
assessment under Statement 144 is largely unchanged from Statement 121.
3. Segment Information
At March 31, 2002, 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
March 31,
-------------------------------
2002 2001
-------------- ---------------
Rental revenues $ 9,910 $ 10,184
Other property revenues 119 385
-------------- ---------------
Total revenues 10,029 10,569
-------------- ---------------
Property net operating income 6,251 6,818
Depreciation and amortization 2,474 2,400
General and administrative expenses 413 435
Interest expense 2,268 2,268
Amortization of deferred financing costs 257 257
-------------- ---------------
Net income $ 839 $ 1,458
============== ===============
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 months ended March 31, 2002 and
2001. 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 March 31, 2002 and 2001 was 5,948
in 26 apartment communities. Average monthly rental per apartment unit increased
to $618 at March 31, 2002 from $610 at March 31, 2001. Overall occupancy was
94.0% and 95.7% at March 31, 2002 and 2001, respectively.
RESULTS OF OPERATIONS (Dollars in 000's)
COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED MARCH 31, 2002 TO THE THREE
MONTHS ENDED MARCH 31, 2001
Total revenues for the three months ended March 31, 2002 decreased 5.1% from the
three months ended March 31, 2001. This decrease is due to the decline in
occupancy from the first quarter of 2001.
Property operating expenses for the three months ended March 31, 2002 increased
by .7% as compared to the same period a year ago. Increases in personnel, and
real estate taxes and insurance were partially offset by decreases in utilities,
building repairs and maintenance and other operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased to $3,521 for the three
months ended March 31, 2002 from $3,474 for the three months ended March 31,
2001 mainly related to changes in operating assets and liabilities.
Net cash flow used in investing activities decreased by $152 for the three
months ended March 31, 2002 as compared to the same period a year earlier
primarily due to decreased 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.
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 2001 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: 5/14/2002 /s/ Simon R.C. Wadsworth
Simon R.C. Wadsworth
President and Director
(Principal Financial and Accounting Officer)