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 June 30, 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 August 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 June 30, 2002 (Unaudited) and December 31, 2001
Statements of Operations of the Partnership for the three and six
months ended June 30, 2002 and 2001 (Unaudited)
Statements of Cash Flows of the Partnership for the six months ended
June 30, 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
June 30, 2002 (Unaudited) and December 31, 2001
(Dollars in thousands)
2002 2001
----------------- --------------
Assets:
Real estate assets:
Land $ 20,727 $ 20,727
Buildings and improvements 217,994 217,299
Furniture, fixtures and equipment 6,653 6,457
Construction in progress 1,140 647
- -----------------------------------------------------------------------------------------------------
246,514 245,130
Less accumulated depreciation (54,962) (50,040)
- -----------------------------------------------------------------------------------------------------
Real estate assets, net 191,552 195,090
Cash and cash equivalents 1,557 1,446
Restricted cash 37 36
Deferred financing costs, net 684 1,197
Other assets 727 560
- -----------------------------------------------------------------------------------------------------
Total assets $ 194,557 $ 198,329
=====================================================================================================
Liabilities and partners' capital:
Liabilities:
Bonds payable $ 142,000 $ 142,000
Accounts payable 384 94
Accrued expenses and other liabilities 3,259 2,494
Due to affiliate 468 545
Security deposits 857 813
- -----------------------------------------------------------------------------------------------------
Total liabilities 146,968 145,946
Partners' capital:
General partner 2,571 2,554
Limited partner 92,067 90,312
Due from limited partner (47,049) (40,483)
- -----------------------------------------------------------------------------------------------------
Total partners' capital 47,589 52,383
- -----------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 194,557 $ 198,329
=====================================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Operations
Three and six months ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues:
Rental $ 10,065 $ 10,320 $ 19,975 $ 20,504
Other 119 146 238 531
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues 10,184 10,466 20,213 21,035
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Personnel 1,245 1,143 2,487 2,261
Building repairs and maintenance 434 474 841 905
Real estate taxes and insurance 1,162 1,088 2,292 2,164
Utilities 294 321 585 680
Landscaping 311 312 615 619
Other operating 397 450 801 910
Depreciation and amortization real estate assets 2,440 2,363 4,906 4,755
Depreciation and amortization non-real estate assets 8 8 16 16
General and administrative 435 425 848 859
Interest 2,268 2,268 4,537 4,537
Amortization of deferred financing costs 257 243 513 500
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 9,251 9,095 18,441 18,206
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 933 $ 1,371 $ 1,772 $ 2,829
==================================================================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Cash Flows
Six months ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
2002 2001
------------- ------------
Cash flows from operating activities:
Net income $ 1,772 $ 2,829
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,435 5,271
Changes in assets and liabilities:
Restricted cash (1) (1)
Other assets (167) 360
Accounts payable 290 (34)
Accrued expenses and other liabilities 765 626
Due to affiliate (77) (573)
Security deposits 44 30
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 8,061 8,508
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in investing activities - improvements to properties (1,384) (1,908)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used in financing activities - due from limited partner (6,566) (6,064)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 111 536
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, beginning of period 1,446 859
- ---------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 1,557 $ 1,395
=================================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 4,537 $ 4,537
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 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 and six months ended June 30, 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
(Statement 141), and Statement No. 142, Goodwill and Other Intangible Assets
(Statement 142). 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 Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (Statement 144).
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.
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 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 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 142.
The Partnership adopted Statement 144 effective January 1, 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.
In April 2002, the FASB issued Statement No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No.13, and Technical Corrections
(Statement 145). The rescission of Statement No. 4, Reporting Gains and Losses
from Extinguishment of Debt and Statement No. 64, Extinguishments of Debt made
to Satisfy Sinking-Fund Requirements eliminates an exception to general practice
relating to the determination of whether certain items should be classified as
extraordinary and is effective in fiscal years beginning after May 15, 2002,
with earlier implementation encouraged. The amendment of Statement No. 13,
Accounting for Leases affects the accounting by the lessee for certain lease
modifications that have economic effects similar to sale-leaseback transactions
and Intangible Assets for Motor Carriers removes a no longer relevant standard
from the authoritative literature. The rescission of Statement No. 44 and all
other provisions of Statement 145 are effective for financial statements issued
on or after May 15, 2002. The impact of adopting Statement 145 is not expected
to be material.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (Statement 146). Statement 146 requires all
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Statement 146 is to be applied prospectively to exit or disposal
activities after December 31, 2002. The impact of adopting Statement 146 is not
expected to be material.
3. Segment Information
At June 30, 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 Six months ended
June 30, June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- --------------- --------------- --------------
Rental revenues $ 10,065 $ 10,320 $ 19,975 $ 20,504
Other property revenues 119 146 238 531
-------------- --------------- --------------- --------------
Total revenues 10,184 10,466 20,213 21,035
-------------- --------------- --------------- --------------
Property net operating income 6,341 6,678 12,592 13,496
Depreciation and amortization 2,448 2,371 4,922 4,771
General and administrative expenses 435 425 848 859
Interest expense 2,268 2,268 4,537 4,537
Amortization of deferred financing costs 257 243 513 500
-------------- --------------- --------------- --------------
Net income $ 933 $ 1,371 $ 1,772 $ 2,829
============== =============== =============== ==============
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 six months ended June 30, 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 June 30, 2002 and 2001 was 5,948 in
26 apartment communities. Average monthly rental per apartment unit increased to
$618 at June 30, 2002 from $613 at June 30, 2001. Overall occupancy was 95.1%
and 95.6% at June 30, 2002 and 2001, respectively.
RESULTS OF OPERATIONS (Dollars in 000's)
COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED JUNE 30, 2002 TO THE THREE
MONTHS ENDED JUNE 30, 2001
Total revenues for the three months ended June 30, 2002 decreased 2.7% from the
three months ended June 30, 2001. This decrease is due to the decline in
occupancy from the first quarter of 2001.
Property operating expenses for the three months ended June 30, 2002 increased
by 1.5% 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.
COMPARISON OF THE PARTNERSHIP'S SIX MONTHS ENDED JUNE 30, 2002 TO THE SIX MONTHS
ENDED JUNE 30, 2001
Total revenues for the six months ended June 30, 2002 decreased 3.9% from the
six months ended June 30, 2001. This decrease was due to the decline in
occupancy from the first six months of 2001.
Property operating expenses for the six months ended June 30, 2002 increased by
1.1% 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 decreased to $8,061 for the six
months ended June 30, 2002 from $8,508 for the six months ended June 30, 2001
mainly related to lower net income, and changes in operating assets and
liabilities.
Net cash flow used in investing activities decreased by $524 for the six months
ended June 30, 2002 as compared to the same period a year earlier due to
decreased capital improvements to the properties.
Net cash used in financing activities increased 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) The following exhibits are filed as part of this report.
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: August 14, 2002 /s/Simon R.C. Wadsworth
Simon R.C. Wadsworth
President and Director
(Principal Financial and Accounting Officer)