UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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: 1-12762
MID- AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1543819
(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
(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 at April 30, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 13,382,812
This Form 10-Q has been amended to exclude pro forma financial data.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996
Consolidated Statements of Operations for the three months
ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 2.
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996
(Dollars in thousands)
1997 1996
-------- --------
Assets:
Real estate assets:
Land $ 65,706 $ 61,150
Buildings and improvements 607,827 563,584
Furniture, fixtures and equipment 13,424 12,511
Construction in progress 6,766 4,648
-------- --------
693,723 641,893
Less accumulated depreciation (55,447) (49,558)
-------- --------
Real estate assets, net 638,276 592,335
Cash and cash equivalents 3,194 4,053
Restricted cash 4,620 5,538
Deferred financing costs, net 2,848 2,984
Other assets 7,390 6,289
-------- --------
Total assets $656,328 $611,199
======== ========
Liabilities and Shareholders' equity:
Liabilities:
Notes payable $304,180 $315,239
Accounts payable 860 744
Accrued expenses and other liabilities 9,235 12,182
Security deposits 2,502 2,412
-------- --------
Total liabilities 316,777 330,577
Minority interest 42,623 39,238
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, 2,000,000 shares at 9.5% Series A
Cumulative Preferred Stock Liquidation Preference
$25 per share, issued and outstanding 20 20
Common stock, $.01 par value (authorized 20,000,000
shares; issued and outstanding 13,306,362 and
10,949,216 shares at March 31, 1997 and
December 31, 1996 133 109
Additional paid-in capital 315,363 256,689
Unearned compensation (230) (260)
Accumulated deficit (18,358) (15,174)
-------- --------
Total shareholders' equity 296,928 241,384
-------- --------
Total liabilities and shareholders' equity $656,328 $611,199
======== ========
[FN]
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Three months ended March 31, 1997 and 1996
(Dollars in thousands except per share data)
(Unaudited)
Three months ended March 31,
----------------------------
1997 1996
-------- --------
Revenues:
Rental $ 29,356 $ 26,837
Other 483 314
-------- --------
Total revenues 29,839 27,151
Expenses:
Personnel 3,109 2,770
Building repairs and maintenance 1,270 1,123
Real estate taxes and insurance 3,144 2,986
Utilities 1,476 1,667
Landscaping 823 644
Other operating 1,252 1,088
Depreciation and amortization real estate assets 5,895 5,084
Depreciation and amortization non-real estate assets 42 35
General and administrative 1,416 1,706
Interest 6,510 6,236
Amortization of deferred financing costs 198 174
-------- --------
Total expenses 25,135 23,513
-------- --------
Income before minority interest in operating partnership income 4,704 3,638
Minority interest in operating partnership income 842 670
-------- --------
Net income 3,862 2,968
Dividends on preferred shares 1,187 -
-------- --------
Net income available for common shareholders $ 2,675 $ 2,968
======== ========
Net income available per common share $ 0.23 $ 0.27
======== ========
[FN]
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flow
Three months ended March 31, 1997 and 1996
(Dollars in thousands)
(Unaudited)
1997 1996
-------- --------
Cash flows from operating activities:
Net income $ 3,862 $ 2,968
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,180 5,323
Minority interest in operating partnership income 842 670
Changes in assets and liabilities:
Restricted cash 918 (2,214)
Other assets (1,125) (387)
Accounts payable 116 (257)
Accrued expenses and other liabilities (2,947) (1,528)
Security deposits 90 (9)
-------- --------
Net cash provided by operating activities 7,936 4,566
Cash flows from investing activities:
Purchases of real estate assets (31,706) (14,309)
Improvements to properties (3,770) (3,860)
Construction of units in progress (2,496) (601)
-------- --------
Net cash used in investing activities (37,972) (18,770)
Cash flows from financing activities:
Proceeds from notes payable - 16,733
Net increase (decrease) in credit line (24,348) 4,720
Principal payments on notes payable (569) (631)
Deferred financing costs (101) (863)
Proceeds from issuances of common shares 62,556 80
Redemption of unitholder interests (8) (37)
Distributions to unitholders (1,308) (1,248)
Dividends paid on common shares (5,858) (5,578)
Dvidends paid on preferred shares (1,187) -
-------- --------
Net cash provided by financing activities 29,177 13,176
-------- --------
Net decrease in cash and cash equivalent (859) (1,028)
-------- --------
Cash and cash equivalents, beginning of period 4,053 3,046
-------- --------
Cash and cash equivalents, end of period $ 3,194 $ 2,018
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 6,745 $ 5,956
======== ========
Supplemental disclosure of noncash investing and financing activities:
Assumption of debt related to property acquisitions $ 13,858 -
Conversion of units for common shares $ 870 -
[FN]
See accompanying notes to consolidated financial statements.
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. The accompanying unaudited consolidated financial statements have
been prepared in accordance with the accounting policies in effect as of
December 31, 1996, as set forth in the annual consolidated financial
statements of Mid-America Apartment Communities, Inc. ("MAAC" or the
"Company"), as of such date. In the opinion of management, all adjustments
necessary for a fair presentation of the consolidated financial statements
have been included and all such adjustments were of a normal recurring
nature. All significant intercompany accounts and transactions have been
eliminated in consolidation. The results of operations for the three-month
period ended March 31, 1997 are not necessarily indicative of the results
to be expected for the full year.
2. Primary earnings per share is computed based upon 11,420,554 weighted
average common shares outstanding during the period from January 1, 1997
through March 31, 1997, and 10,944,269 for the period January 1, 1996
through March 31, 1996. Fully diluted earnings per share is not presented
as the dilution is not materially different as compared to primary earnings
per share.
At March 31, 1997 13,306,362 common shares and 2,389,613 operating
partnership units were outstanding, a total of 15,695,975. Additionally,
MAAC has outstanding options of 519,800 shares of common stock which
increased weighted average shares outstanding during the period January 1,
1997 through March 31, 1997 by 69,979 shares and the period January 1,
1996 through March 31, 1996 by 43,652 shares.
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share," specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS). The objective of SFAS No. 128
is to simplify the computation and to make the U.S. standard more compatible
with EPS standards of other countries and with that of the International
Accounting Standards Committee. When adopted in the first quarter of 1998,
the standard is not expected to have a material impact on the EPS computation
of the Company.
3. Subsequent Events
Property Acquisitions
On April 10, 1997, the Company acquired the 450-unit Woodhollow
apartment community located in Jacksonville, FL. The purchase price of
$16.7 million was funded by the Company's credit line.
On April 15, 1997, the Company acquired the 278-unit The Woods
apartment community located in Austin, TX. The purchase price of $10
million was funded by the Company's credit line.
PART 1. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the consolidated financial condition
and results of operations of the Company for the three months ended
March 31, 1997 and 1996. This discussion should be read in conjunction
with all of the financial statements appearing elsewhere 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.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") represents net income (computed
in accordance with GAAP) excluding extraordinary items, minority interest
in Operating Partnership income, gain or loss on disposition of real
estate assets, and certain non-cash items, primarily depreciation
and amortization, less preferred stock dividends. The Company computes
FFO in accordance with NAREIT's current definition, which eliminates
amortization of deferred financing costs and depreciation of non-real
estate assets as items added back to net income when computing FFO.
FFO should not be considered as an alternative to net income or any other
GAAP measurement of performance, as an indicator of operating performance
or as an alternative to cash flows from operating, investing, and
financing activities as a measure of liquidity. The Company believes that
FFO is helpful in understanding the Company's results of operations
in that such calculation reflects cash flow from operating activities
and the Company's ability to support interest payments and general
operating expenses before the impact of certain activities such as changes
in other assets and accounts payable.
For the three months ended March 31, 1997, FFO increased by approximately
$690,000 or 8%, when compared to the year earlier. The increase was
primarily attributable to an approximate $2,688,000 increase in revenues,
which was partially offset by increases in expenses mainly associated with
the increase in the number of apartment units owned by the Company and
$1,187,000 of dividend distributions to preferred shareholders from the
October 1996 issuance of 9.5% Series A Cumulative Preferred Stock. On a
per share basis, FFO increased 5% from $.65 per share for the three months
ended March 31, 1996 to $.68 per share for the same period in 1997.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THE
THREE MONTHS ENDED MARCH 31, 1996
The total number of apartment units owned at March 31, 1997 was 20,394 in
77 apartment communities, compared to 18,660 in 71 communities at March 31,
1996. Average monthly rental per apartment unit increased to $532 at
March 31, 1997 from $512 at March 31, 1996. Overall occupancy was 94.3% at
March 31, 1997 compared to 95.4% for the exceptionally strong
first quarter of a year ago.
Total revenues for the three months ended March 31, 1997 increased by
approximately $2,688,000, due primarily to (i) approximately $2,677,000
from the communities acquired in 1996, (ii) approximately $509,000
from the communities acquired in 1997, and (iii) approximately $426,000
from the communities owned throughout both periods. This increase was
offset by approximately $1,072,000 of revenues from the communities sold
in 1996.
Property operating expenses for the three months ended March 31, 1997
increased by approximately $796,000, due primarily to (i) approximately
$917,000 from the communities acquired in 1996, (ii) approximately $184,000
from the communities acquired in 1997, and (iii) approximately $295,000 from
the communities owned throughout both periods. This increase was offset
by approximately $407,000 of expense from the communities sold in 1996.
Utility costs decreased from 6.1% of revenue to 4.9% of revenue for the
three months ended March 31, 1997 compared to the same period a
year earlier, due primarily to the installation of approximately 6,700
individual apartment unit water meters and the completion of the individual
apartment unit electricity metering at Sailwinds at Lake Magdalene.
General and administrative expense decreased for the three months ended
March 31, 1997 compared to the same period a year earlier. Some of the
reductions are one-time expense adjustments and the remaining decreases are
primarily in the area of bonus expense, 1996 underabsorbed landscape
costs held in general and administrative and reduced state and local
taxes.
Depreciation and amortization expense increased approximately $818,000 for
the three months ended March 31, 1997 compared to the same period a year
earlier primarily due to depreciation expense for (i) approximately
$546,000 from the communities acquired in 1996, (ii) approximately $69,000
from the communities acquired in 1997, and (iii) approximately $374,000
from the communities owned throughout both periods. This increase was
offset by approximately $188,000 of expense from the communities sold in 1996.
Interest expense increased approximately $274,000 during the three months
ended March 31, 1997 compared to the same period a year earlier due
primarily to apartment acquisitions. The average borrowing cost of 7.9%
and average maturity of 10 years on the Company's debt was the same for
periods ending March 31, 1997 and 1996.
As a result of the foregoing, income before minority interest in operating
partnership income increased $1,066,000 for the three months ended March 31,
1997 over the same period a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased from approximately
$4,566,000 for the three months ended March 31, 1996 to approximately
$7,936,000 for the three months ended March 31, 1997. The increase
in net cash flow was primarily due to an increase in net income,
depreciation and amortization, accounts payable and a decrease in
restricted cash. This increase in net cash flow provided by operating
activities was offset by an increase in other assets for earnest money
escrows for future acquisitions and a decrease in accrued expenses and
liabilities.
Net cash flow used in investing activities increased from approximately
$18,770,000 for the three months ended March 31, 1997 to approximately
$37,972,000 for the three months ended March 31, 1996. The increase was
primarily due to the acquisition of 1,114 apartment units during the first
three months of 1997 for approximately $31,706,000, net of debt assumed,
as compared to the acquisition of 316 apartment units during the same period
in 1996 for approximately $14,309,000.
Capital improvements to existing properties totaled approximately
$3,770,000 for the three months ended March 31, 1997, compared to
approximately $3,860,000 for the same period in 1996. Of the $3,770,000
capital improvements approximately $1,604,000 was for recurring capital
expenditures, including carpet and appliances, approximately $1,575,000
was for revenue enhancing projects, approximately $507,000 was for
acquisition capital with the remaining balance for other miscellaneous
items. Annualizing the first quarter's spending for the stabilized
apartment units, recurring capital expenditures averaged $346 per
apartment unit, compared to $413 per unit for the full year 1996 and
compared to a 1997 full year budget of $397 per unit. Construction in
progress for new apartment units increased from approximately $601,000
for the three months ended March 31, 1996 to approximately $2,496,000
for the comparable period in 1997, due primarily to the development of
the 234-unit expansion at Lincoln on the Green apartments in Memphis,
Tennessee which is scheduled to begin leasing during the third
quarter of 1997.
Net cash flow provided by financing activities increased from approximately
$13,176,000 during the three months ended March 31, 1996 to approximately
$29,177,000 for the same period in 1997. In March 1997, approximately
$62,556,000 was provided from the Company's issuance of 2,300,000 shares
of common stock in an underwritten public offering. The principal uses
of cash from financing activities included approximately $24,348,000
reducing the Company's credit line and approximately $8,353,000 for
dividends and distributions.
At March 31, 1997, the Company had approximately $6,057,000 outstanding
on the Company's unsecured $90,000,000 credit line. At March 31, 1997,
the Company had approximately $22,895,000 (including the credit line) of
floating rate debt at an average interest rate of 6.0%; all other debt
was fixed rate term debt at an average interest rate of 8.1%. The weighted
average interest rate and weighted average maturity at March 31, 1997
for the approximately $304,180,000 of notes payable were 7.9% and
10 years, respectively. The credit line is unsecured and is subject to
borrowing base calculations that effectively reduce the maximum amount
that may be borrowed under the credit line. The Company expects to use the
credit line for future acquisitions, development, and to provide letters
of credit as credit enhancements for tax-exempt bonds.
The Company 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) and payment of distributions by the
Company in accordance with REIT requirements under the Internal
Revenue Code.
Capital expenditures on property improvements and expansion projects for
1997 are currently planned at approximately $29.8 million, including $11.6
million for the development of new units and $2.7 million for the six
properties acquired during January through April 1997. The Company expects
to meet its long term liquidity requirements, such as scheduled mortgage
debt maturities, property acquisitions, expansions and non-recurring capital
expenditures, through long and medium-term collateralized and uncollateralized
fixed rate borrowings, issuance of debt or additional equity securities in
the Company and the Company's credit line.
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 Company'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 Company 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 Company
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 forwardlooking 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. Although the Company 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 Form 10-Q
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 Company or
any other person that the objectives and plans of the Company will be
achieved.
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
Form Events Reported Financial Statements Date of Report Date Filed
- ------ ---------------------------- --------------------- -------------- ----------
8-K(A) Filing of audited statements Historical Summary of 2-21-97 2-21-97
related to purchase of Gross Income and
Tiffany Oaks Apartments. Operating Expenses.
8-K Purchase consumation of To be filed. 2-21-97 2-21-97
Howell Commons Apartments.
8-K(A) Filing of audited statements Historical Summary of 3-17-97 3-18-97
related to purchase of Gross Income and
Howell Commons Apartments. Operating Expenses.
8-K Announcement of sale of Not applicable. 3-19-97 3-19-97
2,000,000 shares of common
stock. Underwriting agreement
attached as an exhibit.
Purchase consumation of To be filed. 3-19-97 3-19-97
Balcones Woods Apartments.
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 APARTMENT COMMUNITIES, INC.
Date: February 4, 1998 /s/ GEORGE E. CATES
-------------------- ---------------------------------
George E. Cates
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: February 4, 1998 /s/ SIMON R.C. WADSWORTH
-------------------- ---------------------------------
Simon R.C. Wadsworth
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)