UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A Amendment #2
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the period ended: March 31, 1998 Commission file number: 001-11981
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 52-1449733
(State of organization) (I.R.S. Employer Identification No.)
218 North Charles Street, Suite 500, Baltimore, Maryland 21201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(410)962-8044
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The Company had 14,355,075 Growth Shares outstanding as of May 13, 1998,
the latest practicable date.
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
INDEX TO FORM 10-Q/A Amendment #2
DESCRIPTION OF AMENDMENTS:
AMENDMENT #1:
A) Item 6(a) has been amended to reflect additional exhibits furnished as
part of the Registrant's quarterly report on Form 10-Q for the quarter
ended March 31, 1998 (previously filed on May 29, 1998).
AMENDMENT #2:
A) The following components of Item 1 and Item 6(a) have been amended
to properly reflect the tender and purchase of Series I and Series II
Preferred Shares and Series I and Series II Preferred Capital
Distribution Shares as disclosed in Note 19 to the Registrant's 1997
Annual Report on Form 10-K/A:
1) Item 1 - Balance Sheet and Statement of Shareholders' Equity -
Series I and Series II Preferred Shares, Series I and Series II
Preferred Capital Distribution Shares and Growth Shares
equity at March 31, 1998
2) Item 1 - Income Statement and Note 6 - Diluted weighted
average shares outstanding
3) Item 6(a) - Exhibit No. 11 - Computation of Earnings per
Share - Diluted weighted average shares outstanding
4) Item 6(a) - Exhibit No. 27 - Financial Data Schedule - Series
I and Series II Preferred Shares, Series I and Series II Preferred
Capital Distribution Shares and Growth Shares equity at March
31, 1998
Part I- FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (previously filed on May 14, 1998)
Part II- OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) (unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $26,294 $7,370
Interest receivable 1,532 1,472
Investment in mortgage revenue bonds,
net (Note 2) 127,565 182,035
Investment in mortgage revenue bonds
pledged, net (Note 2) 57,925 -
Investment in other bond related
investments, net (Note 3) 71,106 38,926
Investment in parity working capital loans, demand
notes and other loans, net (Note 4) 20,791 11,491
Other assets 305 477
Restricted assets 1,330 1,330
----------- ----------
TOTAL ASSETS $306,848 $243,101
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $1,174 $1,000
Unearned revenue 687 702
----------- ----------
TOTAL LIABILITIES 1,861 1,702
----------- ----------
Commitments and contingencies - -
<PAGE>
Shareholders' equity:
Preferred shares:
Series I (15,590 and 16,329 shares
issued and outstanding, respectively) 10,799 11,308
Series II (7,350 and 7,637 shares
issued and outstanding, respectively) 6,017 6,230
Preferred capital distribution shares:
Series I (8,325 and 8,909 shares issued
and outstanding, respectively) 4,263 4,559
Series II (3,535 and 3,809 shares issued
and outstanding, respectively) 1,985 2,126
Term growth shares (2,000 shares issued
and outstanding) 125 97
Growth shares (14,419,123 shares, including
14,399,668 issued, 4,356 deferred, and
15,099 restricted shares at March 31, 1998
and 11,166,227 shares, including 11,153,168
issued, 3,685 deferred, and 9,374 restricted
shares at December 31, 1997) 256,816 192,504
Less growth shares held in treasury at cost
(59,716 shares and 60,077, respectively) (917) (922)
Less unearned compensation - restricted
shares (1,799) (1,865)
Accumulated other comprehensive income 27,698 27,362
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 304,987 241,399
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $306,848 $243,101
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
INCOME
Interest on mortgage revenue bonds and
other bond related investments $5,292 $4,019
Interest on parity working capital loans,
demand notes and other loans 1,080 805
Interest on short-term investments 372 270
Net gain on sale 321 -
Other income 268 250
----------- ----------
TOTAL INCOME 7,333 5,344
----------- ----------
EXPENSES
Operating expenses 1,160 812
----------- ----------
TOTAL EXPENSES 1,160 812
----------- ----------
NET INCOME $6,173 $4,532
=========== ==========
NET INCOME ALLOCATED TO:
Preferred shares:
Series I ($13.96 and $13.55 per
share, respectively) $218 $221
=========== ==========
Series II ($19.78 and $16.05 per
share, respectively) $146 $123
=========== ==========
Preferred capital distribution shares:
Series I ($11.55 and $11.18 per
share, respectively) $96 $100
=========== ==========
Series II ($16.46 and $12.61 per
share, respectively) $58 $48
=========== ==========
Term growth shares $125 $91
=========== ==========
Growth shares $5,530 $3,949
=========== ==========
Net income per growth share
Basic $0.41 $0.36
=========== ==========
Diluted
$0.41 $0.36
=========== ==========
Weighted average growth shares outstanding
Basic 13,336,903 11,093,415
=========== ==========
Diluted 14,098,161 11,095,175
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
Net income $6,173 $4,532
----------- ----------
Other comprehensive income:
Unrealized gains on investments:
Unrealized holding gains arising
during the period 604 -
Less: reclassification adjustment for
gains included in net income (268) -
----------- ----------
Other comprehensive income 336 -
----------- ----------
Comprehensive income $6,509 $4,532
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,173 $4,532
Adjustments to reconcile net income to net cash
provided by operating activities:
Net gain on sale of bonds (321) -
Net amortization of premiums and
discounts on investments 11 14
Depreciation 5 -
Restricted share compensation expense 66 3
Deferred shares issued under the
Non-Employee Directors'Share Plan 15 -
Director fees paid by reissuance of
treasury shares 7 -
(Increase) decrease in interest receivable (60) 50
Decrease in other assets 182 181
Increase (decrease) in accounts
payable and accrued expense 174 (159)
Decrease in unearned fees collected, net 178 -
----------- ----------
Net cash provided by operating activities 6,430 4,621
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of mortgage revenue bonds and
other bond related invesments (39,627) (7,055)
Origination of other loans (9,495) (563)
Net proceeds from sale of bond related
investments 4,544 -
Purchases of furniture and equipment (15) (27)
Principal payments received 96 20
----------- ----------
Net cash used in investing activities (44,497) (7,625)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of growth shares 62,714 -
Retirement of preferred shares (1,044) -
Proceeds from stock options exercised 7 -
Distributions (4,686) (8,075)
----------- ----------
Net cash provided by (used in) financing
activities 56,991 (8,075)
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 18,924 (11,079)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 7,370 34,817
----------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $26,294 $23,738
=========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Municipal Mortgage and Equity, L.L.C
Consolidated Statement of Shareholders' Equity
For the Period January 1, 1998 Through March 31, 1998
(In thousands, except share data)
(unaudited)
Preferred Capital
Preferred Shares Distribution Shares Term
------------------- --------------------- Growth
Series I Series II Series I Series II Shares
--------- --------- --------- -------- ---------
Balance, January 1, 1998 $11,308 $6,230 $4,559 $2,126 $ 97
Comprehensive income:
Net Income 218 146 96 58 125
Unrealized gains on investments,
net of reclassification - - - - -
Total comprehensive income
Distributions (215) (125) (93) (46) (97)
Reissuance of treasury shares - - - - -
Options exercised - - - - -
Deferred shares issued under the
Non-Employee Directors'
Share Plan - - - - -
Issuance of Growth Shares - - - - -
Retirement of preferred shares (512) (234) (299) (153) -
Amortization of unearned
compensation - - - - -
------- ------- ------- ------- --------
Balance, March 31, 1998 $10,799 $6,017 $4,263 $1,985 $125
======== ======= ======= ======= ========
Preferred Capital
Preferred Shares Distribution Shares Term
------------------ -------------------- Growth
Series I Series II Series I Series II Shares
--------- ----------- -------- ---------- ------
SHARE ACTIVITY:
Balance, January 1, 1998 16,329 7,637 8,909 3,809 2,000
Reissuance of treasury shares - - - - -
Issuance of growth shares - - - - -
Retirement of Preferred
shares (739) (287) (584) (274) -
Options exercised - - - - -
Deferred shares issued under the
Non-Employee Directors' Share
Plan - - - - -
Vesting of restricted shares - - - - -
--------- ----------- -------- ---------- ------
Balance, March 31, 1998 15,590 7,350 8,325 3,535 2,000
========= ============ ======== ========== ======
Accumulated
Other
Growth Treasury Unearned Comprehensive
Shares Shares Compensation Income Total
--------- --------- ------------ --------- --------
Balance, January 1, 1998 $ 192,504 $ (922) $ (1,865) $ 27,362 $241,399
Comprehensive income:
Net income 5,530 - - -
Unrealized gains on investments,
net of reclassification - - - 336
Total comprehensive income 6,509
Distributions (4,110) - - - (4,686)
Reissuance of treasury shares 2 5 - - 7
Options exercised 7 - - - 7
Deferred shares issued under the
Non-Employee Directors' Share
Plan 15 - - - 15
Issuance of growth shares 62,714 - - - 62,714
Retirement of preferred shares 154 - - - (1,044)
Amortization of unearned
compensation - - 66 - 66
--------- --------- ----------- --------- --------
Balance, March 31, 1998 $256,816 $ (917) $(1,799) $ 27,698 $304,987
========= ========= =========== ======= ========
Growth Treasury
Shares Shares
---------- ----------
SHARE ACTIVITY:
Balance, January 1, 1998 11,106,150 60,077
Reissuance of treasury shares 361 (361)
Issuance of growth shares 3,246,000 -
Retirement of preferred shares - -
Options exercised 500 -
Deferred shares issued under the
Non-Employee Directors' Share
Plan 671 -
Vesting of restricted shares 5,725 -
---------- -----------
Balance, March 31, 1998 14,359,407 59,716
========== ===========
The accompanying notes are an integral part of these financial statements.
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Municipal Mortgage and Equity, L.L.C. (the "Company") is in the
business of originating, investing in and servicing tax-exempt mortgage
revenue bonds issued by state and local government authorities to finance
multifamily housing developments and secured by nonrecourse mortgage loans
on the underlying properties. The Company, organized in July 1995 as a
limited liability company under Delaware law, is the successor to the business
of the SCA Tax Exempt Fund Limited Partnership (the "Partnership"), which
was merged into the Company effective August 1, 1996 (the "Merger").
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission and in the opinion of management contain all
adjustments (consisting of only normal recurring accruals) necessary to present
a fair statement of the results for the periods presented. These results have
been determined on the basis of accounting principles and policies discussed
in Note 2 to the Financial Statements appearing in the Company's 1997
Annual Report on Form 10-K (the "Company's 1997 Form 10-K"). Certain
information and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles have
been condensed or omitted. The accompanying financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's 1997 Form 10-K.
NOTE 2 - INVESTMENT IN MORTGAGE REVENUE BONDS
The Company invests in various mortgage revenue bonds and other
bond related investments, the proceeds of which are used to make nonrecourse
mortgage loans on multifamily housing developments. The Company's rights
and the specific terms of the bonds are defined by the various loan documents
which were negotiated at the time of settlement. The basic terms and structure
of each bond are described in Note 6 to the Company's 1997 Form 10-K.
The following table provides certain information with respect to each
of the bonds held by the Company at March 31, 1998.
<PAGE>
<TABLE>
<CAPTION>
March 31, 1998
---------------------------
Unrealized
Base Face Amortized Gain Fair
Investment in Mortgage Year Interest Maturity Amount Cost (Loss) Value
Revenue Bonds Acquired Rate Date (000s) (000s) (000s) (000s)
- ------------------------ -------- ------- -------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Participating Bonds (1):
Alban Place (2),(4) 1986 7.875 Oct. 2008 $10,065 $10,065($1,170) $8,895
Creekside Village (2) 1987 7.500 Nov. 2009 11,760 7,396 190 7,586
Emerald Hills (2) 1988 7.750 Apr. 2008 6,725 6,725 579 7,304
Lakeview Garden (2) 1987 7.750 Aug. 2007 9,003 5,340 - 5,340
Newport-on-Seven (2) 1986 8.125 Aug. 2008 10,125 7,898 1,265 9,163
North Pointe (2),(4) 1986 7.875 Aug. 2006 25,185 12,738 3,717 16,455
Northridge Park (2) 1987 7.500 June 2012 8,815 8,815 (1,547) 7,268
Riverset (2),(4) 1988 7.875 Nov. 1999 19,000 19,000 1,116 20,116
Southfork Village (2),(4) 1988 7.875 Jan. 2009 10,375 10,375 2,084 12,459
Villa Hialeah (2) 1987 7.875 Oct. 2009 10,250 8,004 (117) 7,887
Willowgreen (2) 1986 8.000 Dec. 2010 9,275 6,770 2 6,772
The Crossings 1997 8.000 July 2007 7,036 6,925 245 7,170
------- ------ -------
Subtotal participating bonds 110,051 6,364 116,415
------- ------ -------
Non-Participating Bonds:
Riverset II 1996 9.500 Oct. 2019 110 105 5 110
Charter House 1996 7.450 July 2026 35 35 1 36
Hidden Valley 1996 8.250 Jan. 2026 1,700 1,690 82 1,772
Oakbrook 1996 8.200 July 2026 3,195 3,211 167 3,378
Torries Chase 1996 8.150 Jan. 2026 2,070 2,060 159 2,219
Gannon Portfolio 1998 12.000 Dec. 2029 3,500 3,500 - 3,500
------- ------ -------
Subtotal non-participating bonds 10,601 414 11,015
------- ------ -------
Participating Subordinate Bonds (1):
Barkley Place (3) 1995 16.000 Jan. 2030 3,480 2,445 1,430 3,875
Gilman Meadows (3) 1995 3.000 Jan. 2030 2,875 2,530 1,409 3,939
Hamilton Chase (3) 1995 3.000 Jan. 2030 6,250 4,140 98 4,238
Mallard Cove I (3) 1995 3.000 Jan. 2030 1,670 798 645 1,443
Mallard Cove II (3) 1995 3.000 Jan. 2030 3,750 2,429 1,599 4,028
Meadows (3) 1995 16.000 Jan. 2030 3,635 3,716 451 4,167
Montclair (3) 1995 3.000 Jan. 2030 6,840 1,691 3,914 5,605
Newport Village (3) 1995 3.000 Jan. 2030 4,175 2,973 1,803 4,776
Nicollet Ridge (3) 1995 3.000 Jan. 2030 12,415 6,075 2,325 8,400
Steeplechase Falls (3) 1995 16.000 Jan. 2030 5,300 5,852 744 6,596
Whispering Lake (3) 1995 3.000 Jan. 2030 8,500 4,779 3,234 8,013
Riverset II 1996 10.000 Oct. 2019 1,489 - 1,229 1,229
------- ------ -------
Subtotal participating subordinate bonds 37,428 18,881 56,309
------- ------ -------
Non-Participating Subordinate Bonds:
Independence Ridge 1996 12.500 Dec. 2015 1,045 1,045 21 1,066
Locarno 1996 12.500 Dec. 2015 675 675 10 685
------- ------ -------
Subtotal non-participting subordinate bonds 1,720 31 1,751
------- ------ -------
Total investment in mortgage revenue bonds $159,800 25,690 185,490
======= ====== =======
December 31, 1997
-----------------------------------
Face Amortized Unrealized Fair
Investment in Mortgage Year Amount Cost Gain (Loss) Value
Revenue Bonds Acquired (000s) (000s) (000s) (000s)
- ---------------------------- ---------- ------- ---------- --------- ------
<S> <C> <C> <C> <C> <C>
Participating Bonds (1):
Alban Place (2),(4) 1986 $10,065 $10,065 ($1,170) $8,895
Creekside Village (2) 1987 11,760 7,396 190 7,586
Emerald Hills (2) 1988 6,725 6,725 579 7,304
Lakeview Garden (2) 1987 9,003 5,340 - 5,340
Newport-on-Seven (2) 1986 10,125 7,898 1,265 9,163
North Pointe (2),(4) 1986 25,185 12,738 3,717 16,455
Northridge Park (2) 1987 8,815 8,815 (1,547) 7,268
Riverset (2),(4) 1988 19,000 19,000 1,116 20,116
Southfork Village (2),(4) 1988 10,375 10,375 2,084 12,459
Villa Hialeah (2) 1987 10,250 8,004 (117) 7,887
Willowgreen (2) 1986 9,275 6,770 2 6,772
The Crossings 1997 6,940 6,940 245 7,185
------- ------- --------
Subtotal participating bonds 110,066 6,364 116,430
------- ------- --------
Non-Participating Bonds:
Riverset II 1996 110 105 15 120
Charter House 1996 35 35 1 36
Hidden Valley 1996 1,700 1,700 77 1,777
Oakbrook 1996 3,195 3,226 161 3,387
Torries Chase 1996 2,070 2,070 155 2,225
Gannon Portfolio 1998 - - - -
-------- ------- --------
Subtotal non-participating bonds 7,136 409 7,545
-------- ------- --------
Participating Subordinate Bonds (1):
Barkley Place (3) 1995 3,480 2,445 1,430 3,875
Gilman Meadows (3) 1995 2,875 2,530 1,409 3,939
Hamilton Chase (3) 1995 6,250 4,140 98 4,238
Mallard Cove I (3) 1995 1,670 798 645 1,443
Mallard Cove II (3) 1995 3,750 2,429 1,599 4,028
Meadows (3) 1995 3,635 3,716 451 4,167
Montclair (3) 1995 6,840 1,691 3,914 5,605
Newport Village (3) 1995 4,175 2,973 1,803 4,776
Nicollet Ridge (3) 1995 12,415 6,075 2,325 8,400
Steeplechase Falls (3) 1995 5,300 5,852 744 6,596
Whispering Lake (3) 1995 8,500 4,779 3,234 8,013
Riverset II 1996 1,489 - 1,229 1,229
-------- ------- --------
Subtotal participating subordinate bonds 37,428 18,881 56,309
-------- ------- --------
Non-Participating Subordinate Bonds:
Independence Ridge 1996 1,045 1,045 21 1,066
Locarno 1996 675 675 10 685
-------- ------- --------
Subtotal non-participting subordinate bonds 1,720 31 1,751
-------- ------- --------
Total investment in mortgage revenue bonds $156,350 $25,685 $182,035
========= ======= ========
(1) These bonds also contain additional interest features contigent on
available cash flow, except for Barkley Place, Meadows and
Steeplechase Falls.
(2) One of the original 22 bonds.
(3) Series B Bonds derived from original 22 bonds.
(4) These assets were pledged as collateral.
In the first quarter, the Company purchased bonds totaling $84.5
million collateralized by ten properties located in Florida and Missouri and
sold $81 million of these bonds to Merrill Lynch. As part of Merrill Lynch's
securitization of the bonds which were sold, the Company retained a $1 million
RITES interest and pledged four additional bonds as collateral for the $80
million senior interest in the trust (see further discussion in Note 3).
NOTE 3 - OTHER BOND RELATED INVESTMENTS
The Company's other bond related investments are primarily
investments in RITES, a security offered by Merrill Lynch through its P-floats
Program. The RITES are part of a program under which a bond is placed into
a trust and two types of securities are sold by the trust, P-floats and RITES.
The P-floats are the senior security and bear interest at a rate that is reset
weekly by the Remarketing Agent, Merrill Lynch, to result in the sale of the
P-floats at par. The RITES are the subordinate security and receive the
residual interest. The residual interest is the remaining interest on the
bond after payment of all fees and the P-floats interest. In conjunction with
the purchase of the RITES, the Company enters into interest rate swap
contracts to hedge against interest rate exposure on the Company's investment
in the RITES. The following table provides certain information with respect to
each of the other bond related investments.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------------
Face Amortized Unrealized Fair
Year Amount Cost Gain (Loss) Value
Other Bond Related Investments: Acquired (000s) (000s) (000s) (000s)
- -------------------------------- -------- ------- -------- -------- ------
<S> <C> <C> <C> <C>
RITES-Hunters Ridge/South Pointe 1996 - - - -
Interest Rate swap on Hunters Ridge/
South Pointe 1996 - - - -
RITES -Indian Lake 1997 3,340 3,505 369 3,874
Interest rate swap on Indian Lake (1) 1997 6,500 - (188) (188)
Charter House (2) 1997 7,595 7,861 91 7,952
RITES-Southgate 1997 2,757 3,176 274 3,450
RITES-Southwood 1997 10,320 10,308 166 10,474
Stone Mountain (2) 1997 33,900 34,126 707 34,833
Riverset (2) 1997 7,500 7,847 338 8,185
$58M Interest rate swap (1) 1997 58,000 - (542) (542)
RITES-Gannon 1998 814 1,074 (395) 679
Gannon swap (1) 1998 73,000 - 811 811
Stone Mountain I/O Strip (4) 1997 - 1,201 76 1,277
Cinnamon ridge total return swap (1),(5) 1997 10,570 - 291 291
Cinnamon ridge interest rate swap(1),(5) 1997 7,000 - (22) (22)
Interest rate swap (1 year) (1),(3) 1998 9,675 - (9) (9)
Interest rate swap (10 year) (1),(3) 1998 9,675 - 41 41
------- ------- ------
Total other bond related investments 69,098 2,008 71,106
======= ======= ======
December 31, 1997
-----------------------------------
Face Amortized Unrealized Fair
Year Amount Cost Gain (Loss) Value
Other Bond Related Investments: Acquired (000s) (000s) (000s) (000s)
- ---------------------------------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
RITES-Hunters Ridge/South Pointe 1996 3,560 4,248 700 4,948
Interest Rate swap on Hunters Ridge/
South Pointe 1996 7,200 - (427) (427)
RITES -Indian Lake 1997 3,360 3,530 363 3,893
Interest rate swap on Indian Lake (1) 1997 6,500 - (202) (202)
Charter House (2) 1997 1,930 2,196 76 2,272
RITES-Southgate 1997 2,760 3,178 217 3,395
RITES-Southwood 1997 10,320 10,308 166 10,474
Stone Mountain (2) 1997 10,140 10,366 661 11,027
Riverset (2) 1997 1,875 2,222 328 2,550
$58M Interest rate swap (1) 1997 58,000 - (493) (493)
RITES-Gannon 1998 - - - -
Gannon swap (1) 1998 - - - -
Stone Mountain I/O Strip (4) 1997 - 1,201 76 1,277
Cinnamon ridge total return swap (1),(5) 1997 10,570 - 264 264
Cinnamon ridge interest rate swap(1),(5) 1997 7,000 - (52) (52)
Interest rate swap (1 year) (1),(3) 1998 - - - -
Interest rate swap (10 year) (1),(3) 1998 - - - -
------- ------- ---------
Total other bond related investments 37,249 1,677 38,926
======= ======= ========
(1) Amount represents notional amount of swap agreements.
(2) The underlying bonds are held in a trust; the Company owns all of the
custodial receipts related to the underlying bonds in the form of RITES,
Pfloats and Fixed Receipts.
(3) The Company has entered into these swaps to hedge future anticipated
transactions.
(4) Custodial receipt which represents the interest generated on the
underlying bond in excess of 7.875%
(5) The Company has entered into a total return and interest rate swap on the
Cinnamon Ridge Mortgage Bond. During the term of the total return swap,
the Company will receive income approximating .625% of the face amount
of the bond.
As discussed in Note 2, the Company sold $81 million of bonds to
Merrill Lynch which were then securitized into approximately $80 million in
P-floats and $1 million in RITES. The Company retained the RITES
investment.
On February 27, 1998, the Company sold for $5.0 million the RITES
associated with Hunters Ridge/South Pointe which resulted in a gain of $0.7
million. Also, the Company terminated the $7.2 million interest rate swap
contract associated with this investment at a cost of $0.4 million. As a result
of the sale of the RITES and the termination of the swap, the Company
recognized a net gain of approximately $0.3 million.
From time to time, the Company may purchase or sell in the open
market interests in bonds that it has securitized depending on the Company's
capital position and needs. In February and March, the Company used
uninvested equity offering proceeds to purchase interests in three bonds that
were securitized in December 1997. In April 1998, the Company sold some of
these interests. Also, the Company raised capital through the sale of interests
in two other securitized bonds.
NOTE 4 - INVESTMENT IN PARITY WORKING CAPITAL LOANS,
DEMAND NOTES AND OTHER LOANS
On February 11, 1998, the Company originated a $9.5 million taxable
mortgage loan collateralized by a 328 unit multifamily apartment project
known as Palisades Park located in Universal City, Texas. The six month loan
was made as short term financing pending issuance, by the Bexar County
Housing Finance Corporation, of a tax-exempt mortgage revenue bond not to
exceed $9.65 million with a base interest rate of 7.125%. The Company has
committed to acquire this bond when it is issued. The mortgage loan bears
interest at a stated annual rate of 8.5%.
NOTE 5 - SHAREHOLDERS' EQUITY
On January 26, 1998, the Company sold to the public 3,000,000 Growth
Shares at a price of $20.625 per share and granted the underwriters an option
to purchase up to an aggregate of 450,000 Growth Shares to cover over-allotments
at the same price. Net proceeds on the 3,000,000 shares approximated
$57.9 million. On February 13, 1998, the underwriters exercised their
option to purchase 246,000 Growth Shares generating net proceeds of
approximately $4.8 million. The net proceeds from this offering have been used
to fund bond acquisitions.
NOTE 6 - EARNINGS PER SHARE
The following tables reconcile the numerators and denominators in the
basic and diluted EPS calculations for the three months ended March 31, 1998
and 1997:
</TABLE>
<TABLE>
<CAPTION>
For the three months ended March 31, 1998
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS
Income allocable to grow shares $5,530 13,336,903 $ 0.41
===========
Effect of Dilutive Securities
Options and restricted shares - 218,553
Convertible preferred shares
(Series I Preferred Shares) 218 542,705
------------ ----------------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $5,748 14,098,161 $ 0.41
============= ================ ============
For the three months ended March 31, 1997
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS
Income allocable to growth shares $3,949 11,093,415 $ 0.36
===========
Effect of Dilutive Securities
Options and restricted shares - 1,760
Convertible preferred shares
(Series I Preferred Shares) - -
--------------- --------------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $3,949 11,095,175 $ 0.36
=============== ============= =============
For the period ended March 31, 1997, the effect of the potential dilution from
the conversion of the preferred shares is not included in the calculation of
diluted EPS because the effect of the conversion would have been anti-dilutive.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On February 26, 1998, the Company entered into a put option with Merrill
Lynch Capital Services, Inc. whereby Merrill Lynch has the right to sell to the
Company, and the Company has the obligation to buy, a pool of participating
tax-exempt mortgage revenue bonds with a combined face amount of $120
million for a purchase price of $105 million. Under this three year option, the
Company receives an annual payment equal to 20 basis points of the average
principal amount of the bonds in the pool, or approximately $0.2 million, for
assuming the purchase obligation. The purchase price can be reduced by up to
10% in the event of a material adverse change (as defined in the put
agreement).
NOTE 8 - SUBSEQUENT EVENTS
Distributions
On April 8, 1998, distributions for the three months ended March 31, 1998
were declared for shareholders of record on April 20, 1998 to be paid on May
4, 1998. The per share distributions are shown in the following table:
Preferred Capital
Preferred Shares Distribution Shares
Growth ----------------- -------------------
Shares Series I Series II Series I Series II
------- -------- --------- ------- ----------
Distributions paid on May 4, 1998
to holders of record on April 20, 1998:
For the three months ended
March 31, 1998 $0.3750 $ 13.96 $ 17.13 $ 11.39 $ 13.34
New Acquisitions
Subsequent to March 31, 1998, the Company originated $37.7 million tax-exempt
mortgage revenue bonds collateralized by 4 multifamily apartment projects
with 993 units. The weighted average interest rate of these investments
is 7.47% and the maturities range from 2013 to 2034. On certain transactions,
the Company earned construction administration or origination fees,
$0.4 million in the aggregate, that are recognized into income over the life
of the construction period or the life of the bond.
PART II - OTHER INFORMATION
Item 5 - Other Information
On January 26, 1998, the Registrant filed a Form S-3 Registration
Statement under the Securities Act of 1933 registering the offering of
3,000,000 Growth Shares at a price of $20.625 per share and granted the
underwriters an option to purchase up to an aggregate of 450,000 Growth
Shares to cover over-allotments at the same price. The net proceeds from this
offering are intended to fund bond acquisitions totaling $116 million. Net
proceeds on the 3,000,000 shares approximated $57.9 million. On February
13, 1998, the underwriters exercised their option to purchase 246,000 Growth
Shares generating net proceeds of approximately $4.8 million.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Formation and
Operating Agreement of the Company (filed as Item 14
(c) Exhibit 3.1 to the Company's current report on
Form 10-K/A - Amendment #1, filed with the
Commission on May 29, 1998 and incorporated by
reference herein).
3.2 By-laws of the Company (filed as Item 14 (c) Exhibit
3.2 to the Company's current report on Form 10-K/A -
Amendment #1, filed with the Commission on May 29,
1998 and incorporated by reference herein).
10.1 Employment Agreement between the Registrant and
Mark K. Joseph, dated August 1, 1996 (filed as Item 7
(c) Exhibit 10.1 to the Company's Form 8-K, File No.
001-11981, and incorporated by reference herein).
10.2 Employment Agreement between the Registrant and
Michael L. Falcone, dated August 1, 1996 (filed as
Item 7 (c) Exhibit 10.2 to the Company's Form 8-K,
File No. 001-11981, and incorporated by reference
herein).
10.3 Employment Agreement between the Registrant and
Thomas R. Hobbs, dated August 1, 1996 (filed as Item
7 (c) Exhibit 10.3 to the Company's Form 8-K, File No.
001-11981, and incorporated by reference herein).
10.4 Master Repurchase Agreement among the Registrant,
Trio Portfolio Investors, L.L.C., Rio Portfolio
Partners, L.P., Blackrock Capital Finance, L.P., Brazos
Fund, L.P. and M.F. Swapco, Inc. dated June 30, 1997
(filed as Item 7 (c) Exhibit 10.4 to the Company's Form
8-K, File No. 001-11981, and incorporated by
reference herein).
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
On January 23, 1998, the Company filed a Form 8-K to report
the Company entered into employee agreements with three senior officers and
to report the Company entered into a Master Repurchase Agreement with the
various owners of BlackCap, LLC.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
(Registrant)
By: /s/ Mark K. Joseph
Mark K. Joseph
Chief Executive Officer
DATED: July 1, 1998
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Document
11 Computation of Earnings Per Share
27 Financial Data Schedule
EXHIBIT NO. 11
COMPUTATION OF EARNINGS PER SHARE
The following table reconciles the numerators and denominators in the
basic and diluted EPS calculations for the three months ended March 31, 1998
and 1997:
</TABLE>
<TABLE>
<CAPTION>
For the three months ended March 31, 1998
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS
Income allocable to grow shares $5,530 13,336,903 $ 0.41
===========
Effect of Dilutive Securities
Options and restricted shares - 218,553
Convertible preferred shares
(Series I Preferred Shares) 218 542,705
------------ ----------------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $5,748 14,098,161 $ 0.41
============= ================ ============
For the three months ended March 31, 1997
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS
Income allocable to growth shares $3,949 11,093,415 $ 0.36
===========
Effect of Dilutive Securities
Options and restricted shares - 1,760
Convertible preferred shares
(Series I Preferred Shares) - -
--------------- --------------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $3,949 11,095,175 $ 0.36
=============== ============= =============
For the period ended March 31, 1997, the effect of the potential
dilution from the conversion of the preferred shares is not included in the
calculation of diluted EPS because the effect of the conversion would have
been anti-dilutive.
</TABLE>
