SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10Q
___________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended
SEPTEMBER 30, 1999
Commission file number: 000-29778
MERRY LAND PROPERTIES, INC.
State of Incorporation: I.R.S. Employer Identification Number:
Georgia 58-2412761
___________
P.O. Box 1417
Augusta, Georgia
(Address of Principal Executive Offices)
706 722-6756 30903
(Registrant's Telephone (Zip Code)
Number, Including Area Code)
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 twelve months, and (2) has been subject to such
filing requirements for the past ninety days: Yes X . No____.
The number of shares of common stock outstanding as of September 30, 1999 was
2,601,300.
<PAGE>
Form 10-Q - Merry Land Properties, Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1999 and December 31, 1998
Consolidated Statements of Income - Three months ended September 30,
1999 and 1998, and nine months ended September 30, 1999 and 1998.
Consolidated Statements of Cash Flows - Nine months ended September
30, 1999 and 1998
Notes to Consolidated Financial Statements
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
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1- Financial Statements
Merry Land Properties, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
Sept. 30, Dec. 31,
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land held for mining, development,
and investment $ 5,869,805 $ 7,255,130
Apartments 95,019,617 40,765,214
Commercial rental property 2,627,652 2,622,024
Furniture and equipment 1,870,730 1,836,144
Development in progress 2,525,030 -
------------ ------------
Total cost 107,912,834 52,478,512
Accumulated depreciation and depletion (12,663,267) (11,496,904)
------------ ------------
95,249,567 40,981,608
CASH AND CASH EQUIVALENTS 3,275,071 3,995,365
RESTRICTED CASH 1,342,970 -
OTHER ASSETS
Interest receivable 23,520 -
Notes receivable 590,522 1,342,246
Other receivable 89,387 1,434,512
Deferred tax asset 5,780,952 6,909,857
Deferred loan costs 961,037 -
Prepaid income taxes 160,071 -
Other 144,288 79,620
------------ ------------
7,749,777 9,766,235
------------ ------------
TOTAL ASSETS $107,617,385 $54,743,208
============ ============
NOTES PAYABLE
Line of credit $ 1,500,000 $ -
Senior debt - 18,317,429
Subordinated debt - 20,000,000
Mortgage loans 91,883,261 -
------------ ------------
93,383,261 38,317,429
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 608,949 444,553
Accrued income taxes 600 123,846
Accrued property taxes 750,336 309,936
Accrued dividends payable - 81,111
Deferred revenue - 771,627
Other 1,125,920 477,967
------------ ------------
2,485,805 2,209,040
PREFERRED STOCK - 5,000,000
STOCKHOLDERS' EQUITY
Common stock, at $1 stated value 2,601,300 2,597,633
Capital surplus 8,994,528 9,121,985
Unamortized compensation (1,743,452) (1,854,291)
Receivable from ESOP (676,840) -
Retained earnings - prior years (648,588) -
Cumulative undistributed net earnings (deficit) 3,221,371 (648,588)
------------ ------------
11,748,319 9,216,739
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $107,617,385 $54,743,208
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1- Financial Statements
Merry Land Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, Sept. 30,
------------------ -----------------
(Accounting (Accounting
Predecessor) Predecessor)
INCOME 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental income $ 3,157,572 $2,071,843 $7,227,919 $ 6,078,120
Royalty income 288,011 428,815 1,226,841 1,289,396
Interest income 51,909 27,401 196,883 83,474
Management fees 148,877 - 581,483 -
Development fees 329,980 - 1,344,496 -
Long term loss - - (29,512) -
Other income 190,995 - 190,995 -
----------- ---------- ----------- -----------
4,167,344 2,528,059 10,739,105 7,450,990
EXPENSES
Rental expense 1,236,755 882,857 2,814,108 2,402,093
Interest expense 1,259,105 - 2,943,433 -
Depreciation 448,234 361,324 1,166,378 1,142,564
General and administrative
expense 711,663 30,120 1,883,010 90,360
Amortization 16,805 - 16,805 -
----------- ---------- ----------- -----------
3,672,562 1,274,301 8,823,734 3,635,017
INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM 494,782 1,253,758 1,915,371 3,815,973
----------- ---------- ----------- -----------
Income taxes 193,454 - 579,684 -
----------- ---------- ----------- -----------
INCOME BEFORE EXTRAORDINARY
ITEM 301,328 1,253,758 1,335,687 3,815,973
----------- ---------- ----------- -----------
Extraordinary gain -
discount on repayment of
debt, net of income tax
provision of $441,746 - - 721,969 -
----------- ---------- ----------- -----------
NET INCOME 301,328 1,253,758 2,057,656 3,815,973
Discount on redemption of
preferred stock - - 1,163,715 -
----------- ---------- ----------- -----------
NET INCOME - COMMON $ 301,328 $1,253,758 $3,221,371 $3,815,973
=========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES
Basic 2,187,070 2,151,093 2,183,070 2,095,402
Diluted 2,252,814 2,223,000 2,254,340 2,143,500
EARNINGS PER COMMON SHARE
Basic $ .14 $ .58 $ 1.48 $ 1.82
=========== ========== ========== ==========
Diluted $ .13 $ .56 $ 1.43 $ 1.78
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Form 10-Q - Part I. Financial Information
Item 1- Financial Statements
Merry Land Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended Sept. 30,
---------------------------
1999 1998
------------- ------------
<S> <C> <C>
(Accounting
CASH FLOWS FROM OPERATING ACTIVITIES: Predecessor)
Net income $ 2,057,657 $ 3,815,973
Adjustments to reconcile net income to
net cash provided by operating activities:
Discount on repayment of debt, net of
taxes (721,969) -
Depreciation expense 1,183,183 1,142,564
Income tax expense 567,525 -
Increase in property taxes payable 440,400 126,415
Decrease in income taxes payable (283,317) -
Decrease in deferred revenue (97,065) 330,696
Increase in accrued interest 164,396 -
Increase in mortgage escrow (1,342,970) -
Decrease in other receivables 647,043 -
Other 713,015 (15,378)
----------- -----------
Net cash provided by operating
activities 3,327,898 5,400,270
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 751,724 53,566
Purchase of real property (54,355,001) -
Investment in real estate assets (1,076,510) (1,479,006)
Receivable from ESOP (676,840) -
----------- -----------
Net cash used in investing activities (55,356,627) (1,425,440)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from Merry Land &
Investment Co., Inc. - 1,479,006
Distributions to Merry Land & Investment
Co., Inc. - (5,453,836)
Repayment of senior debt (18,317,429) -
Repayment of subordinated debt (18,836,285) -
Redemption of preferred stock (3,836,285) -
Proceeds from mortgage loans 91,883,261 -
Line of credit 1,500,000 -
Loan Costs (961,037) -
Other (123,790) -
----------- -----------
Net cash used in financing activities 51,308,435 (3,974,830)
NET DECREASE IN CASH (720,294) -
CASH AT BEGINNING OF PERIOD 3,995,365 -
----------- -----------
CASH AT END OF PERIOD $ 3,275,071 $ -
=========== ===========
Interest paid $ 2,585,704 $ -
Income taxes paid $ 168,071 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Merry Land Properties, Inc. was formed on September 3, 1998, as a
corporate subsidiary of Merry Land & Investment Company, Inc. in connection
with a transaction in which Merry Land & Investment Company was merged into
Equity Residential Properties Trust on October 19, 1998. On October 15,
1998, the common stock of Merry Land Properties was spun off to the common
shareholders of Merry Land & Investment Company on the basis of one share
of Merry Land Properties stock for every twenty shares of Merry Land &
Investment Company.
2. Basis of Presentation
The financial statements for Merry Land Properties include its six
wholly-owned subsidiaries and eleven limited liability companies. These
limited liability companies are also wholly-owned by Merry Land Properties
and its subsidiaries and were formed in connection with the $41,241,000
mortgage loans financing in June, 1999 and with the $50,683,000 mortgage
loans financing in August, 1999. Each limited liability company is a
separate legal entity and its assets and liabilities are neither available
to pay the debts of Merry Land Properties nor constitute obligations of
Merry Land Properties.
The financial statements for periods prior to the spin off include
only those assets and liabilities contributed by Merry Land & Investment
Company. These financial statements have been prepared using Merry Land &
Investment Company's historical basis of the assets and liabilities and the
historical results of operations and have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission
applicable for subsidiaries which have been spun off. These rules stipulate
that statements shall be prepared as if the entity had existed prior to the
existence of the new company. Such statements are not those of a real
entity, but describe a hypothetical "accounting predecessor" to Merry Land
Properties.
Management has estimated common and corporate level expenses which
would have been incurred on behalf of the accounting predecessor by Merry
Land & Investment Company and has allocated such expenses based on its best
estimate of the time and effort that would have been expended. Property
management costs have been estimated and allocated on a per unit basis. The
assets contributed to Merry Land Properties by Merry Land & Investment
Company were not encumbered by mortgage debt at any time prior to the spin
off and the financial statements for the accounting predecessor for periods
prior to the spin off do not include any debt or related interest expense.
Merry Land & Investment Company was qualified to be taxed as a real
estate investment trust and was not subject to federal income taxation on
distributed income. Accordingly, no provision for income tax is included in
the accompanying financial statements for periods prior to the spin off.
Amounts shown for periods and dates prior to the spin off assume lower
levels of general and administrative expenses than have actually been
incurred after the spin off and exclude any debt, interest expense or
income taxes. Accordingly, comparisons of periods subsequent to the spin
off with periods prior to the spin off may be difficult and misleading.
The consolidated financial statements for the nine month periods ended
September 30, 1999 and September 30, 1998, reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim period.
3. Earnings Per Share and Share Information
Basic earnings per common share is computed on the basis of the
weighted average number of shares outstanding during each period excluding
the unvested shares issued to employees under the Company's Management
Incentive Plan. Diluted earnings per share is computed giving effect to
dilutive stock equivalents resulting from outstanding options and
restricted stock using the treasury stock method.
For periods prior to the spin off, earnings per share have been
computed giving effect to the distribution ratio of one share of Merry Land
Properties for every twenty common shares of Merry Land & Investment
Company. Accordingly, weighted average common shares outstanding for the
accounting predecessor have been assumed to be 1/20 of the shares
outstanding of Merry Land & Investment Company for the periods prior to the
spin off. For the periods prior to the spin off, dilutive earnings per
share are calculated giving effect to dilutive options of Merry Land &
Investment Company using the same ratio.
A reconciliation of the average outstanding shares used in the two
calculations is as follows:
<TABLE>
<CAPTION>
Three months ending Nine months ending
------------------- ------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding-basic 2,187,070 2,151,093 2,183,070 2,095,402
Dilutive potential
common shares 65,744 71,907 71,270 48,098
--------- --------- --------- ---------
Weighted average shares
outstanding-diluted 2,252,814 2,223,000 2,254,340 2,143,500
</TABLE>
4. NOTES RECEIVABLE
At September 30, 1999 and December 31, 1998, notes receivable consisted
of the following:
<TABLE>
<CAPTION>
Note Balances at
-----------------
Original Sept. 30, December 31,
Note Rate Due Amount 1999 1998
- ---- ---- --- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Augusta Partners 10.00% 10/99 $ 695,000 $ - $ 573.566
Brothersville 6.00% 11/12 675,000 493,769 636,512
Brothersville 10.00% 9/02 327,600 41,183 74,717
New Zion 7.00% 11/12 60,000 55,570 57,451
---------- ---------- ----------
$1,757,600 $ 590,522 $1,342,246
</TABLE>
<PAGE>
During February, the Company received $542,734 from Augusta Partners in
total satisfaction of its note receivable, generating a loss of $29,512.
During 1999, the Company loaned $676,840 to the Merry Land Employee Stock
Ownership Plan. The loan bears interest at LIBOR plus 250 basis points and
matures on March 31, 2004. The loan is secured by 140,302 shares of the
Company's common stock which were purchased by the ESOP and is reflected in
the Stockholder's Equity section of the Balance Sheet.
5. Debt
At September 30, 1999, debt consisted of the following:
<TABLE>
<CAPTION>
Note Balances at
---------------------
Sept. 30, Dec. 31,
1999 1998
Maturity Interest --------- --------
Debt date rate Balance Balance
- ---- -------- -------- --------- --------
<S> <C> <C> <C> <C>
Line of credit June 24, 2001 LIBOR+1.25% $ 1,500,000 $ -
Senior debt October 15, 1999 LIBOR+ 2.5% - 18,317,429
Subordinated debt October 15, 2013 8% - 20,000,000
Mortgage Loan -
Greentree, L.L.C. July 1, 2009 7.73% 6,712,363 -
Mortgage Loan -
Marsh Cove, L.L.C. July 1, 2009 7.73% 8,151,939 -
Mortgage Loan -
Quarterdeck, L.L.C. July 1, 2009 7.73% 9,954,157 -
Mortgage Loan -
Waters Edge, L.L.C. July 1, 2009 7.73% 7,190,890 -
Mortgage Loan -
West Wind Landing, L.L.C. July 1, 2009 7.73% 9,190,912 -
Mortgage Loan - ML Hammocks
at Long Point, L.L.C. September 1, 2011 7.99% 18,787,000 -
Mortgage Loan - ML
Huntington, L.L.C. September 1, 2007 7.97% 5,084,000 -
Mortgage Loan - ML
Magnolia Villa, L.L.C. September 1, 2007 7.97% 4,739,000 -
Mortgage Loan - ML
Summit Place, L.L.C. September 1, 2007 7.97% 7,079,000 -
Mortgage Loan - ML
Windsor Place, L.L.C. September 1, 2011 7.99% 8,640,000 -
Mortgage Loan - ML
Woodcrest (Augusta),
L.L.C. September 1, 2007 7.97% 6,354,000 -
----------- -----------
Total $93,383,261 $38,317,429
</TABLE>
On June 24, 1999, the Company closed $41.2 million in mortgage
financing. The five nonrecourse loans are secured by five apartment
communities containing 1,004 units located in Charleston and Savannah. At
the time of the closing, the Company transferred the apartment communities
to five newly created limited liability companies, which are wholly-owned
by the Company and its subsidiaries. The proceeds of the financing were
used to retire all of the Company's debt and preferred stock obligations to
Equity Residential Properties Trust, including the Senior debt and
Subordinated debt.
On August 24, 1999 the Company acquired the partnership interests held
by Equity Residential Properties Trust in six apartment communities
containing 1,297 units located in Charleston, Savannah and Augusta. The
purchase price for the interests was $54.0 million.
The communities were previously owned by Merry Land & Investment Company,
Inc., the predecessor of new Merry Land. The purchase was financed with
$50.7 million in mortgage financing. The six nonrecourse loans have 8 and
12 year terms and bear interest at 7.98% in the aggregate.
6. Income Taxes
The Company is a taxable "C" corporation. It is assumed that the
accounting predecessor distributed sufficient taxable income to
shareholders in the form of dividends to qualify as a REIT, and so no
income taxes were provided for in periods prior to the spin off.
The components of the income tax provision for the nine months ended
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Current federal tax $ (574,666)
Current state tax (107,885)
Deferred federal tax 1,425,711
Deferred state tax 267,655
----------
Total income tax 1,010,815
State franchise tax 10,615
----------
Total tax $1,021,430
Less: income tax provision on extraordinary gain (441,746)
----------
Net income taxes $ 579,684
</TABLE>
The reconciliation of income tax computed at the U.S. federal
statutory rate to income tax expense for the nine months ended September
30, 1999 is as follows:
<TABLE>
<CAPTION>
% of
pretax
Amount Income
------ ------
<S> <C> <C>
Income tax expense at statutory rate $1,112,623 34.0%
Increases (reductions) in taxes resulting from:
State and local income taxes, net of federal income tax
benefit 129,588 4.0%
Prior period adjustment (16,874) (0.5%)
Dividends not deductible 73,389 2.2%
Non-taxable clay lease income (287,911) (8.8)%
---------- -----
Total income tax 1,010,815 30.9%
State franchise tax 10,615 0.3%
---------- -----
Total tax $1,021,430 31.2%
Less: income tax provision on extraordinary gain (441,746)
----------
Net income taxes $ 579,684
</TABLE>
<PAGE>
7. Segment Information
The Company has four reportable segments: Apartment Communities,
Commercial Properties, Land and Third Party Services. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies.
<PAGE>
<TABLE>
<CAPTION>
Third
Party
Three months ending Apartments Commercial Land Services Corporate Consolidated
Sept. 30, 1999 ---------- ---------- ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate revenue
revenue $ 3,076,679 $ 66,867 $ 14,026 $ - $ - $ 3,157,572
Real estate expense 1,151,212 63,980 21,563 - - 1,236,755
Depreciation and
amortization 370,641 6,102 1,405 - 86,891 465,039
----------- ---------- ---------- --------- --------- -----------
Income from real
estate 1,554,826 (3,215) (8,942) - (86,891) 1,455,778
Other income - - 479,006 478,857 51,909 1,009,772
----------- ---------- ---------- --------- --------- -----------
Segment income 1,554,826 (3,215) 470,064 478,857 (34,982) 2,465,550
Interest expense - - - - (1,259,105) (1,259,105)
General and
administrative - - - (223,668) (487,995) (711,663)
----------- ---------- ---------- --------- --------- -----------
Income before taxes
and extraordinary
item 1,554,826 (3,215) 470,064 255,189 (1,782,082) 494,782
----------- ---------- ---------- --------- --------- -----------
Income tax - - - - (193,454) (193,454)
Income before
extraordinary item 1,554,826 (3,215) 470,064 255,189 (1,975,536) 301,328
----------- ---------- ---------- --------- --------- -----------
Extraordinary item - - - - - -
Net Income $ 1,554,826 $ (3,215) $ 470,064 $ 255,189 $(1,975,536) $ 301,328
=========== ========== ========== ========= =========== ===========
Capital investments $ 110,224 $ - $ 102,604 $ - $ (174,466) $ 38,362
Total real estate
assets $83,995,185 $2,300,911 $8,362,499 $ - $ 590,972 $95,249,567
Third
Accounting Predecessor Party
Three months ending Apartments Commercial Land Services Corporate Consolidated
Sept. 30, 1998 ---------- ---------- ---- -------- --------- ------------
Real estate rental
revenue $ 1,936,731 $ 120,362 $ 14,750 $ - $ - $ 2,071,843
Real estate expense 792,261 64,782 25,814 - - 882,857
Depreciation and
amortization 258,178 103,146 - - - 361,324
----------- ---------- ---------- --------- ----------- -----------
Income from real
estate 886,292 (47,566) (11,064) - - 827,662
Other income - - 428,815 - 27,401 456,216
----------- ---------- ---------- --------- ----------- -----------
Segment income 886,292 (47,566) 417,751 - 27,401 1,283,878
Interest expense - - - - - -
Insurance expense - - - - - -
General and
administrative - - - - (30,120) (30,120)
----------- ---------- ---------- --------- ----------- -----------
Income before taxes 886,292 (47,566) 417,751 - (2,719) 1,253,758
----------- ---------- ---------- --------- ----------- -----------
Income tax - - - - - -
Net income $ 886,292 $ (47,566) $ 417,751 $ - $ (2,719) $ 1,253,758
=========== =========== ========== ========= =========== ===========
Capital Investments $ 123,155 $ 2,654 $ 645,512 $ - $ 27,287 $ 798,608
Total real estate
assets $30,890,099 $ 4,002,784 $7,206,401 $ - $ 833,457 $42,932,741
Third
Party
Nine months ending Apartments Commercial Land Services Corporate Consolidated
Sept. 30, 1999 ---------- ---------- ---- -------- --------- ------------
Real estate rental
revenue $ 7,015,650 $ 151,834 $ 60,435 $ - $ - $ 7,227,919
Real estate expense 2,548,549 190,743 74,816 - - 2,814,108
Depreciation and
amortization 923,542 24,206 2,811 - 232,624 1,183,183
----------- ----------- ---------- --------- ----------- -----------
Income from real
estate 3,543,559 (63,115) (17,192) - (232,624) 3,230,628
Other income - - 1,417,836 1,925,979 167,371 3,511,186
----------- ----------- ---------- --------- ----------- -----------
Segment income 3,543,559 (63,115) 1,400,644 1,925,979 (65,253) 6,741,814
Interest expense - - - - (2,943,433) (2,943,433)
General and
administrative - - - (689,789) (1,193,221) (1,883,010)
---------- ----------- ---------- --------- ----------- -----------
Income before taxes and
extraordinary items 3,543,559 (63,115) 1,400,644 1,236,190 (4,201,907) 1,915,371
---------- ----------- ---------- --------- ----------- -----------
Income tax - - - - (579,684) (579,684)
Income before
extraordinary items 3,543,559 (63,115) 1,400,644 1,236,190 (4,781,591) 1,335,687
---------- ----------- ---------- --------- ----------- -----------
Extraordinary item - - - - 721,969 721,969
Net income $ 3,543,559 $ (63,115) $1,400,644 $1,236,190 $(4,059,622) $ 2,057,656
=========== =========== ========== ========== =========== ===========
Capital Investments $ 377,950 $ - $ 311,442 $ - $ 67,721 $ 757,113
Total real estate
assets $83,995,185 $ 2,300,911 $8,362,499 $ - $ 590,972 $95,249,567
Third
Accounting Predecessor Party
Nine months ending Apartments Commercial Land Services Corporate Consolidated
Sept. 30, 1998 ---------- ---------- ---- -------- --------- ------------
Real estate rental
revenue $ 5,698,195 $ 328,740 $ 51,185 $ - $ - $ 6,078,120
Real estate expense 2,145,521 189,879 66,693 - - 2,402,093
Depreciation and
amortization 852,190 290,374 - - - 1,142,564
----------- ----------- ---------- ---------- ----------- -----------
Income from real
estate 2,700,484 (151,513) (15,508) - - 2,533,463
Other income - - 1,289,396 - 83,474 1,372,870
----------- ----------- ---------- ---------- ----------- -----------
Segment income 2,700,484 (151,513) 1,273,888 - 83,474 3,906,333
Interest expense - - - - - -
Insurance expense - - - - - -
General and
administrative - - - - (90,360) (90,360)
----------- ----------- ---------- ---------- ----------- -----------
Income before
taxes 2,700,484 (151,513) 1,273,888 - (6,886) 3,815,973
----------- ----------- ---------- ---------- ----------- -----------
Income tax - - - - - -
Net income $ 2,700,484 $ (151,513) $1,273,888 $ - $ (6,886) $ 3,815,973
=========== =========== ========== ========== =========== ===========
Capital investment $ 294,413 $ 205,175 $ 815,040 $ - $ 164,378 $ 1,479,006
Total real estate
assets $30,890,099 $ 4,002,784 $7,206,401 $ - $ 833,457 $42,932,741
</TABLE>
<PAGE>
Form 10-Q-Merry Land Properties, Inc.
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Merry Land Properties, Inc. was formed on September 3, 1998, as a
corporate subsidiary of Merry Land & Investment Company, Inc., in connection
with a transaction in which merry Land & Investment Company was merged into
Equity Residential Properties Trust on October 19, 1998. Merry Land has
operated only since October 15, 1998. Accordingly, only the Consolidated
Balance Sheets for December 31, 1998 and September 30, 1999 and the
Consolidated Statements of Income for the period ended September 30, 1999
are financial statements prepared for a real company. The Statements of
Income for the period ended September 30, 1998 is for an "accounting
predecessor" which has been constructed in accordance with the rules of
the Securities and Exchange Commission as described in the Notes to the
Financial Statements.
On August 24, 1999, Merry Land acquired the investment interests held
by Equity Residential Properties Trust in six apartment communities
containing 1,297 units located in Charleston, Savannah and Augusta, which
approximately doubled Merry Land's apartment holdings and assets. The
purchase was financed with $50.7 million in mortgage financing. As a
result of these acquisitions, Merry Land's income and expenses from rental
operations and interest expense in future periods will be significantly
higher than in previous periods. Further, Merry Land's property management
fees will no longer include income from these communities. Thus, we do not
believe the discussion and analysis of our historical financial condition and
results of operations discussed below should be relied upon as an indicator
of our future performance.
RECENT EVENTS
On October 21, 1999, Merry Land filed a Form S-11 registration statement
with the SEC with respect to a proposed distribution of rights to its existing
shareholders which entitle its stockholders to purchase from the Company
Convertible Trust Preferred Securities. These securities will pay dividends
to their holders and will be convertible into Merry Land's common stock. A
prospectus describing the offering will be distributed to all Merry Land
shareholders when the registration statement is declared effective by the SEC.
The Company hopes to complete the securities offering during the first quarter
of 2000.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Rental Operations-Total Portfolio. The Company's eleven apartment
communities are described in the following table:
<TABLE>
<CAPTION>
Nine Months ended Sept. 30,
---------------------------
Average Average
Occupancy (1) Rental Rate (2)
------------- ---------------
Community Units 1999 1998 1999 1998
- --------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Woodcrest (3) 248 96.4% - $509 -
--- ---- ----- ---- ----
Total Augusta 248 96.4 - 509 -
Quarterdeck 230 99.6 99.8% 675 $631
Summit Place (3) 226 96.5 - 528 -
Waters Edge 200 97.9 96.3 609 571
Windsor Place (3) 224 98.2 - 598 -
--- ---- ----- ---- ----
Total Charleston 880 98.5 98.1 603 603
Hammocks at Long Point (3) 308 95.0 - 836 -
Huntington (3) 147 97.6 - 638 -
Greentree 194 97.1 94.0 612 598
Magnolia Villa (3) 144 96.9 - 639 -
Marsh Cove 188 97.6 98.2 692 669
West Wind 192 95.9 98.4 720 698
--- ---- ----- ---- ----
Total Savannah 1,173 96.9 96.9 708 655
Total 2,301 97.5% 97.4% $646 $633
(1) Represents the average physical occupancy at each month end for the period held.
(2) Represents weighted average monthly rent charged for occupied units and
rents asked for unoccupied units at September 30.
(3) Community acquired on August 24, 1999.
</TABLE>
The operating performance of the Company's apartment communities is
summarized in the following table (dollars in thousands, except average
monthly rent):
<TABLE>
<CAPTION>
% Change from Nine Months ended Sept. 30,
Change 1998 to 1999 ---------------------------
------ ------------ 1999 1998
---- ----
<S> <C> <C> <C> <C>
Rental income 23.1% $1,317.5 $7,015.7 $5,698.2
Personnel 23.7 178.8 933.1 754.3
Utilities 14.6 31.2 244.5 213.3
Operating 11.7 23.9 227.6 203.7
Maintenance and grounds 5.2 24.2 487.6 463.4
Taxes and insurance 28.4 145.1 655.8 510.7
Depreciation and
amortization 8.4 71.3 923.5 852.2
---- ------- ------- -------
Subtotal 15.8 474.5 3,472.1 2,997.6
Operating income 31.2% $ 843.0 $3,543.6 $2,700.6
Average occupancy (1) 0.1% 97.5% 97.4%
Average monthly rent (2) 2.1% $ 13 $ 646 $ 633
Expense ratio (3) (1.4)% 36.3% 37.7%
(1) Represents the average physical occupancy at each month end for the period held.
(2) Represents weighted average monthly rent charged for occupied units and rents
asked for unoccupied units at September 30.
(3) Represents total operating expenses (excluding depreciation and amortization)
divided by rental revenues.
</TABLE>
The addition of the six apartment communities in the third quarter of 1999
increased the weighted average number of apartment units owned to 1,292 in the
nine month period of 1999 from 1,004 in the nine month period of 1998. Rental
revenues, expenses and taxes and insurance rose accordingly.
The 2.1% increase in portfolio average rental rates in the nine month
period of 1999 from the nine month period of 1998 resulted from 4.4% higher
rents at the Company's continuing properties, but was offset somewhat by the
lower rents charged at the communities the Company acquired, whose monthly
rents averaged $634 at September 30, 1999 versus the continuing portfolio
average of $661.
Merritt at James Island. The Company owns land adjacent to its Quarterdeck
Apartments in Charleston and expects to begin construction in the fourth
quarter on Merritt at James Island, a 230 unit apartment community. The $16.5
million cost is expected to be funded with nonrecourse financing. The units
are expected to be available for rental in June, 2000.
Rental Operations-Same Store. The performance of the 1,004 units which
the Company held for the nine month period of both 1999 anexcept average
monthly rent; see footnotes above):
<TABLE>
<CAPTION>
% Change from Nine Months ended Sept. 30,
Change 1998 to 1999 ---------------------------
------ ------------ 1999 1998
---- ----
<S> <C> <C> <C> <C>
Rental income 4.5% $253.6 $5,951.8 $5,698.2
Personnel 3.0 22.6 776.9 754.3
Utilities (5.0) (10.7) 202.6 213.3
Operating (4.4) (8.9) 194.8 203.7
Maintenance and
grounds (16.3) (75.5) 387.9 463.4
Taxes and insurance 10.9 55.8 566.5 510.7
Depreciation and
amortization (2.8) (23.8) 828.4 852.2
----- ------ -------- --------
Subtotal (1.4) (40.5) 2,957.1 2,997.6
----- ------ -------- --------
Operating income 10.9% $294.1 $2,994.7 $2,700.6
Average occupancy (1) 0.3% 97.7% 97.4%
Average monthly
rent (2) 4.4% $ 28 $ 661 $ 633
Expense ratio (3) (1.9)% 35.8% 37.7%
</TABLE>
For the nine month period ended September 30, 1999, rental income rose
by $253.6 thousand, or 4.5%, for the five apartment communities because of
4.4% higher rents over the same period in 1998. In the aggregate, the
Charleston and Savannah rental markets were strong in the first nine months
of 1999 over 1998 as demand for apartments exceeded additions to supply.
Charleston rents increased to $644, or 6.8% and Savannah rents increased to
$674, or 2.9% during this period. The Company believes that physical occupancy
should remain satisfactory despite substantial delivery of new units if
general economic activity, job growth and household formation along the
southeastern coast remain strong.
Total expenses were down $40.5 thousand, or 1.4%, for the nine months
ended September 30, 1999 from the same period in 1998. For the nine months
personnel expenses increased $22.6 thousand and taxes and insurance
increased $55.8 thousand, because of increases in assessed values, millage
rates and higher insurance premiums. These increases were more than offset
by declines in operating expenses, down $8.9 thousand, in utilities, down
$10.7 thousand, and in maintenance and ground expenses, down $75.5
thousand.
Rental Operations-Commercial. The Company owns six commercial properties
in the Augusta area containing a total of 169,915 square feet, including
the office building where the Company's headquarters are located. Three
buildings containing approximately 75,000 square feet are located in the
depressed downtown Augusta rental market and are in varying stages of
physical obsolescence. Consequently, occupancy for all six commercial
properties was less than 50% at September 30, 1999.
Rental income decreased by $176.9 thousand, or 53.8%, for commercial
properties because of decreased occupancy. Total expenses were up $0.8
thousand, or 0.4%, in the third quarter of 1999 from the same period in
1998.
Land. The Company owns approximately 4,800 acres of unimproved land,
of which 3,144 acres are subject to clay and sand mining leases and 180 acres
are zoned for apartment or commercial uses. The operating performance of the
land is summarized in the following table (dollars in thousands):
<TABLE>
<CAPTION>
% Change from Nine Months ended Sept. 30,
CHANGE 1998 to 1999 ---------------------------
------ ------------ 1999 1998
---- ----
<S> <C> <C> <C> <C>
Clay royalties (7.0)% $(82.9) $1,100.0 $1,182.9
Sand royalties 19.2 20.4 126.9 106.5
Rental income 9.2 5.1 60.4 55.3
---- ------ -------- --------
Subtotal (4.3) (57.4) 1,287.3 1,344.7
Depletion - 2.8 2.8 -
Operating expenses 15.8 1.9 13.9 12.0
Taxes and insurance 11.3 6.2 60.9 54.7
---- ------ -------- --------
Subtotal 16.3 10.9 77.6 66.7
Operating income (5.3)% $(68.3) $1,209.7 $1,278.0
</TABLE>
Clay royalties decreased $82.9 thousand, or 7.0%, for the nine month
period ended September 30, 1999 compared to the same period in 1998 due
primarily to the expiration of one of the royalty agreements. In the first
nine months of 1999, $734.9 in royalties were received under that agreement
compared to $859.8 in the first nine months of 1998.
Mortgage Interest Income. Interest income from mortgage notes receivable
totaled $40.4 thousand in the nine month period ended September 30, 1999,
down from $83.5 thousand in the same period of 1998. The decrease was due to
the repayment of mortgage notes receivable.
Property Management and Development Fees. In the nine months ended
September 30, 1999 management fee income was $581.5 thousand and development
fee income was $1.34 million. These fees were earned primarily under
agreements with Equity Residential whereby the Company provides either
property management or development consulting services for twelve apartment
communities. At September 30, 1999, the property management agreements with
Equity Residential have been completed, and approximately $1.0 million
remains to be earned under the development agreement. The Company intends
to seek other third party property management and development consulting
business, but we expect fee income to decline substantially in coming
quarters.
Other income. During the quarter the Company sold timber from its
clay land for a pretax gain of $191,000. The Company has purchased a 9,000
s.f. historic building in Charleston, South Carolina which it is currently
being converted from ten apartments to seven condominiums for sale in 2000.
In future periods, the Company may engage in various activities which may
produce other income, including the purchase and sale of real estate, land
subdivision and lot sales, conversion of apartments to condominiums, the
sale or lease of various interests in real property and other real estate
activities.
Interest Expense. The assets contributed to the Company by Merry Land
& Investment Company were not encumbered by mortgage debt at any time during
1998 prior to the spin off. Therefore, the financial statements for the
accounting predecessor to Merry Land Properties for periods prior to the
spin off assume that there was no debt or related interest expense. In
October 1998 and in connection with the spin off, the Company received its
assets subject to $18.3 million of senior debt, $20.0 million of subordinated
debt, and $5.0 million of preferred stock. These obligations were repaid in
June, 1999. Interest expense related to these obligations totaled $1.6
million for the nine months ended September 30, 1999 and included $193.3
thousand of dividends accrued on the Company's preferred stock. Interest
expense related to the $41.2 million mortgage loans closed in June, 1999,
and the $50.7 million mortgage loans closed in August, 1999, totaled $1.2
million and $0.1 million, respectively. Interest on the Company's line of
credit totaled $7.2 thousand.
General and Administrative Expenses. General and administrative
expenses totaled $1.9 million for the nine months ended September 30, 1999.
For periods prior to October 15, 1998, management has estimated common and
corporate level expenses which might have been incurred on behalf of the
accounting predecessor to Merry Land Properties by Merry Land & Investment
Company in accordnace with the rules and regulations of the Securities and
Exchange Commission applicable for subsidiaries which have been spun off.
Management has allocated such expenses based on its best estimate under these
guidelines of time and effort that would have been expended for the benefit
of the accounting predecessor.
Income Before Taxes and Extraordinary Items. Income before taxes and
extraordinary items decreased to $1.9 million for the nine months ended
September 30, 1999 from $3.8 million for the same period in 1998. As
discussed in Note 1 to the financial statements, general and administrative
expenses estimated in the statements were considerably less prior to the
spin off than after the spin off and there was no interest expense assumed
prior to the spin off. The decrease in income before taxes for the nine
months ended September 30, 1999 was primarily related to the higher general
and administrative expense of $1.8 million and higher interest expense of
$2.9 million, but was offset by higher net rental income primarily from an
increase in the number of apartments owned.
Income Taxes. As a REIT, the accounting predecessor to Merry Land
Properties would not have been subject to income taxes. The net incme
tax expense for the nine month period ended September 30, 1999 totaled
$0.6 million, and consisted of $0.4 million in current income tax benefit
and $1.0 million in deferred income tax expense.
Discount on Repayment of Debt and on Redemption of Preferred Stock.
The subordinated debt and preferred stock were repaid at a discount in
June, 1999. The extraordinary gain from the discount on repayment of
subordinated debt, net of income taxes of $0.4 million, totaled $0.7
million. The discount on redemption of the preferred stock was $1.2 million.
Funds from Operations. For the nine month period ended Septembe 30, 1999,
funds from operations were $2.47 million. The following is a reconciliation
of net income to funds from operations. (data in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net income available for common $ 3,221.4
Add depreciation of real estate owned 950.6
Add long term capital loss 29.5
Add permanent deferred tax benefit 155.0
Less extraordinary gain (722.0)
Less discount on redemption of preferred stock (1,163.7)
----------
Funds from operations available to common shares $ 2,470.8
==========
Weighted average common shares outstanding--
Basic 2,183.1
Diluted 2,254.3
</TABLE>
The Company believes that funds from operations are an important
measure of its operating performance. Funds from operations do not
represent cash flows from operations as defined by generally accepted
accounting principles, GAAP, and should not be considered as an alternative
to net income, or as an indicator of the Company's operating performance,
or as a measure of the Company's liquidity. The Company defines funds from
operations as net income computed in accordance with GAAP, excluding
non-recurring costs and net realized gains, plus depreciation of real
property and the tax benefit related to the step-up in basis of the
Company's assets for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Financial Structure. Before the spinoff, none of Merry Land &
Investment Company's debt was attributed to the predecessor. At September
30, 1999, total debt equaled 89% of total capitalization at cost and 87%
of total capitalization with equity valued at market (2,601,300 shares
outstanding at the September 30, 1999 times the closing price of $5.50
per share). At that date, the Company's financial structure was as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Equity at
% of Market % of
Book Total Value Total
---- ----- --------- -----
<S> <C> <C> <C> <C>
Line of Credit $ 1,500 1% $ 1,500 1%
Mortgage loans 91,883 88% 91,883 86%
-------- --- -------- ---
Total debt 93,383 89% 93,383 87%
Common stock 11,748 11% 14,307 13%
-------- --- -------- ---
Total capitalization $105,131 100% $107,690 100%
======== === ======== ===
</TABLE>
Liquidity. The Company expects to meet its short-term liquidity
requirements with its working capital, cash provided by operating activities,
construction loans, and a line of credit which it has established with a
commercial bank. The Company's primary short-term liquidity needs are
operating expenses, capital improvements, the proposed development of the
Merritt at James Island community, the condominium conversion of the Calhoun
Street apartments, and the Waters Edge land development.
The Company expects to meet its long-term liquidity requirements from
a variety of sources including operating cash flow, additional mortgage
loans and other borrowings, and the issuance and sale of debt and equity
securities in public and private markets. The Company's long-term liquidity
needs include the maturity of mortgage debt and financing acquisitions and
development. The Company has filed a Form S-11 Registration Statement with
the SEC with respect to a proposed distribution of rights to its existing
shareholders. These rights entitle its stockholders to purchase from the
Company up to $8.7 million of Convertible Trust Preferred Securities which
will pay dividends and will be convertible into Merry Land's common shares.
The Company hopes to complete the securities offering during the first quarter
of 2000. The proceeds from the offering will be used to repay the outstanding
balance under the line of credit and for general corporate purposes, including
capital improvements to our existing properties, the acquisition of additional
apartment communities, and the development and construction of new apartment
communities.
Cash Flows. Cash and cash equivalents totaled $3.3 million on September
30, 1999, a decrease of $0.7 million from December 31, 1998. The $3.3 million
net cash provided from operating activities was offset primarily by $2.2
million used to acquire the partnership interests in the six apartment
communities owned by Equity Residential Properties Trust, $0.8 million to
acquire the Calhoun Street apartments and $1.1 million for repairs,
replacements and improvements on the residential communities. In addition,
$0.8 million received from the repayment of mortgage notes receivable was
offset by the $0.7 million lent to the Employee Stock Ownership Plan.
Year 2000 Disclosure. The Company has evaluated the impact of the
"Year 2000" issue on its business, results of operations, and financial
condition and has determined that the cost of any software and hardware
upgrades is not expected to be material. The cost to analyze and prepare for
the Year 2000 issue has not been material and the Company does not anticipate
the need for a contingency plan. While there can be no assurances, the Company
does not currently expect the Year 2000 issue will have a material impact
on the Company's business, operations, or financial condition.
Inflation. Substantially all of the Company's leases are for terms
of one year or less, which should enable the Company to replace existing
leases with new leases at higher rent rates in times of rising prices. The
Company believes that this would offset the effect of cost increases
stemming from inflation.
Forward Looking Statements. This filing includes statements that are
"forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 regarding expectations with respect to market conditions, development
projects, acquisitions, occupancy rates, capital requirements, sources of
funds, expense levels, operating performance, and other matters. These
assumptions and statements are subject to various factors, unknown risks
and uncertainties, including general economic conditions, local market
factors, delays and cost overruns in construction, completion and rent up
of development communities, performance of consultants or other third parties,
environmental concerns, and interest rates, any of which may cause actual
results to differ from the Company's current expectations.
<PAGE>
PART I
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
During the nine months ended September 30, 1999, the Company reduced
its outstanding variable rate debt. In June, 1999, the Company closed on
$41.2 million of ten-year, fixed rate mortgage financing. The proceeds of
the financing were used to repay the Company's obligations under the senior
debt, subordinated debt and preferred stock. The senior debt had a principal
balance of $18.3 million, a maturity date of October 1999 and a variable
interest rate of LIBOR plus 250 basis points. At September 30, 1999, the
Company's only remaining variable rate debt consisted of a $2.0 million
line of credit. At that date, there was an outstanding balance of $1.5
million under the line with a variable interest rate of LIBOR plus 125 basis
points. The line of credit matures in June, 2001.
<PAGE>
MERRY LAND PROPERTIES, INC.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
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 and Reports on Form 8-K
a. Exhibits:
--------
(3.i.) Articles of Incorporation, as amended by Articles of
Amendment to Articles of Incorporation re Series A
Redeemable Cumulative Preferred Stock (incorporated
herein by reference to Exhibit 3(i) to the Company's
Annual Report on Form 10-K filed March 31, 1999, file
number 000-29778).
(3.ii) By-laws, as amended on January 28, 1999, (incorporated
herein by reference to Exhibit 3(ii) of Item 14 to the
Company's Annual Report on Form 10-K filed March 31,
1999, file number 000-29778).
(4) Instruments Defining the Rights of Security Holders,
including indentures.
(4.1) The following instruments each dated August 23, 1999
define the rights of holders of indebtedness of the
Company's subsidiaries:
(a) Deed to Secure Debt and Security Agreement for ML
Hammocks at Long Point, L.L.C. (incorporated herein
by reference to Exhibit 4.8(a) to the Company's
Registration Statement on Form S-11 filed October
21, 1999, file number 333-89469).
(b) Promissory Note for ML Hammocks at Long Point, L.L.C.
(incorporated herein by reference to Exhibit 4.8(b)
to the Company's Registration Statement on Form S-11
filed October 21, 1999, file number 333-89469).
The Company has additional long-term debt that does not exceed
ten (10%) percent of the total assets of Merry Land and its
subsidiaries on a consolidated basis. Merry Land agrees to
furnish a copy of any such instrument to the Commission upon
request.
(27) Financial Data Schedules
b. Reports on Form 8-K:
-------------------
The registrant filed reports on Form 8-K during the third quarter of
1999 as follows with respect to the following matters.
<TABLE>
<CAPTION>
Date Financial
Form Items Filed Statements
- ---- ----- ----- ----------
<S> <C> <C> <C>
8-K 2 & 7 (Acquisition or Disposition of Assets & August No
Financial Statements and Exhibits) 26, 1999
8-K/A 7 (Financial Statements, Pro Forma Financial September Yes
Information and Exhibits) 13, 1999
</TABLE>
<PAGE>
FORM 10-Q - MERRY LAND PROPERTIES, INC.
SIGNATURES
Pursuant to the requirements 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.
MERRY LAND PROPERTIES, INC.
/s/ Dorrie E. Green
-------------------
DORRIE E. GREEN
Vice President and
Chief Financial Officer
November 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,275,071
<SECURITIES> 0
<RECEIVABLES> 863,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,275,071
<PP&E> 107,912,834
<DEPRECIATION> 12,663,267
<TOTAL-ASSETS> 107,617,385
<CURRENT-LIABILITIES> 2,485,805
<BONDS> 93,383,261
0
0
<COMMON> 2,601,300
<OTHER-SE> 9,147,019
<TOTAL-LIABILITY-AND-EQUITY> 107,617,385
<SALES> 10,571,734
<TOTAL-REVENUES> 10,739,105
<CGS> 3,997,291
<TOTAL-COSTS> 8,823,734
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,943,433
<INCOME-PRETAX> 1,915,371
<INCOME-TAX> 579,684
<INCOME-CONTINUING> 1,335,687
<DISCONTINUED> 0
<EXTRAORDINARY> 721,969
<CHANGES> 0
<NET-INCOME> 2,057,656
<EPS-BASIC> 1.48
<EPS-DILUTED> 1.43
</TABLE>
