<PAGE>
- -----------------------------------------------------------------
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 quarter ended
March 31, 1995
--------------------
MERRY LAND & INVESTMENT COMPANY, INC.
P. O. Box 1417
Augusta, Georgia 30903
706 722-6756
Commission file number: 001-11081
State of Incorporation: Georgia
I.R.S. Employer Identification Number: 58-0961876
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value New York Stock Exchange
$1.75 Series A Cumulative
Convertible Preferred Stock New York Stock Exchange
$2.15 Series C Cumulative
Convertible Preferred Stock New York Stock Exchange
Number of shares outstanding as of March 31, 1995:
Common Stock 32,860,696
Series A Preferred Stock 1,042,915
Series C Preferred Stock 4,000,000
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 (or for such shorter time as required), and (2) has been
subject to such filing requirements for the past ninety days:
Yes X . No .
---- ----
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance sheets - March 31, 1995 and December 31, 1994
Statements of income - Three months ended March 31, 1995 and 1994
Statements of cash flows - Three months ended March 31,
1995 and 1994
Notes to condensed financial statements - March 31, 1995
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
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
Part I. Financial Information
Item 1 - Financial Statements
<TABLE>
<CAPTION>
BALANCE SHEETS
(Unaudited)
March 31, December 31,
----------- ------------
1995 1994
----------- ------------
<S> <C> <C>
PROPERTIES AT COST
Apartments $799,438,809 $796,436,199
Apartments under development 9,452,803 8,128,943
Commercial rental property 6,165,489 6,039,242
Land held for investment or
future development 3,831,281 3,831,281
Operating equipment
914,388 870,120
----------- -----------
819,802,770 815,305,785
Less accumulated depreciation
and depletion 47,807,538 41,874,144
----------- -----------
771,995,232 773,431,641
CASH & SECURITIES
Cash 876,039 717,957
Repurchase agreements 18,800,000 -
Marketable securities 31,565,950 27,716,350
---------- ----------
51,241,989 28,434,307
OTHER ASSETS
Notes receivable 869,183 941,172
Deferred loan costs 1,979,110 2,066,106
Other 2,901,558 1,781,815
------------ ------------
5,749,851 4,789,093
------------ ------------
TOTAL ASSETS $828,987,072 $806,655,041
------------ ------------
NOTES PAYABLE:
Mortgage loans $ 17,818,561 $ 17,834,734
6.625% Senior unsecured notes 120,000,000 120,000,000
Note payable-credit line - 57,600,000
Repurchase agreements - 17,375,000
----------- ------------
137,818,561 212,809,734
PAYABLES & ACCRUED LIABILITIES
Accrued interest 113,017 2,224,288
Resident security deposits 2,923,064 3,011,824
Accrued property taxes 3,037,831 1,204,966
Other 1,965,127 2,553,373
8,039,039 8,994,451
----------- ---------
EQUITY
Preferred stock ($1.75 Series
A, $25.00 per share) 26,072,875 62,908,100
Preferred stock ($2.205 Series
B, $25.00 per share) 100,000,000 100,000,000
Preferred stock ($2.15 Series
C, $25.00 per share) 100,000,000 -
Common stock ($1 per share
stated value) 32,860,696 30,744,451
Capital surplus 408,196,141 375,169,573
Cumulative undistributed net
earnings 20,541,732 23,111,941
Notes receivable from stock-
holders and ESOP (10,139,330) (10,283,657)
Unrealized gain on securities 5,597,358 3,200,448
------------ ------------
683,129,472 584,850,856
LIABILITIES AND STOCKHOLDERS' ------------ ------------
EQUITY $828,987,072 $806,655,041
------------ ------------
Shares of preferred stock
outstanding 9,042,915 6,516,324
Shares of common stock
outstanding 32,860,696 30,744,451
</TABLE>
The notes to financial statements are an integral part of this
statement.
<PAGE>
Form 10-Q - Merry Land & Investment Company, Inc.
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
INCOME STATEMENTS
(Unaudited)
Three Months Ending March 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
INCOME
Rental income $32,882,263 $23,135,994
Mineral royalties 108,033 241,468
Mortgage interest 19,766 31,363
Other interest 544,173 283,310
Dividends 67,396 74,519
Other income 139,772 -
---------- ----------
33,761,403 23,766,654
EXPENSES
Rental expense 9,136,506 6,454,221
Interest 2,977,082 2,695,790
Depreciation - real estate 5,892,102 3,970,776
Depreciation - other 41,291 20,408
Amortization - financing costs 86,995 86,995
Taxes and insurance 3,246,475 2,467,103
General and administrative
expense 509,857 377,526
---------- ----------
21,890,308 16,072,819
Income before net realized gains 11,871,095 7,693,835
Net realized gains 48,436 189,398
---------- ---------
NET INCOME 11,919,531 7,883,233
Dividends to preferred
shareholders 3,074,166 2,012,500
---------- ----------
NET INCOME AVAILABLE
FOR COMMON SHARES $ 8,845,365 $ 5,870,733
---------- ----------
Weighted average common shares
outstanding 32,720,101 22,895,556
Weighted average common shares
- fully diluted 39,626,940 29,059,556
NET INCOME PER COMMON SHARE $ .27 $ .26
---------- ----------
CASH DIVIDENDS DECLARED
PER COMMON SHARE $ .35 $ .30
---------- ----------
</TABLE>
The notes to financial statements are an integral part of this
statement.
<PAGE>
Item 1 - Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
----------------------------
1995 1994
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Rents and royalties received $ 32,984,124 $ 23,371,462
Interest received 372,200 440,293
Dividends received 67,396 74,518
Rental expense (9,224,571) (6,454,221)
General and administrative
expense (779,772) (1,023,731)
Interest expense (5,088,352) (4,683,290)
Property taxes and insurance
expense (1,627,849) (1,001,230)
Other (92,301) (106,910)
Net cash provided (used) by
operating activities: --------- -----------
16,610,875 10,616,891
INVESTING ACTIVITIES:
Principal received on notes
receivable 71,989 49,512
Sale of securities 9,939,500 242,712
Purchase of securities (11,343,750) (9,339,063)
Improvements to properties (3,173,125) (4,491,805)
Development of properties (1,323,860) -
Purchase of short term
investments (18,800,000) 1,750,000
Other (1,180,826) 2,592
Net cash provided (used) by ---------- ----------
investing activities: (25,810,072) (11,786,052)
FINANCING ACTIVITIES:
Net borrowings (repayments) -
repurchase agreements (17,375,000) 16,300,000
Net borrowings (repayments) -
bank debt (57,600,000) 1,250,000
Repayments on mortgage loans (16,174) (8,086,882)
Cash dividends paid - common (11,420,300) (6,884,509)
Cash dividends paid - preferred,
Series A (486,944) (2,012,500)
Cash dividends paid - preferred,
Series B (2,205,000) -
Sale of common stock - public
offerings - (186,051)
Sale of common stock - reinvested
dividends 1,961,720 635,659
Sale of common stock - stock
purchase plan 582,416 299,501
Sale of common stock - employees 167,294 171,235
Sale of preferred stock - public
offering 95,749,267 -
---------- ----------
Net cash provided (used) in
financing activities 9,357,279 1,486,453
---------- ---------
NET INCREASE (DECREASE) IN CASH 158,082 317,292
CASH AT BEGINNING OF PERIOD 717,957 577,54
---------- ----------
CASH BALANCE $ 876,039 $ 894,836
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Reconciliation of Net Income to Cash Flows from Operating
Activities)
(Unaudited)
Three Months ended March 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net income $ 11,919,531 $ 7,883,233
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 6,020,388 4,078,179
(Increase) decrease in interest
and accounts receivable (246,808) 296,539
(Increase) decrease in other
assets (785,940) (751,025)
Increase (decrease) in accounts
payable and accrued interest (247,858) (700,637)
Gain on the sale of marketable
securities (48,438) (174,212)
Gain on the sale of real estate - (15,186)
----------- -----------
Net cash provided by operating
activities $16,610,875 $10,616,891
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
Merry Land & Investment Company, Inc.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
1. Nature of Business
Merry Land & Investment Company, Inc. is a real estate
investment trust (REIT), which owns and operates upscale apartment communi-
ties in Florida, Georgia, Maryland, North Carolina, Ohio, South Carolina,
Tennessee and Virginia. As a qualified REIT the Company pays no corporate
income taxes on earnings distributed to stockholders. The Company is self
administered and has no affiliated advisor, sponsor, or property
manager.
2. Marketable Securities
The cost and market value of securities by major classification
at March 31, 1995 were as follows:
<TABLE>
<CAPTION>
Cost Market
----------- -----------
<S> <C> <C>
Common stocks $ 2,771,279 $ 7,927,650
Corporate debentures 1,905,750 2,425,500
U.S. Treasury
securities 21,291,563 21,212,800
Repurchase agreements 18,800,000 18,800,000
----------- -----------
$44,768,592 $50,365,950
----------- -----------
</TABLE>
3. Notes Receivable
Notes receivable at March 31, 1995 were as follows:
<TABLE>
<S> <C>
11% to 11.5% mortgage notes, monthly amortizing,
due 1995-1996 $101,247
10% mortgage notes, primarily interest only
balloon notes, due 1995-2002 767,936
--------
$869,183
--------
</TABLE>
4 . Borrowings
Borrowings at March 31, 1995 were as follows:
<TABLE>
<S> <C>
Senior unsecured notes (a) $120,000,000
Mortgage loan at fixed rate (b) 7,493,561
Tax exempt mortgage loan at variable
rate (c) 10,325,000
------------
$137,818,561
------------
</TABLE>
(a) 6.625% notes, interest payable semi-annually, principal
installments of $40 million each due 1999, 2000, and 2001.
(b) Secured by apartments at interest rate of 8.375%, due in
monthly installments through 2000.
(c) Secured by apartments at a variable interest rate equal to
75% of prime, due in principal installments of $125,000 each
in 1995 and 1996, with balances callable in 2000.
5. Income Taxes and Dividend Policy
As discussed in Note 1, the Company has elected to be taxed as a
REIT. The Internal Revenue Code provides that a REIT, which in any taxable
year meets certain requirements and distributes to its stockholders at least
95% of its ordinary taxable income, will not be subject to federal income
taxation on taxable income which is distributed. The Company intends to
distribute the required amounts of income in 1995 to qualify as a REIT and to
avoid paying income taxes. The Company paid a $.35 per share cash dividend on
its common stock, a $.4375 per share cash dividend on its $1.75 Series A
Cumulative Convertible Preferred Stock, and a $.55125 per share cash dividend
on its $2.205 Series B Cumulative Convertible Preferred Stock on March 31,
1995. At March 31, 1995 the Company accrued a $.1015 per share cash dividend
on its Series C Cumulative Convertible Preferred Stock, which will be paid
with the June 30, 1995 quarterly dividend.
6. Environmental Matters
On July 1, 1994 the Environmental Protection Division of the
State of Georgia published its initial Hazardous Site Inventory under
the State's 1992 "Superfund"law, which requires investigation, and if
appropriate, remedial action with respect to listed sites. A 96 acre tract
owned by the Company and located in Richmond County, Georgia, formerly used
as a landfill, was included on this list. In the third quarter of 1994 the
Company accrued $200,000 as a non recurring charge. Such amount represented
the Company's estimate of its share of the potential cost if further
investigation of the site was required as a result of the action by the State
of Georgia.
On April 24, 1995, following discussions with the Company's representatives,
the Georgia EPD notified the Company that it had determined that there was
insufficient evidence to include the site on the Hazardous Site Inventory.
The site was removed from the inventory as of that date. The Company expects
to reverse the $200,000 non recurring charge in the second quarter of 1995.
<PAGE>
Part I
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
(In thousands except apartment and per share data)
Overview
Over the past several years, Merry Land has significantly expanded its apart-
ment holdings through an active program of acquisitions. The following table
describes the growth ofthe Company's apartment holdings in recent years:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Dec. 31,
1994 Increase 1993 Increase 1992 Increase
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Units (1) 18,851 35% 13,979 114% 6,527 76%
Cost (in
thousands)
(1)(2) $796,364 44% $554,444 165% $209,549 73%
</TABLE>
__________
(1) Excludes condominium units held for sale.
(2) Represents the total acquisition cost of the property plus
the capitalized cost of improvements made subsequent to acquisition.
In December 1994, the Company commenced a program of apartment
development by buying three tracts of land on which it intends to build high
quality suburban garden apartments. The Company is building these communities
using experienced apartment developers to provide development and construction
management services. Construction on all three communities is expected to
commence in the first half of 1995 with the first units expected to be
available for occupancy later that year. The Company's present intention is
to limit its financial commitment to development to no more than 10% of total
assets.
The Company expects that further expansion of its apartment holdings will
continue to come primarily from acquisitions.
Recent Developments
Sale of Preferred Stock. In a public offering on March 8, 1995, the Company
issued 4,000,000 shares of $2.15 Series C Cumulative Convertible Preferred
Stock at $25.00 per share for net proceeds of $95.7 million in a public
offering. On April 7, 1995, the Company issued an additional 600,000 shares
of the Series C Preferred Stock for net proceeds of $14.4 million. The
additional 600,000 shares covered the 15% overallotment option given to the
underwriters concurrent with the March 8 offering.
The Series C Preferred Stock has an annual dividend rate of $2.15 per share
and contains a ratchet provision which provides that the preferred dividend
rate shall be increased if necessary so that it will always be equal to the
greater of $2.15 per share or the dividends payable on the number of shares of
common stock into which the Series C Preferred Stock is convertible. The
Series C shares are convertible into shares of common stock at a conversion
price of $22.00 per share. The Series C shares may not be redeemed for cash
at any time, but may be redeemed after March 31, 2000 by the Company for
shares of common stock at a rate of 1.136 shares of common stock for each
share of preferred, provided the Company's common stock is trading above the
conversion price. The Series C Preferred Stock is traded on the New York
Stock Exchange under the symbol "MRYPrC". The proceeds from the offering were
used to repay all of the Company's short-term unsecured debt, and the balance
has been invested in marketable securities, pending investment in additional
apartment acquisitions and development.
Results of Operations for the Three Months Ended March 31, 1995
and 1994
Rental Operations. The operating performance of the Company's apartments is
summarized in the following table (dollars in thousands, except average
monthly rent):
<TABLE>
<CAPTION>
Three Months
---------------
%Change 1995 1994
------- ------- ------
<S> <C> <C> <C>
Rents 43% $32,760 $22,924
Operating expenses 42% 9,088 6,394
Taxes and insurance 33% 3,146 2,374
Depreciation 49% 5,854 3,936
--- ------ ------
44% $14,672 $10,224
Average monthly rent (1)5.5% $595 $564
Average occupancy (2) 1.0%(4) 95.4% 94.4%
Expense ratio (3) (0.9%)(4) 37.3% 38.2%
</TABLE>
_____________
(1) Represents weighted average monthly rent charged for
occupied units and rents asked for unoccupied units at
March 31.
(2) Represents the average physical occupancy at each month
end for the period held.
(3) Represents total of operating expenses, taxes and
insurance divided by rental revenues.
(4) Represents increase or decrease between years.
With the Company's acquisition of new communities, the weighted average
number of apartments owned rose to 18,851 in the first quarter of 1995 from
13,979 in the first quarter of 1994 and rental revenues and expenses rose
accordingly. Furthermore, most of the rental markets in which Merry Land
operates are experiencing strong job growth and household formation, and this
is reflected in rising occupancy levels and rent rates. However, the 5.5%
increase in portfolio average rental rates in the first quarter of 1995 from
the first quarter of 1994 also reflects the higher rents charged at the
communities the Company acquired in the last three quarters of 1994, whose
monthly rents averaged $626 at March 31, 1995, versus the total portfolio
average of $595. Although construction starts of new apartment communities
have increased recently, the Company believes demand continues to outstrip
supply and expects a generally strong rental market to continue throughout
1995, with continued high occupancy and rising rent rates in most states.
The performance of the 13,979 units which the Company held for the first
quarters of both 1995 and 1994 ("same property" results), is summarized in
the following table (dollars in thousands, except average monthly rents;
see footnotes above):
<TABLE>
<CAPTION>
Three Months
--------------------
%Change 1995 1994
------- ------- -------
<S> <C> <C> <C>
Rents 5% $24,073 $22,924
Operating expenses 7% 6,811 6,394
Taxes and insurance 12% 2,667 2,374
Depreciation 10% 4,317 3,936
--- ------- -------
1% $10,278 $10,224
Average monthly rent 3.5% $584 $564
Average occupancy 1.3% 95.7% 94.4%
Expense ratio 1.2% 39.4% 38.2%
</TABLE>
Reflecting the strong rental markets, rental revenues rose 5% for those
properties held for all of both periods, as a result of 1.3% higher
occupancy and 3.5% higher rental rates. In part offsetting the increase in
rents, operating expenses increased $0.4 million or 7% for the first quarter
of 1995 as compared to the same period in 1994, due primarily to increases in
offsite property management expense, water and personnel costs. The increase
in personnel costs is attributable primarily to higher levels of staffing as
formerly vacant positions were filled at communities acquired in late 1993
and the vesting of additional employees in the Company's ESOP plan. Off site
property management expense has risen as the Company has established new
corporate level positions in marketing, training, maintenance and administra-
tion. The cost of off site, corporate level management expenditures are
allocated to communities as part of their operating expense. For the first
quarter of 1995, the accrual for property taxes increased by $0.2 million, or
10.5%, over the accrual for the same period in 1994. Insurance expense
increased by $0.6 million, or 41.5%, due largely to increases in premiums for
Florida properties as many insurance companies elected to reduce their
exposure to Florida.
Mineral Royalty and Commercial Property Income. These amounts decreased to
$0.2 million in the first quarter of 1995 from $0.4 million in the first
quarter of 1994 largely as the result of the expiration in late 1994 of a
contract for the sale of sand and also lower occupancies at the non-apartment
properties.
Interest and Dividend Income. Interest and dividend income rose to $0.6
million for the first quarter of 1995 from $0.4 million for the first quarter
of 1994 due to a higher level of investments in 1995. Interest and dividend
income includes interest received on temporary investments, notes receivable,
and dividends earned on equity securities investments.
Interest Expense. Interest expense totaled $3.0 million for the first
quarter of 1995, up from $2.7 million for the first quarter of 1994. The
increase resulted both from an increase in the amount of debt outstanding and
from higher interest rates. Average debt outstanding rose to $200.8 million
in the first quarter of 1995 from $160.2 million in the first quarter of 1994,
primarily as a result of financing apartment purchases. The weighted average
interest rate charged on all the Company's debt increased to 6.7% for the
first quarter of 1995 from 6.4% for the first quarter of 1994, primarily as a
result of rising short term rates. As discussed earlier, net proceeds from the
sale of the Series C Preferred Stock were used to reduce the Company's out-
standing debt, which at March 31, 1995 totaled $137.9 million. Of this
amount, $9.9 million was at variable interest rates. These borrowings were
tax exempt financing bearing interest at 75% of prime.
General and Administrative Expenses. In 1995, general and administrative
expense totaled $0.5 million, versus $0.4 million for 1994. For both years,
these amounts equaled 1.6% of rental revenues. The Company expects that as it
continues to grow, even though general and administrative expenses will
increase in absolute terms, such expenses will not increase as a percentage
of revenues.
Gains on Sales of Assets. Net gains recognized on the sale of assets totaled
$0.1 million for the first quarter of 1995 and $0.2 million for the first
quarter of 1994. Gains in both years came primarily from the sale of
securities and real estate. Net gains for the first quarter of 1995 included
gains of $0.82 million on the sale of corporate securities and losses of
$0.77 million on the sale of U.S. Treasury securities.
Net Income. Net income totaled $11.9 million for the first quarter of 1995
and $7.9 million for the first quarter of 1994. Net income available for
common shareholders totaled $8.8 million for the first quarter of 1995 and
$5.9 million for the first quarter of 1994. The increases in net income and
net income available for common shareholders for 1995 when compared to 1994
arose principally from substantially increased operating income from apart-
ments. Net income per common share for 1995 increased to $.27 from $.26 in
1994 as a result of higher net rental income and lower interest expense,
which were offset by increased depreciation and preferred dividends.
Dividends to preferred shareholders. Dividends to preferred shareholders
totaled $3.1 million for the first quarter of 1995 and $2.0 million for the
first quarter of 1994. The increase in preferred dividends arose from an
increase in the amount of preferred stock outstanding during the two quarters.
The preferred dividends are summarized in the following table (in thousands):
<TABLE>
<CAPTION>
Three months
------ -------
1995 1994
------ ------
<S> <C> <C>
Series A Preferred shares $ 487 $2,013
Series B Preferred shares 2,205 -
Series C Preferred shares 382 -
------ ------
Total preferred dividends $3,074 $2,013
</TABLE>
Holders of the Company's Series A Preferred Stock have converted 3.6
million of the 4.6 million Series A shares originally issued in June 1993
into approximately 4.8 million shares of the Company's common stock as the
common dividend was raised above the equivalent preferred dividend.
In November 1994, the Company completed a private placement of 4.0 million
shares of the Company's Series B Preferred Stock. As discussed earlier,
the Company issued 4.6 million shares of the Series C Preferred Stock in
March and April 1995.
Funds From Operations. The Company believes that funds from operations is
an important measure of its operating performance. Funds from operations does
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. Based on recently published
recommendations of a task force of the National Association of Real Estate
Investment Trusts, 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. This revised definition
eliminates from funds from operations any amortization of debt costs and any
non-real estate depreciation. Revision of the definition reduced the
Company's funds from operations by $0.1 million for both quarters in 1995 and
1994.
Funds from operations rose 52% to $17.8 million for the first quarter of
1995 as compared to $11.7 million for the first quarter of 1994. Funds from
operations available to common shares totaled $14.7 million for the first
quarter of 1995 and $9.7 million for the first quarter of 1994. These
increases were principally due to increased rental operating income resulting
from the growth of the Company's apartment holdings. On a per share basis,
funds from operations increased from $.40 to $.45 per share, or 12%, less
than the absolute increase because of the larger number of shares outstanding.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months
------- ------
1995 1994
------- ------
<S> <C> <C>
Net income $11,919 $7,883
Less preferred dividends paid 3,074 2,012
------- ------
Net income available for common shares 8,845 5,871
Add depreciation of real estate owned 5,892 3,971
Less net realized gains 48 189
------- -------
Funds from operations available to
common shares 14,689 9,653
Add preferred dividends 3,074 2,012
------- -------
Funds from operations-fully diluted $17,763 $11,665
------- -------
Weighted average common shares outstanding-
primary 32,720 22,896
fully diluted 39,627 29,060
Funds from operations per share-
primary $0.45 $0.42
fully diluted $0.45 $0.40
</TABLE>
Liquidity and Capital Resources
Merry Land's financial strategy is to buy and develop apartment communities
for cash, using amounts drawn on its unsecured line of credit, and
subsequently to raise funds in the capital markets to permanently finance
these investments. The Company completed a number of such acquisition and
funding cycles in recent years and expects to continue to operate in this
manner.
On March 8, 1995, the Company completed the public offering of $2.15 Series
C Cumulative Convertible Preferred Stock described above and used the total
net proceeds of $95.7 million to repay debt incurred in the acquisition and
improvement of apartments and to purchase marketable securities. On April 12,
1995, the Company received net proceeds of $14.4 million from the sale of
the over-allotment option of the Series C Preferred Stock.
Financial Structure. At March 31, 1995, total debt equaled 17% of total
capitalization at cost, and 14% of total capitalization with equity valued at
market. At that date, the Company's financial structure was as follows
(dollars in thousands):
<TABLE>
<CAPTION>
% of Market % of
Cost Total Value Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
Advances under line of credit $ - 0% $ - 0%
Mortgage loans 17,819 2% 17,819 2%
6.625% Senior unsecured notes 120,000 15% 120,000 12%
------- --- ------- ---
Total debt 137,819 17% 137,819 14%
Common and preferred equity (1) 683,129 83% 819,307 86%
------- --- ------- ----
Total capitalization $820,948 100% $987,126 100%
------- ---- ------- ----
</TABLE>
_________
(1) Assumes conversion of all outstanding preferred stock
into common stock.
Merry Land's primary commercial bank provides the Company with a $100.0
million unsecured line of credit for property acquisitions and other general
corporate purposes. This line bears interest at 0.65% over the 30 day LIBOR
rate, matures on September 30, 1995, and, subject to the bank's approval, is
expected to be renewed annually. At March 31, 1995, the Company had no
borrowings outstanding under this line of credit.
The Company's Preferred Stock, and implicitly its senior notes, are rated
investment grade by Standard & Poor's Corporation and Moody's Investors
Service, Inc.
Liquidity. Merry Land expects to meet its short-term liquidity requirements
with the net cash flow provided by operating activities, by liquidating its
short term investments and by borrowing under its line of credit. The
Company's primary short-term liquidity needs are operating expenses, apartment
acquisitions, capital improvements and replacements, debt service payments,
dividend payments and current requirements of its program of new apartment
development. Capitalized expenditures for the three development projects under
way totaled $4.4 million at March 31, 1995. Of the remaining estimated cost
of $42.6 million, $24.1 million is expected to be incurred in the last three
quarters of 1995 with the balance spent in 1996.
The Company expects to meet its long-term liquidity requirements, including
scheduled debt maturities and permanent financing for property acquisitions
and development, with a variety of sources, including additional borrowings
and the issuance and sale of debt and equity securities in the public and
private markets. The Company is limited in the amount of debt it may incur
under the terms of its existing loan agreements. At March 31, 1995, the
Company's loan agreements would have allowed it to borrow an additional $320
million on an unsecured basis.
Cash Flows. The following table summarizes cash flows for the first quarters
of 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
Sources and Uses of Cash:
-------------------------
Three Months
------------------------
1995 1994
-------- --------
<S> <C> <C>
Operating activities $ 16,611 $ 10,617
Sales of common and preferred stock 98,460 920
Net borrowings - 9,463
Other 72 52
------- ------
Total sources 115,143 21,052
Acquisitions of and improvements to
properties (3,173) (4,492)
Development of properties (1,324) -
Dividends paid (14,112) (8,897)
Net repayment of debt (74,991) -
Net purchase of securities and
temporary investments (20,204) (7,346)
Other (1,181) -
--------- --------
Total uses $(114,985) $(20,735)
</TABLE>
Operating cash flow has grown significantly with the expansion of the
Company's apartment holdings. Operating cash flow grew to $16.6 million in
the first quarter of 1995 from $10.6 million in the first quarter of 1994.
Dividends paid in 1995 and 1994 increased from levels in prior years due to an
increase in the average amount of stock outstanding, and in the case of the
Company's common stock, an increase in the quarterly dividend per share to
$0.35 for the first quarter of 1995 from $0.30 for the first quarter of 1994.
Capital Expenditures. The Company capitalizes the direct and indirect cost
of expenditures for the acquisition or development of apartments, for
replacements and for improvements. Replacements are items which recur on a
regular basis, but which have estimated useful lives of more than one year,
such as carpet, vinyl flooring and exterior repainting. Replacements are
non-revenue producing capital expenditures. Improvements are expenditures
which significantly increase the revenue producing capability or which reduce
the cost of operating assets. At newly acquired communities, the Company
often finds it necessary to upgrade the physical appearance of such properties
and to complete maintenance and repair work which had been deferred by prior
owners. These activities often result in heavier capital expenditures in the
early years of Company ownership. Interest, real estate taxes and other
carrying costs incurred during the development period are capitalized and,
upon completion of the project, depreciated over the lives of the project.
The following table summarizes the capital expenditures for the first
quarters of 1995 and 1994 (dollars in thousands, except per unit data):
<TABLE>
1995 1994
----- -------
<S> <C <C>
Apartment communities:
Acquisitions $ - $ -
Development projects:
Development costs 1,068 -
Capitalized interest 255 -
Replacements for stabilized
communities (1) 727 407
Improvements (2) 2,276 4,042
Commercial properties 126 -
Corporate level expenditures 45 43
------ ------
$4,497 $4,491
------ ------
Per Unit:
Replacements for stabilized
communities (1) $ 52 $ 62
Improvements (2) $ 121 $ 290
</TABLE>
__________
(1) Stabilized communities are those properties which have been
owned for at least one full calendar year. In the first
quarter of 1995, 13,979 properties were stabilized as
compared to 6,527 in the first quarter of 1994.
(2) Improvements include expenditures for all properties owned
during the quarter.
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 rentals in times of rising prices. The Company believes
that this would offset the effect of cost increases stemming from inflation.
<PAGE>
<PAGE>
Merry Land & Investment Company, Inc.
Part II - OTHER INFORMATION
ITEM. Legal Proceedings
None
ITEM 2. Changes in Securities
In a public offering on March 8, 1995, the Company issued
4,000,000 shares of $2.15 Series C Cumulative Convertible
Preferred Stock at $25.00 per share for net proceeds of $95.7
million in a public offering. On April 7, 1995, the Company
issued an additional 600,000 shares of the Series C Preferred
Stock for net proceeds of $14.4 million. The additional 600,000
shares covered the 15% overallotment option given to the
underwriters concurrent with the March 8 offering.
The Series C Preferred Stock has an annual dividend rate of
$2.15 per share and contains a ratchet provision which provides
that the preferred dividend rate shall be increased if necessary
so that it will always be equal to the greater of $2.15 per share
or the dividends payable on the number of shares of common
stock into which the Series C Preferred Stock is convertible. The
Series C shares are convertible into shares of common stock at a
conversion price of $22.00 per share. The Series C shares may not
be redeemed for cash at any time, but may be redeemed by the
Company after March 31, 2000 for shares of common stock at a rate
of 1.136 shares of common stock for each share of preferred,
provided the Company's common stock is trading above the
conversion price. The Series C Preferred Stock is traded on the
New York Stock Exchange under the symbol "MRYPrC".
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
Exhibits
(3.i) Articles of Incorporation (incorporated herein by reference
to Exhibit 3ii of Item 14 of the Company's annual report on
Form 10-K for the year ended December 31,1993 and to Exhibit 1 of
Item 7 of the Company's current report on Form 8-K/A filed on
January 25, 1995 and to Exhibit 4 of Item 7 of the Company's
current report on Form 8-K filed on March 13,1995 incorporating
by reference Exhibit 3 of the Company's Form 8-A/A filed on
March 10, 1995.)
<TABLE>
<CAPTION>
Reports on Form 8-K
Financial
Event Statements
Form Date Filed Reported Filed
---- ---------- -------- ----------
<S> <S> <S> <S>
8-K/A 1/24/95 Articles of Amendment N/A
for Series B Preferred
Stock
8-K/A 2/7/95 Updated financial Statement of
statements for Fogleman excess of
portfolio acquisition revenues
over specific
operating
expenses
for the nine
months ended
September 30.
8-K 2/14/95 Balance Sheets,Statements Balance Sheets,Statements
of Income, Stockholders' of Income, Stockholders'
Equity and Cash Flows, Equity and Cash Flows,
Managements's Discussion Management's Discussion
and Analysis of and Analysis of
Financial Condition Financial Condition
and Results of Operations and Results of Operations
and Selected Financial and Selected Financial
Data Data
8-K 3/13/95 Series C Preferred Offering;
Articles of Amendment for
Series C Preferred Stock
</TABLE>
<PAGE>
Form 10-Q - Merry Land & Investment Company, 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 & INVESTMENT COMPANY,INC.
/s/ W. Tennent Houston
W. Tennent Houston
President
Principal Financial Officer
May 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 19,676
<SECURITIES> 31,566
<RECEIVABLES> 5,750
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,992
<PP&E> 819,803
<DEPRECIATION> 47,808
<TOTAL-ASSETS> 828,987
<CURRENT-LIABILITIES> 8,039
<BONDS> 137,819
<COMMON> 32,861
0
226,073
<OTHER-SE> 457,056
<TOTAL-LIABILITY-AND-EQUITY> 828,987
<SALES> 32,990
<TOTAL-REVENUES> 33,810
<CGS> 18,246
<TOTAL-COSTS> 18,246
<OTHER-EXPENSES> 667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,977
<INCOME-PRETAX> 11,920
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,920
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
