UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Amendment No. 1
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________________
to _______________
Commission File Number 1-12358
COLONIAL PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Alabama 59-7007599
(State of organization) (I.R.S. employer
identification no.)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal executive
offices)
Registrant's telephone number, including area code: (205) 250-8700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Common Shares of Beneficial New York Stock Exchange
Interest,
$.01 par value per share
Series A Cumulative Preferred Shares New York Stock Exchange
of Beneficial Interest,
$.01 par value per share
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing
requirements for the past 90 days. YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of the 25,625,610 Common Shares held by
non-affiliates of the Registrant was approximately $674,594,183 based on the
closing price on the New York Stock Exchange for such Common Shares on March 10,
1999.
Number of the Registrant's Common Shares of Beneficial Interest
outstanding as of March 10, 1999: 26,314,504.
Documents Incorporated by Reference
Portions of the proxy statement for the annual shareholders meeting to
be held in 1999 are incorporated by reference into Part III.
<PAGE>
On May 10, 1999, Colonial Properties Trust (the "Company") hereby amends
its Annual Report on Form 10-K for the year ended December 31, 1998 to include
the following restated items:
Part II
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 8. Financial Statements and Supplementary Data.
Part IV
Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.
(a)(3) Exhibits:
23.1 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedules (EDGAR Version Only)
This amendment to Colonial Properties Trust's annual report on Form 10-K
for the year ended December 31, 1998 is being filed to reflect an adjustment
made to the Company's 1998 Consolidated Financial Statements. As previously
filed, the Company's financial statements calculated net income without
allocating to the minority interest in Colonial Realty Limited Partnership
("CRLP") a pro rata portion of the cost of the dividends paid by CRLP on the
Series A Cumulative Preferred Units issued by CRLP in November 1997.
Distributions on the Preferred Units are paid to the Company and equal the
amount of dividends required to be paid by the Company on its outstanding Series
A Cumulative Preferred Shares of Beneficial Interest. The adjustment reflected
in this amendment has the effect, in calculating net income, of allocating to
the minority interest a portion of the cost of the distribution on the Preferred
Units. This adjustment results in a decrease in minority interest in income of
CRLP by approximately $3.2 million for 1998, and a corresponding increase in the
Company's net income and net income available to common shareholders by
approximately $3.2 million, or $0.13 per share.
The restatement of the 1998 Consolidated Financial Statements had no effect
on the Company's previously reported calculations of funds from operations
("FFO") or FFO per share, nor did it effect the federal income tax treatment of
distributions or dividends previously paid to shareholders or unitholders.
<PAGE>
<TABLE>
Item 6. Selected Financial Data.
SELECTED FINANCIAL Information
<CAPTION>
Dollar amounts in thousands,
except per share data 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
OPERATING DATA
<S> <C> <C> <C> <C> <C>
Total revenue ..................... $ 257,367 $ 184,126 $ 134,881 $ 110,890 $ 64,031
Expenses:
Depreciation and amortization .. 48,647 33,278 23,534 20,490 13,061
Other operating ................ 87,972 63,581 46,819 41,772 24,026
Income from operations ............ 120,748 87,267 64,529 48,628 26,944
Interest expense .................. 52,063 40,496 24,584 24,060 10,877
Other income (expense), net ....... (1,597) 3,187 1,303 736 578
Income before extraordinary items
and minority interest .......... 67,088 49,958 41,248 25,479 16,767
Dividends to preferred shareholders 10,938 1,671 -- -- --
Net income available to
common shareholders ............ 39,284 30,277 27,506 14,936 11,317
Per share - basic and diluted:
Income before extraordinary items . $ 1.60 $ 1.66 $ 1.60 $ 1.29 $ 1.18
Extraordinary loss from early
extinguishment of debt ......... (0.01) (0.13) (0.02) -- --
Net income ........................ 1.59 1.53 1.58 1.29 1.18
Dividends declared ................ 2.20 2.08 2.00 1.90 1.73
- ---------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Land, buildings, and equipment, net $ 1,566,841 $ 1,268,432 $ 801,800 $ 624,517 $ 555,581
Total assets ...................... 1,755,449 1,397,078 948,105 681,122 620,413
Total debt ........................ 909,322 702,044 506,435 354,100 362,134
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Funds from operations(1) .......... $ 103,746 $ 77,493 $ 62,999 $ 44,015 $ 28,123
Total market capitalization(2) .... 2,013,084 1,764,810 1,298,946 894,342 759,313
Interest coverage ratio ........... 3.20 3.00 3.60 2.90 3.70
Cash flow provided by (used in):
Operating activities ........... $ 115,528 $ 72,065 $ 62,873 $ 47,004 $ 27,970
Investing activities ........... (365,347) (346,379) (224,076) (95,592) (119,162)
Financing activities ........... 249,870 275,504 162,957 29,443 84,689
Total properties (at end of year) . 106 93 73 62 55
<FN>
(1) The Company generally considers Funds from Operations ("FFO") a widely used
and appropriate measure of performance for an equity REIT that provides a
relevant basis for comparison among REITs. FFO, as defined by the National
Association of Real Estate Investment Trusts (NAREIT), means income (loss)
before minority interest (determined in accordance with GAAP), excluding gains
(losses) from debt restructuring and sales of property, plus real estate related
depreciation and after adjustments for unconsolidated partnerships and joint
ventures. FFO is presented to assist investors in analyzing the performance of
the Company. The Company's method of calculating FFO may be different from
methods used by other REITs and, accordingly, may not be comparable to such
other REITs. FFO (i) does not represent cash flows from operations as defined by
GAAP, (ii) is not indicative of cash available to fund all cash flow needs and
liquidity, including its ability to make distributions, and (iii) should not be
considered as an alternative to net income (as determined in accordance with
GAAP) for purposes of evaluating the Company's operating performance.
(2) Total market capitalization is the market value of all outstanding Common
Shares of the Company plus total debt. This amount was calculated assuming the
conversion of 10,613,966, 9,976,419, 8,431,198, 8,141,023, and 8,070,159 units
of minority interest in Colonial Realty Limited Partnership into the Company's
Common Shares for 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Colonial Properties Trust (Colonial or the Company) is engaged in the ownership,
development, management, and leasing of multifamily communities, retail malls
and shopping centers, and office buildings. Colonial is organized as a real
estate investment trust (REIT) and owns and operates properties in nine states
in the Sunbelt region of the United States. As of December 31, 1998, Colonial's
real estate portfolio consisted of 49 multifamily communities, 40 retail
properties, and 17 office properties.
Colonial is one of the largest diversified REITs in the United States.
Consistent with its diversified strategy, Colonial manages its business with
three separate and distinct operating divisions: Multifamily, Retail, and
Office. Each division has an Executive Vice President that oversees growth and
operations and has a separate management team that is responsible for acquiring,
developing, and leasing properties within each division. This structure allows
Colonial to utilize specialized management personnel for each operating
division. Constant communication among the Executive Vice Presidents and
centralized functions of accounting, information technology, due diligence and
administrative services provide the Company with unique synergy allowing the
Company to take advantage of a variety of investment opportunities. Decisions
for investments in acquisitions and developments and for dispositions are also
centralized.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements appearing
elsewhere in this report. As used herein, the terms "Colonial" or "the Company"
includes Colonial Properties Trust, and one or more of its subsidiaries
including, among others, Colonial Realty Limited Partnership (CRLP).
Any statement contained in this report which is not a historical fact, or which
might be otherwise considered an opinion or projection concerning the Company or
its business, whether express or implied, is meant as, and should be considered,
a forward-looking statement as that term is defined in the Private Securities
Litigation Reform Act of 1996. Forward-looking statements are based upon
assumptions and opinions concerning a variety of known and unknown risks,
including but not limited to changes in market conditions, the supply and demand
for leasable real estate, interest rates, increased competition, changes in
governmental regulations, and national and local economic conditions generally,
as well as other risks more completely described in the Company's filings with
the Securities and Exchange Commission. If any of these assumptions or opinions
prove incorrect, any forward-looking statements made on the basis of such
assumptions or opinions may also prove materially incorrect in one or more
respects.
Results of Operations - 1998 vs. 1997
In 1998, the Company experienced growth in revenues, operating expenses, and net
income which primarily resulted from the acquisition and development of 40
properties and the expansion of 13 properties during 1998 and 1997. As a result
of the acquisitions, developments, and expansions the Company's net income
before dividends to preferred shareholders increased by $18.3 million, or 57.2%,
for 1998 when compared to 1997. On a per share basis, net income was $1.59 for
1998, a 3.9% increase, compared to $1.53 for 1997.
Revenues - Total revenues increased by $73.2 million, or 39.8%, during 1998 when
compared to 1997. Of this increase, $61.7 million relates to revenues generated
by properties that were acquired or developed during 1998 and 1997, net of
revenues of properties disposed of in 1997. The retail division accounted for
the majority of the overall revenue increase, approximately $46.4 million, while
the office and multifamily divisions accounted for $18.2 million and $9.0
million, respectively. The divisional revenue growth was primarily attributable
to the acquisition, development, and expansion of 21 retail properties, 22
multifamily properties, and 10 office properties during 1998 and 1997. The
remaining increase relates to increases in rental rates at existing properties
and lease buyouts during 1998.
Operating Expenses - Total operating expenses increased by $39.8 million, or
41.1%, during 1998 when compared to 1997. The majority of this increase relates
to additional property operating expenses of $20.3 million and additional
depreciation of $13.4 million associated with properties that were acquired,
developed, or expanded during 1998 and 1997, net of operating expenses of
properties disposed of during 1997. Depreciation expense on existing properties
increased by $1.5 million during 1998 when compared to 1997. Divisional property
operating expenses increased by $14.8 million, $2.8 million, and $5.5 million
for retail, multifamily, and office divisions, respectively, during 1998 when
compared to 1997. The increase in divisional property operating expenses was
primarily attributable to the acquisition, development, and expansion of 21
retail properties, 22 multifamily properties, and 10 office properties during
1998 and 1997. The remaining increase primarily relates to increases in
operating expenses at existing properties, and overall increases in corporate
overhead and personnel costs associated with the Company's continued growth.
Other Income and Expenses - Interest expense increased by $11.6 million, or
28.6%, during 1998 when compared to 1997. The increase in interest expense is
primarily attributable to the assumption of $5.7 million of debt, the issuance
of $175 million in Medium-Term Notes, and the net increased usage of the
Company's Line of Credit in conjunction with the financing of acquisitions and
developments.
Results of Operations - 1997 vs. 1996
In 1997, the Company experienced growth in revenues, operating expenses, and net
income which resulted from the acquisition and development of 38 properties and
the expansion of 7 properties during 1997 and 1996. As a result of the
acquisitions and developments, the Company's net income before dividends to
preferred shareholders increased by $5.0 million, or 18.0%, for 1997 when
compared to 1996. On a per share basis, net income was $1.53 for 1997, a 3.2%
decrease, compared to $1.58 for 1996. The decrease in net income available to
common shareholders, on a per share basis, is directly attributable to the
extraordinary loss from early extinguishment of debt and the dividends paid to
the preferred shareholders in 1997.
Revenues - Total revenues increased by $49.2 million, or 36.5%, during 1997 when
compared to 1996. Of this increase, $43.4 million relates to revenues generated
by properties that were acquired or developed during 1997 and 1996. The
remaining increase primarily relates to increases in rental rates at existing
properties. The retail division accounted for the majority of the overall
revenue increase, approximately $25.4 million, while the multifamily and office
divisions accounted for $14.6 million and $8.9 million, respectively. The
divisional revenue growth was primarily attributable to the acquisition,
development, and expansion of 20 retail properties, 19 multifamily properties,
and 6 office properties during 1997 and 1996.
Operating Expenses - Total operating expenses increased by $26.5 million, or
37.7%, during 1997 when compared to 1996. The majority of this increase relates
to additional property operating expenses of $13.3 million and additional
depreciation of $8.2 million associated with properties that were acquired or
developed during 1997 and 1996. Depreciation expense on existing properties
increased by $1.8 million during 1997 when compared to 1996. Divisional property
operating expenses increased by $7.4 million, $2.1 million, and $4.9 million for
retail, multifamily, and office divisions, respectively, during 1997 when
compared to 1996. The increase in divisional property operating expenses was
primarily attributable to the acquisition, development, and expansion of 20
retail properties, 19 multifamily properties, and 6 office properties during
1997 and 1996. The remaining change primarily relates to the resolution of prior
year reserves for certain tax contingencies, increases in operating expenses at
existing properties, and overall increases in corporate overhead and personnel
costs associated with the Company's continued growth.
Other Income and Expenses - Interest expense increased by $15.9 million, or
64.7%, during 1997 when compared to 1996. The increase in interest expense is
primarily attributable to the assumption of $75 million of debt, the issuance of
$175 million in Medium-Term Notes, and the increased usage of the Company's Line
of Credit in conjunction with the financing of acquisitions and developments.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company invested $358.1 million, net of disposition, in the
acquisition and development of properties. This acquisition and development
activity increased the Company's multifamily, retail, and office property
holdings. The Company financed the growth through proceeds from public offerings
of equity and debt totaling $315 million during 1998, advances on its bank line
of credit, the issuance of limited partnership units in CRLP, the proceeds from
joint ventures, and cash from operations. The Company also used these sources of
funds to repay $29.5 million on five mortgage loans.
Acquisition and Development Activities
Multifamily Properties - During 1998, the Company added 1,026 apartment units
through the acquisition of four multifamily communities at an aggregate cost of
$48.2 million. The Company also completed development of 596 apartment units in
seven multifamily communities during 1998 and acquired land on which it intends
to develop additional multifamily communities during 1999. The aggregate
investment in the multifamily developments during 1998 was $90.4 million. As of
December 31, 1998, the Company has 2,426 apartment units in 12 multifamily
communities under development or expansion. Management anticipates that the 12
multifamily projects will be completed during 1999 through 2001. Management
estimates that it will invest an additional $115 million to complete these
multifamily communities.
Retail Properties - During 1998, the Company added 2.9 million square feet of
retail shopping space (including 1.5 million square feet in two joint ventures)
through the acquisition of a community shopping center, an enclosed mall and
investment in two joint ventures at a net cost of $117.5 million. In addition,
the company began the development of a community shopping center in Birmingham,
Alabama. The aggregate investment in the retail development during 1998 was $8.8
million. Management anticipates that it will invest an additional $25.7 million
to complete the retail development.
Office Properties - During 1998, the Company increased its office portfolio by
827,000 square feet with the acquisition of five office properties at an
aggregate cost of $87.9 million. In addition, the Company began development on
two office properties. The aggregate investment in the office developments
during 1998 was $5.3 million. Management estimates that it will invest an
additional $24.3 million to complete these properties.
Joint Ventures
During the fourth quarter of 1998, the Company entered into two joint ventures.
On December 9, 1998, Colonial and CBL & Associates Properties, Inc. formed a
joint venture to acquire Parkway City Mall in Huntsville, Alabama for $11.4
million. In addition to the purchase of the property, the joint venture will
redevelop the mall, with all related costs being shared equally by both venture
partners. At December 31, 1998, Colonial had invested approximately $5.7 million
in the joint venture and had an ending net investment balance of $5.9 million.
On December 29, 1998, Colonial and Prudential Real Estate Investors through its
Property Investment Separate Account Fund (Prudential) entered into a joint
venture to own Orlando Fashion Square. In connection with the formation of the
joint venture, Prudential acquired a 50% interest in Orlando Fashion Square from
Colonial for $52 million which approximated both book value and fair value of
the recently acquired property. Subsequent to formation, the joint venture
leveraged the property with a $65 million nonrecourse note and the proceeds from
the issuance of the note were distributed equally to the joint venture partners.
The Company's investment in the joint venture at December 31, 1998 was $20.2
million. Colonial used the proceeds from the Prudential joint venture to fund
acquisition and development activities. Both joint ventures have been accounted
for using the equity method.
<TABLE>
Common Share Offerings
<CAPTION>
(in thousands)
Number of Price Per Gross Offering Net
Date Common Shares Share Proceeds Costs Proceeds
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 375,540 $ 30.00 $ 11,266 $ 627 $ 10,639
March 806,452 $ 31.00 $ 25,000 $ 1,389 $ 23,611
March 381,046 $ 31.00 $ 11,812 $ 656 $ 11,156
April 3,046,400 $ 30.13 $ 91,773 $ 4,973 $ 86,800
</TABLE>
<TABLE>
Debt Offering
<CAPTION>
Gross
Type of Proceeds
Date Note Maturity Rate (in thousands)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
July Senior July 1, 2007 7.00% $ 175,000
</TABLE>
Financing Activities
The Company funded a large portion of its acquisitions and developments through
the issuance of common shares and debt securities. During 1998, the Company
completed the following equity and debt transactions:
On July 10, 1998, the Company increased the borrowing capacity under its
unsecured line of credit from $200 million to $250 million. The credit facility,
which is used by the Company primarily to finance additional property
investments, bears interest at a rate ranging between 80 and 135 basis points
above LIBOR and is renewable in July 2000. The line of credit agreement includes
a competitive bid feature that will allow the Company to convert up to $125
million under the line of credit to a fixed rate, for a fixed term not to exceed
90 days. As of December 31, 1998, the balance outstanding on the Company's line
of credit was $174.5 million.
At December 31, 1998, the Company's total outstanding debt balance was $909.3
million. The outstanding balance includes fixed-rate debt of $681.2 million, or
74.9%, and floating-rate debt of $228.1 million, or 25.1%. The Company has
obtained interest rate protection for $50.0 million of the floating-rate debt.
The cap agreement limits the debt to an interest rate of 8.00% through May 2,
2000. The Company's total market capitalization as of December 31, 1998 was $2.0
billion and its ratio of debt to total market capitalization was 45.1%. Certain
loan agreements of the Company contain restrictive covenants which, among other
things, require maintenance of various financial ratios. At December 31, 1998,
the Company was in compliance with these covenants.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. Interest rate cap agreements and
interest rate swaps are used to reduce the potential impact of increases in
interest rates on variable-rate debt. Treasury lock agreements are used by the
Company's subsidiary, CRLP, to lock in interest rates in connection with public
debt offerings. Colonial has entered into an interest rate cap agreement which
limits debt of $50 million to an interest rate of 8.00% through May 2, 2000.
Subsequent to year-end, the Company entered into two interest rate swap
agreements. On January 4, 1999, Colonial entered into an interest rate swap for
$50 million of its line of credit at 4.97% plus 80 to 135 basis points and on
January 15, 1999, Colonial entered into an interest rate swap for $52 million of
tax exempt bonds at a rate of 3.23%. Both of these interest rate swap agreements
have one-year terms and any payments made or received under the agreements are
recognized as adjustments to interest expense as incurred. Colonial is exposed
to credit losses in the event of nonperformance by the counterparties to its
interest rate cap and nonderivative financial assets but has no
off-balance-sheet credit risk of accounting loss. The Company anticipates,
however, that counterparties will be able to fully satisfy their obligations
under the contracts. Colonial does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit
standing of counterparties.
OUTLOOK
Management intends to maintain the Company's strength through continued
diversification, while pursuing acquisitions and developments that meet
Colonial's criteria for property quality, market strength, and investment
return. Management will continue to use its line of credit to provide short-term
financing for acquisition and development activities and plans to continue to
replace significant borrowings under the bank line of credit with funds
generated from the sale of additional equity securities and permanent financing,
as market conditions permit. Management believes that these potential sources of
funds, along with the possibility of issuing limited partnership units of CRLP
in exchange for properties, will provide the Company with the means to finance
additional acquisitions and development.
In addition to the issuance of equity and debt, management is investigating
alternate financing methods and sources to raise future capital. Private
placements, joint ventures, and non-traditional equity and debt offerings are
some of the alternatives the Company is contemplating. Colonial continues to
work diligently to improve its credit rating, in order to reduce its cost of
raising future capital.
Management anticipates that its net cash provided by operations and its existing
cash balances will provide the necessary funds on a short- and long-term basis
to cover its operating expenses, interest expense on outstanding indebtedness,
recurring capital expenditures, and dividends to shareholders in accordance with
Internal Revenue Code requirements applicable to real estate investment trusts.
YEAR 2000 ISSUE
Overview of Y2K Problem
The Year 2000 or "Y2K" problem refers to the inability of many existing computer
programs having time-sensitive software to recognize a date using "00" as the
year 2000. Instead, the computer programs interpret such data as the year 1900.
This failure to accurately recognize the year 2000 and other key dates could
result in a variety of problems ranging from data miscalculations to the failure
of entire systems. In an attempt to eliminate or minimize this potential risk,
the Company has initiated an effort to identify, understand, and address the
myriad of issues associated with the Y2K problem. The Company has identified two
main areas where potential Y2K problems exist: (a) Property Management Systems
and; (b) Information Systems.
Phase One - Assessing the Company's Y2K Readiness
As a result of potential risks posed by Y2K problems on the Company's
operations, in the early months of 1998, the Company formed a Year 2000
Committee to oversee, manage, and implement a Year 2000 Compliance Program (the
"Program"). The Committee is comprised of representatives from senior management
and various departments and advisors at the home and regional offices, including
the telecommunications, information systems, and office services departments.
Because of the wide-ranging implications of the Y2K problem, management decided
to carry out the Program in multiple phases over the remainder of 1998 and 1999.
Many of the phases of the Program are being carried out simultaneously.
The initial step in assessing the Company's Y2K readiness consisted of
identifying systems that are date sensitive and, accordingly, could pose
potential Y2K problems. The process included an examination of information
technology and non-information technology systems at the Company's home and
regional offices and at the Company's properties. The initial step of
identifying systems has been completed by the Company's information services
department and building services department through a combination of physical
inspections and informational interviews with Company employees.
Having identified systems that could have a potential Y2K problem, the Company
is attempting to determine which of the systems actually have a Y2K problem.
Much of the required information is within the exclusive control of the
Company's vendors and manufacturers, who are being contacted through standard
form letters and telephone calls requesting such information. In the case of
property management systems, a database was compiled for the types of equipment,
names of manufacturers and model numbers. The following is a summary of the
Phase One results obtained to date.
Property Management Systems
The Company has identified six categories of property management systems in
which it has the most exposure to potential Y2K problems. These categories
include: o Building automation (e.g., energy management, HVAC) o Security card
access o Fire and life safety o Elevator o Garage revenue control o Office
equipment
In April 1998, the Company began gathering data from vendors to catalog the
equipment in all of its buildings. To date, approximately 75% of the information
requested has been received. The Company does not expect to receive 100% of the
information requested due to a number of nonresponsive vendors or unavailable
information.
All of the responses have confirmed that their systems would not be affected in
an adverse way due to the Y2K date change. The Y2K steering committee is in the
process of evaluating if any of these property management systems are mission
critical in nature and would have a negative impact on the Company's ability to
conduct business if a failure occurs. At this time the Company does not believe
these systems are mission critical. Regardless, efforts continue to obtain
additional evidence from vendors concerning these systems such as processes
followed, test scripts, and actual findings. Once received, the Company will
further evaluate these systems and will determine if it will be necessary to
confirm the information received from the vendors. Due to the positive responses
received the Company does not feel that this will be necessary.
Information Systems
Information systems fall into four general categories: Accounting and property
management; network operating systems; desktop software; and secondary systems.
Accounting and Property Management - The general ledger software systems is not
currently compliant. New versions of these software systems were written and
delivered to the Company during the first quarter of 1999. The Company found the
new versions would not run in the current environment. The vendor continues to
develop the software systems and has represented to the Company that it expects
to deliver Y2K compliant systems during the early part of the third quarter.
Upon receipt, the Company will test the systems and the software upgrades and,
assuming that the systems and upgrades are found to be operational, will install
the systems in the third and fourth quarters with a goal of becoming fully
compliant during the early part of the fourth quarter. While the vendor is
revising the systems, the Company intends to pursue alternative software systems
offered by other vendors. If the Company finds an acceptable alternative
software systems offered by other vendors. If the Company finds an acceptable
alternative software system that is Y2K compliant, it may implement that system
instead of the system being revised by the Company's current vendor. If the
Company were to implement an alternative system, the Company may be able to
achieve full Y2K compliance as early as the third quarter.
Network Operating Systems - Management believes that the network operating
servers are currently Y2K compliant subject to certain possible exceptions.
Microsoft Corporation recently announced that Windows NT 4.0, which the Company
uses, is not Y2K compliant with service pak level III. However, Microsoft has
stated that service pak level IV will need to be loaded to become completely Y2K
compliant. Upgrades of Company network operating systems are expected to be
installed in the first and second quarters of 1999, bringing the network
operating servers into full compliance. Management believes that testing of this
new software will not be necessary, as it has already been proven in the
industry to be Y2K compliant.
Desktop Software - Management has reviewed all desktop systems and software
applications, identified those that are not in compliance and compiled a list of
necessary upgrades. Those upgrades have been completed for 95% of the current
systems and are now Y2K compliant. The remaining upgrades for 5% of the systems
are anticipated to be completed by the end of the first quarter. As part of the
continuing efforts to be Y2K compliant, every new system is tested upon
installation.
The status of desktop compliance is as follows:
o Systems (hardware and software) testing - Complete
o Installation of updated software that also provides Y2K compliance - November
1998 o Complete installation/full compliance - First Quarter 1999
Secondary Information Systems - "Secondary" information systems include, but are
not limited to: payroll; fixed-asset system; and forecasting modeling software,
which provide projections on property returns and other items. Letters have been
received confirming Y2K compliance from the vendors of the Company's secondary
systems. The number of computers related to these secondary systems are nominal
and testing is expected to be completed by the end of the second quarter of
1999.
Telecommunications Systems - In general, management believes that the internal
telephone systems are not date sensitive and should not be materially affected
by Y2K problems. A letter has been received from the telephone system vendor
confirming Y2K readiness of the voice mail system, telephone system and
telephone hardware. Testing will be completed by the end of the second quarter
of 1999.
Phase Two - Determining the Cost of Achieving Y2K Readiness and Implementing
the Y2K Action Plan
During the last two years, costs for new technology to ensure Y2K readiness,
including computers, telephone systems, and software, has been approximately $1
million and an additional $400,000 is estimated to be spent on property
management software upgrades and testing from a third-party consultant on
current secondary systems. However, the costs of the project and the completion
date are based on management's best estimates, which are based on numerous
assumptions of future events.
Phase Three - Assessing the Risks to the Company of Noncompliance
Management does not believe that the impact of Y2K will have a material adverse
effect on the Company's financial condition, results of operations and cash
flows. Such belief is based on management's analysis of the risks to the Company
related to the Company's own potential Y2K problems discussed above and the
assessment of the Y2K problems of vendors, suppliers, and customers.
Property Management Systems - Management believes that the Y2K risks to the
Company's financial condition and operations associated with a failure of
building management systems is immaterial due to the fact that each of the
Company's properties have, for the most part, separate building management
systems. In addition, based upon the investigation results received to date,
management believes there is sufficient time to correct those system problems
within the Company's control before the Year 2000.
In the event a failure of essential property management systems occurs at one or
more of the Company's buildings, whether due to a failure of a Company system or
an interruption of utilities, management believes that the individual tenant
leases will protect the Company from claims of constructive eviction or other
remedies that could result in a termination of lease rights. It is also
management's belief that most of the leases eliminate, limit or qualify the
rights of a tenant to receive an abatement under such circumstances. Although
there is always a risk of claims being brought on a noncontractual basis (e.g.,
in tort), it is management's belief that the Company's efforts to identify and
solve Y2K problems will minimize such risk. The Company has also attempted to
allocate the risk of noncompliance to the vendors and manufacturers of the
property management and information systems by establishing standard riders and
addenda to be attached to new contracts for systems using time sensitive data.
Information Systems - Because the Company's major source of income is rental
payments under long-term leases, the failure of key information systems is not
expected to have a material adverse effect on the Company's financial condition,
results of operations, or cash flows for its existing properties. Even if
problems with the information systems are experienced, the payment of rent under
leases would not be excused. However, the ability of the Company to produce
complete and accurate financial information in a timely fashion could be
impaired. This situation would affect the Company's anticipated development
projects or acquisitions of new properties. Management expects to correct any
information system problems within the Company's control before the Year 2000,
thereby minimizing or avoiding the increased cost of correcting problems after
the fact.
Our Vendors - The success of the Company's business is not closely tied to the
operations of any one manufacturer, vendor or supplier. Accordingly, if any
manufacturers, vendors or suppliers cease to conduct business due to Y2K related
problems, management expects to be able to contract with alternate providers
without experiencing any material adverse effect on the Company's financial
condition, results of operations, or cash flows.
Our Customers - Because of a broad customer/tenant base, the Company's success
is not closely tied to the success of any particular tenant. Accordingly,
management believes that there should not be a material adverse effect on the
Company's financial condition, results of operations, or cash flows if any
tenant ceases to conduct business due to Y2K related problems. The Company has
requested that major tenants provide periodic updates as to their Y2K readiness.
Phase Four - Developing Contingency Plans
The Company currently does not have contingency plans in place; however,
management expects to develop and implement contingency plans by the end of the
second quarter of 1999. The Company's contingency plans will be structured to
address both restoration of systems and their components and overall business
operating risk. These plans are intended to mitigate both internal risks, as
well as potential risks in the supply chain of the Company's suppliers and
customers.
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for
Derivative Instruments and Hedging Activities, addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. Under SFAS 133, the Company will be
required to account for derivative financial instruments, if any, at their fair
market value, and make certain required disclosures. The Company is required to
adopt SFAS 133 for periods beginning January 1, 2000.
INFLATION
Substantially all of the leases at the retail properties provide for the
pass-through to tenants of certain operating costs, including real estate taxes,
common area maintenance expenses, and insurance. Leases at the multifamily
properties generally provide for an initial term of six months to one year and
allow for rent adjustments at the time of renewal. Leases at the office
properties typically provide for rent adjustments and the pass-through of
certain operating expenses during the term of the lease. All of these provisions
permit the Company to increase rental rates or other charges to tenants in
response to rising prices and, therefore serve to minimize the Company's
exposure to the adverse effects of inflation.
<PAGE>
FUNDS FROM OPERATIONS
The Company considers Funds From Operations ("FFO") a widely accepted and
appropriate measure of performance for an equity REIT that provides a relevant
basis for comparison among REITs. FFO, as defined by the National Association of
Real Estate Investment Trusts (NAREIT), means income (loss) before minority
interest (determined in accordance with GAAP), excluding gains (losses) from
debt restructuring and sales of property, plus real estate depreciation and
after adjustments for unconsolidated partnerships and joint ventures. FFO is
presented to assist investors in analyzing the performance of the Company. The
Company's method of calculating FFO may be different from methods used by other
REITs and, accordingly, may not be comparable to such other REITs. FFO (i) does
not represent cash flows from operations as defined by GAAP, (ii) is not
indicative of cash available to fund all cash flow needs and liquidity,
including its ability to make distributions, and (iii) should not be considered
as an alternative to net income (as determined in accordance with GAAP) for
purposes of evaluating the Company's operating performance. The Company's FFO
for the years ended December 31, 1998, 1997 and 1996 was calculated as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 39,284 $ 30,277 $ 27,506
Adjustments:
Minority interest in CRLP 16,465 14,360 13,231
Depreciation (1) 47,189 32,288 22,621
Sales of property (1) 21 (3,082) (870)
Debt prepayment penalties 401 3,650 511
Write-off of development costs
charged to net income 386 - -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Funds from operations $ 103,746 $ 77,493 $ 62,999
- --------------------------------------------------------------------------------
(1) Includes pro-rata share of adjustments for partially owned entities.
</TABLE>
<PAGE>
Item 8. Financial Statements and Supplementary Data.
<TABLE>
Consolidated Balance Sheets
December 31, 1998 and 1997
<CAPTION>
(Amounts in thousands) 1998 1997
- -----------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Land, buildings, and equipment, net ............ $ 1,566,841 $ 1,268,432
Undeveloped land and construction in progress .. 128,336 98,555
Cash and equivalents ........................... 4,583 4,531
Restricted cash ................................ 2,897 2,665
Accounts receivable, net ....................... 9,428 7,301
Prepaid expenses ............................... 3,224 3,164
Deferred debt and lease costs .................. 9,644 6,901
Investment in partially owned entities ......... 25,181 685
Other assets ................................... 5,315 4,844
----------- -----------
Total assets ............................ $ 1,755,449 $ 1,397,078
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and mortgages payable .................... $ 909,322 $ 702,044
Accounts payable ............................... 8,614 12,706
Accounts payable to affiliates ................. 5,540 2,320
Accrued interest ............................... 12,051 6,526
Accrued expenses ............................... 3,456 2,814
Tenant deposits ................................ 4,272 3,715
Unearned rent .................................. 2,800 2,253
----------- -----------
Total liabilities ....................... 946,055 732,378
----------- -----------
Minority interest .............................. 198,947 174,281
----------- -----------
Preferred shares of beneficial interest, $.01 par value, 10,000,000 shares
authorized; 5,000,000 shares issued and outstanding at December 31, 1998
and 1997,
respectively . 50 50
Common shares of beneficial interest, $.01 par value, 65,000,000 shares
authorized; 26,147,054 and 21,152,754 shares issued and outstanding at
December 31, 1998 and 1997, respectively 261 212
Additional paid-in capital ....................... 659,641 524,605
Cumulative earnings .............................. 132,938 82,716
Cumulative distributions ......................... (182,135) (116,768)
Deferred compensation on restricted shares ...... (308) (396)
----------- -----------
Total shareholders' equity ............... 610,447 490,419
----------- -----------
$ 1,755,449 $ 1,397,078
----------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
For the Years Ended December 31, 1998, 1997, 1996
1998 1997 1996
--------------------------------
Revenue:
<S> <C> <C> <C>
Base rent ...................................... $ 206,234 $ 154,063 $ 115,174
Base rent from affiliates ...................... 1,027 879 758
Percentage rent ................................ 4,002 2,161 1,841
Tenant recoveries .............................. 31,573 17,349 10,717
Other .......................................... 14,531 9,674 6,391
--------------------------------------------------------------------------------------
Total revenue ............................... 257,367 184,126 134,881
-----------------------------------------------------------------------------------
Property operating expenses:
General operating expenses ..................... 20,590 12,603 9,530
Salaries and benefits .......................... 12,600 10,283 8,606
Repairs and maintenance ........................ 24,795 18,669 13,073
Taxes, licenses, and insurance ................. 22,312 15,578 11,538
General and administrative ......................... 7,675 6,448 4,071
Depreciation ....................................... 46,841 31,956 22,025
Amortization ....................................... 1,806 1,322 1,509
- ------------------------------------------------------------------------------------------
Total operating expenses .................... 136,619 96,859 70,352
- ------------------------------------------------------------------------------------------
Income from operations ...................... 120,748 87,267 64,529
- ------------------------------------------------------------------------------------------
Other income (expense):
Interest expense ............................... (52,063) (40,496) (24,584)
Income (loss) from partially owned entities .... (1,578) 620 835
Gains (losses) from sales of property .......... (19) 2,567 468
- ------------------------------------------------------------------------------------------
Total other expense ......................... (53,660) (37,309) (23,281)
- ------------------------------------------------------------------------------------------
Income before extraordinary items and
minority interest ............................ 67,088 49,958 41,248
Extraordinary loss from early extinguishment of debt (401) (3,650) (511)
Income before minority interest .............. 66,687 46,308 40,737
- ------------------------------------------------------------------------------------------
Minority interest in income of CRLP ................. 16,465 14,360 13,231
- ------------------------------------------------------------------------------------------
Net income .................................. 50,222 31,948 27,506
- ------------------------------------------------------------------------------------------
Dividends to preferred shareholders ................. (10,938) (1,671) -0-
- ------------------------------------------------------------------------------------------
Net income available to common shareholders .. $ 39,284 $ 30,277 $ 27,506
- ------------------------------------------------------------------------------------------
Basic and Diluted net income per share after consideration of minority
interest:
Income before extraordinary item ............. $ 1.60 $ 1.66 $ 1.60
Extraordinary loss from early extinguishment
of debt .................... (0.01) (0.13) (0.02)
Net income per common share .................. $ 1.59 $ 1.53 $ 1.58
- -------------------------------------------------------------------------------------------
Weighted average common shares outstanding .......... 24,641 19,808 17,378
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Amounts in Thousands) For the
Years Ended December 31, 1998, 1997, 1996 <CAPTION>
Preferred Shares of Common Shares Additional Deferred Total
Beneficial Interest Beneficial Interest Paid-In Cumulative Cumulative Compensation Shareholders'
Shares Par Value Shares Par Value Capital Earnings Distributions Restricted Shares Equity
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 .................. 13,045 $ 131 $ 205,885 $ 23,262 $ (38,080) $ (303) $ 190,895
Distributions ($2.00 per share) ............ (35,307) (35,307)
Net income ................................. 27,506 27,506
Issuance of Restricted Common Shares of
Beneficial Interest ...................... 7 -0- 158 (158) -0-
Amortization of deferred compensation ...... 103 103
Public offering of common shares
of beneficial interest, net of offering
costs of $6,632 .......................... 4,600 46 106,597 106,643
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan .......................... 8 -0- 204 204
Adjustments to minority interest in Colonial
Realty Limited Partnership due to
issuance of common shares of beneficial
interest and limited partnership units .... (10,540) (10,540)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 ................... 17,660 177 302,304 50,768 (73,387) (358) 279,504
Distributions on common shares
($2.08 per share) ......................... (41,710) (41,710)
Distributions on preferred shares
($0.3342 per share) ..................... (1,671) (1,671)
Net income ................................ 31,948 31,948
Issuance of Restricted Common Shares of
Beneficial Interest ..................... 8 -0- 261 (261) -0-
Amortization of deferred compensation ........ 223 223
Public offering of preferred shares
of beneficial interest, net of offering
costs of $4,451 ........5,000 $ 50 120,499 120,549
Public offerings of common shares
of beneficial interest, net of offering
costs of $4,732 ...................... 3,366 34 97,640 97,674
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan ......................... 95 1 2,475 2,476
Issuance of common shares of beneficial
interest through options exercised ........ 24 -0- 570 570
Adjustments to minority interest in Colonial
Realty Limited Partnership due to
issuance of common shares of beneficial
interest and limited partnership units .... 856 856
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 .5,000 50 21,153 212 524,605 82,716 (116,768) (396) 490,419
Distributions on common shares ($2.20 per share) .. (54,429) (54,429)
Distributions on preferred shares ($2.19 per share) (10,938) (10,938)
Net income ........................................ 50,222 50,222
Issuance of Restricted Common Shares of
Beneficial Interest .................. 0 -0- 13 (13) -0-
Amortization of deferred compensation .............. 101 101
Public offerings of common shares
of beneficial interest, net of offering
costs of $4,973 ......................... 4,609 46 132,159 132,205
Issuance of common shares of beneficial
interest through the Company's dividend
reinvestment plan ....................... 370 3 9,284 9,287
Issuance of common shares of beneficial
interest through options exercised ....... 15 -0- 359 359
Adjustments to minority interest in Colonial
Realty Limited Partnership due to
issuance of common shares of beneficial
interest and limited partnership units ........... (6,779) (6,779)
---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 .5,000 $ 50 26,147 $ 261 $ 659,641 $132,938 $(182,135) $ (308) $ 610,447
====================================================================================================================================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
For the Years Ended December 31, 1998, 1997, 1996
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income .................................................. $ 50,222 $ 31,948 $ 27,506
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .............................. 48,647 33,278 23,534
Loss (income) from subsidiaries ............................ 1,578 (620) (835)
Minority interest in CRLP .................................. 16,465 14,360 13,231
Losses (gains) from sales of property ...................... 19 (2,567) (468)
Other, net ................................................. 1,105 4,204 1,026
Decrease (increase) in:
Restricted cash ...................................... (232) (215) (371)
Accounts receivable .................................. (4,437) (2,743) (3,253)
Prepaid expenses ..................................... (57) 867 (224)
Other assets ......................................... 749 565 (1,298)
Increase (decrease) in:
Accounts payable ..................................... (872) (2,646) 81
Accrued interest ..................................... 5,525 1,061 4,508
Accrued expenses and other ........................... (3,184) (5,427) (564)
------ ------ ----
Net cash provided by operating activities ............ 115,528 72,065 62,873
------- ------ ------
Cash flows from investing activities:
Acquisition of properties .................................... (312,585) (301,931) (125,927)
Development expenditures ..................................... (62,075) (37,589) (22,168)
Development expenditures paid to an affiliate ................ (40,347) (46,481) (70,415)
Tenant improvements .......................................... (4,140) (2,792) (1,029)
Capital expenditures ......................................... (24,967) (12,325) (6,824)
Proceeds from sales of property, net of selling costs ........ 52,238 54,092 1,254
Distributions from partially owned entities .................. 32,379 788 1,047
Capital contributions to partially owned entities ............ (5,850) (141) (14)
------ ---- ---
Net cash used in investing activities ............ (365,347) (346,379) (224,076)
-------- -------- --------
Cash flows from financing activities:
Proceeds from common stock issuances, net of expenses paid ... 132,205 97,674 106,643
Proceeds from preferred stock issuance, net of expenses paid . -0- 120,549 -0-
Principal reductions of debt .................................. (31,725) (122,880) (45,798)
Proceeds from additional borrowings .......................... 173,976 175,246 179,540
Net change in revolving credit balances ...................... 57,403 68,271 (21,877)
Dividends paid to common and preferred shareholders .......... (65,367) (43,381) (35,306)
Distributions to minority partners ........................... (22,133) (17,956) (16,523)
Payment of mortgage financing cost ........................... (3,734) (1,417) (3,416)
Proceeds from dividend reinvestments ......................... 9,646 3,048 205
Other, net ................................................... (401) (3,650) (511)
---- ------ ----
Net cash provided by financing activities ............ 249,870 275,504 162,957
------- ------- -------
Increase in cash and equivalents ..................... 51 1,190 1,754
Cash and equivalents, beginning of period ...................... 4,532 3,342 1,588
----- ----- -----
Cash and equivalents, end of period ............................ $ 4,583 $ 4,532 $ 3,342
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ................. $ 46,538 $ 39,435 $ 20,077
--------- --------- ---------
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
Notes to consolidated financial statements
1. Organization and Basis of Presentation
Organization - Colonial Properties Trust (Colonial or the Company), a real
estate investment trust (REIT), was originally formed as a Maryland real estate
investment trust on July 9, 1993 and reorganized as an Alabama real estate
investment trust under a new Alabama REIT statute on August 21, 1995. The
Company is engaged in the ownership, development, management, and leasing of
multifamily housing communities, retail malls and centers, and office buildings.
The Company also owns certain parcels of land.
Federal Income Tax Status - The Company, which is considered a corporation for
federal income tax purposes, qualifies as a REIT for federal income tax purposes
and generally will not be subject to federal income tax to the extent it
distributes its REIT taxable income to its shareholders. REITs are subject to a
number of organizational and operational requirements. If the Company fails to
qualify as a REIT in any taxable year, the Company will be subject to federal
income tax on its taxable income at regular corporate rates. The Company may be
subject to certain state and local taxes on its income and property. No
provision for income taxes is included in the financial statements.
Distributions to shareholders are partially taxable to shareholders as ordinary
income and partially nontaxable to shareholders as return of capital. During
1996, 1997, and 1998 the Company's distributions had the following
characteristics: <TABLE> <CAPTION>
Distribution Ordinary Return of
Per Share Income Capital
----------------------------------------
<S> <C> <C> <C>
1996 $ 2.00 75.32% 24.68%
1997 $ 2.08 74.02% 25.98%
1998 $ 2.20 81.37% 18.63%
</TABLE>
Principles of Consolidation - The Company's consolidated financial statements
include the Company, Colonial Realty Limited Partnership (CRLP) (in which the
Company held 71.12%, 67.94%, and 67.68% general and limited partner interests at
December 31, 1998, 1997, and 1996, respectively), and Colonial Properties
Services Limited Partnership (in which CRLP holds 99% general and limited
partner interests). The minority limited partner interests in CRLP and Colonial
Properties Services Limited Partnership are included as minority interest in the
Company's consolidated financial statements.
Investments in Partially Owned Entities - Partnerships and corporations in which
the Company owns a 50% or less interest and does not control are reflected in
the consolidated financial statements as investments accounted for under the
equity method. Under this method the investment is carried at cost plus or minus
equity in undistributed earnings or losses since the date of acquisition.
Also included in investments in partnerships and partially owned entities is the
Company's 99% nonvoting, equity interest in Colonial Properties Services, Inc.
(CPSI). Colonial holds a 1% voting interest in CPSI. The Company accounts for
its 99% equity interest on the equity method. CPSI provides property management
services for third-party owned properties and administrative services to the
Company. Colonial generally reimburses CPSI for payroll and other costs incurred
in providing services to the Company.
2. Summary of Significant Accounting Policies
Recently Issued Accounting Standard - Statement of Financial Accounting
Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities, addresses the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and hedging
activity. Under SFAS 133, the Company will be required to account for derivative
financial instruments, if any, at their fair market value, and make certain
required disclosures. The Company is required to adopt SFAS 133 for periods
beginning January 1, 2000.
Land, Buildings, and Equipment - Land, buildings, and equipment is stated at the
lower of cost, less accumulated depreciation, or net realizable value. Where an
impairment of a property's value is determined to be other than temporary, an
allowance for the estimated potential loss is established to record the property
at its net realizable value. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which range from seven to
40 years. Repairs and maintenance are charged to expense as incurred.
Replacements and improvements are capitalized and depreciated over the estimated
remaining useful lives of the assets. When items of land, buildings, or
equipment are sold or retired, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is included in the results of
operations.
Undeveloped Land and Construction in Progress - Undeveloped land and
construction in progress is stated at the lower of cost or net realizable value.
The Company capitalizes all costs associated with land development including
construction period interest and property taxes.
Capitalization of Interest - The Company capitalizes interest during periods in
which property is undergoing development activities necessary to prepare the
asset for its intended use.
Cash and Equivalents - The Company includes highly liquid marketable securities
and debt instruments purchased with a maturity of three months or less in cash
equivalents.
Restricted Cash - Cash which is legally restricted as to use consists primarily
of tenant deposits.
Deferred Debt and Lease Costs - Amortization of debt costs is recorded using the
straight-line method, which approximates the effective interest method, over the
terms of the related debt. Leasing commissions and fees are amortized using the
straight-line method over the terms of the related leases.
Derivatives - The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Interest rate cap
agreements and interest rate swaps are used to reduce the potential impact of
increases in interest rates on variable-rate debt. Premiums paid for purchased
interest rate cap agreements are amortized to expense over the terms of the
caps. Unamortized premiums are included in other assets in the balance sheets.
Amounts receivable under cap agreements are accrued as a reduction of interest
expense. Payments under interest rate swap agreements are recognized as
adjustments to interest expense as incurred. Treasury lock agreements are used
by the Company's subsidiary, CRLP, to set interest rates in anticipation of
public debt offerings. Any gains or losses related to treasury locks are
included in deferred debt and lease cost on the balance sheet and amortized over
the life of the related debt to the extent that such treasury locks are
utilized. All unutilized treasury locks are expensed when their future utility
expires. All treasury locks were utilized during 1998 and 1997.
Deferred Compensation on Restricted Shares - Deferred compensation on restricted
shares relates to the issuance of restricted shares to employees of the Company.
Deferred compensation is amortized to compensation expense based on the passage
of time and certain performance criteria.
Revenue Recognition - Rental income and management fees are recognized as
earned. Anticipated losses, if any, are recognized when such amounts become
known.
Net Income Per Share - Basic net income per share is calculated by dividing the
net income available to common shareholders by the weighted average numbers of
common shares outstanding during the periods. Diluted net income per share is
calculated by dividing the net income available to common shareholders by the
weighted average numbers of common shares outstanding during the periods,
adjusted for the assumed conversion of all potentially dilutive share options.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Segment Reporting - In 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), Disclosure about Segments of an
Enterprise and Related Information. Reportable segments are identified based
upon management's approach for making operating decisions and assessing
performance of the Company. The adoption of SFAS 131 did not affect results of
operations or financial position but did require the disclosure of segment
information (see Note 7).
Software Development - The Company capitalizes certain internally developed
software costs. Costs capitalized in connection with internal software
development are amortized using the straight-line method over the estimated
useful life of the software.
Reclassifications - Certain immaterial reclassifications have been made to the
1996 and 1997 financial statements in order to conform them to the 1998
financial statement presentation.
3. Property Acquisitions and Dispositions
The Company acquired 12 properties and invested in an additional joint venture
during 1998, 25 properties during 1997, and 11 properties during 1996 at
aggregate costs of $348.6 million, $430.6 million, and $173.7 million,
respectively. The Company funded these acquisitions with cash proceeds from its
public offerings of equity (see Note 10) and debt (see Note 8), advances on bank
lines of credit, the issuance of limited partnership units in CRLP, the proceeds
received from the formation of joint ventures (see Note 6), and cash from
operations.
Effective
Acquisition
Location Date
- --------------------------------------------------------------------------------
Retail Properties:
Briarcliffe Mall .................. Myrtle Beach, SC July 1, 1996
Colonial Promenade Wekiva ......... Orlando, FL October 1, 1996
Colonial Promenade Bardmoor ....... St. Petersburg, FL October 1, 1996
Colonial Promenade
Hunter's Creek .............. Orlando, FL October 1, 1996
Colonial Shoppes Inverness ........ Birmingham, AL March 24, 1997
Beechwood Shopping Center ......... Athens, GA March 27, 1997
Brookwood Village ................. Birmingham, AL May 13, 1997
Lakewood Plaza .................... Jacksonville, FL October 1, 1997
Glynn Place Mall .................. Brunswick, GA November 1, 1997
Lakeshore Mall .................... Gainesville, GA November 1, 1997
Valdosta Mall ..................... Valdosta, GA November 1, 1997
Holly Hill Mall ................... Burlington, NC November 1, 1997
Yadkin Town Center ................ Yadkinville, NC November 1, 1997
Mayberry Mall ..................... Mount Airy, NC November 1, 1997
Quaker Village .................... Greensboro, NC November 1, 1997
Stanly Plaza ...................... Locust, NC November 1, 1997
Rivermont Plaza ................... Chattanooga, TN November 1, 1997
Staunton Mall ..................... Staunton, VA November 1, 1997
Abingdon Village .................. Abingdon, VA November 1, 1997
Village at Roswell Summit ......... Atlanta, GA December 31, 1997
Orlando Fashion Square ............ Orlando, FL May 29, 1998
Shoppes at Mansell ................ Atlanta, GA July 1, 1998
Parkway City Mall ................. Huntsville, AL December 9, 1998
Bel Air Village ................... Mobile, AL December 29, 1998
Multifamily Properties:
Colonial Village at Ashford Place . Mobile, AL April 1, 1996
Colonial Village at Hillcrest ..... Mobile, AL April 1, 1996
Colonial Grand at Spring Creek .... Macon, GA April 1, 1996
Colonial Grand at Galleria Woods .. Birmingham, AL April 15, 1996
Colonial Grand at Mountain Brook .. Birmingham, AL May 10, 1996
Colonial Village at Cahaba Heights Birmingham, AL May 10, 1996
Colonial Grand at Barrington ...... Macon, GA September 13, 1996
Colonial Village at Trussville .... Birmingham, AL April 1, 1997
Colonial Village at Timothy Woods . Athens, GA July 1, 1997
Colonial Grand at Oakleigh ........ Pensacola, FL July 1, 1997
Colonial Grand at Natchez Trace ... Jackson, MS August 1, 1997
Colonial Village at Caledon Wood .. Greenville, SC October 1, 1997
Colonial Village at Ashley Plantation Bluffton, SC May 1, 1998
Colonial Village at Haverhill ..... San Antonio, TX July 1, 1998
Colonial Village at Walton Way .... Augusta, GA July 1, 1998
Colonial Village at River Hills I . Tampa, FL July 1, 1998
Office Properties:
Riverchase Center ................. Birmingham, AL January 1, 1997
Lakeside Office Park .............. Huntsville, AL May 23, 1997
Progress Center ................... Huntsville, AL June 24, 1997
Mansell Business Park ............. Atlanta, GA July 31, 1997
Perimeter Corporate Park .......... Huntsville, AL January 1, 1998
Independence Plaza ................ Birmingham, AL January 1, 1998
Shades Brook Building ............. Birmingham, AL July 1, 1998
Mansell Overlook 200 .............. Atlanta, GA July 1, 1998
Concourse Center .................. Tampa, FL July 1, 1998
<PAGE>
Results of operations of these properties, subsequent to their respective
acquisition dates, are included in the consolidated financial statements of the
Company. The cash paid to acquire these properties is included in the statements
of cash flows. The acquisitions during 1998, 1997, and 1996 are comprised of the
following: <TABLE> <CAPTION>
(in thousands) 1998 1997 1996
- -------------- ---- ---- ----
Assets purchased:
<S> <C> <C> <C>
Land, buildings, and equipment .... $ 348,564 $ 430,614 $ 173,277
Other assets ...................... -- 4 455
- --------------------------------------------------------------------------------
348,564 430,618 173,732
Notes and mortgages assumed ........... (7,509) (74,910) (40,444)
Other liabilities assumed ............. (5,070) (8,716) (1,774)
Issuance of limited partnership units of
Colonial Realty Limited
Partnership (23,400) (45,061) (5,587)
- --------------------------------------------------------------------------------
Cash paid .............................. $ 312,585 $ 301,931 $ 125,927
- --------------------------------------------------------------------------------
</TABLE>
During 1998, Colonial contributed Orlando Fashion Square into a joint venture
equally owned by Colonial and an unrelated party. Proceeds received from this
contribution were used to fund additional acquisitions and developments. The
Company accounts for its 50% interest in the joint venture as an equity
investment (see Note 6).
The Company's unaudited pro forma results of operations, assuming these
acquisitions and disposition had been effected by the Company prior to January
1, 1997, are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31, ....... 1998 1997
---- ----
(in thousands)
<S> <C> <C>
Revenues ............................... $265,903 $250,713
- --------------------------------------------------------------
Income before minority interest ........ $ 70,884 $ 71,768
- --------------------------------------------------------------
Net income available to
common shareholders ...... $ 39,480 $ 40,109
- --------------------------------------------------------------
Net income per share -
basic and diluted ........ $ 1.51 $ 1.53
- --------------------------------------------------------------
</TABLE>
4. Land, Buildings, and Equipment
Land, buildings, and equipment consists of the following at December 31, 1998
and 1997:
<TABLE>
(in thousands) ......... 1998 1997
- -----------------------------------------------------
<S> <C> <C>
Buildings .............. $ 1,416,937 $ 1,140,504
Furniture and fixtures . 43,074 30,147
Equipment .............. 12,027 3,087
Land improvements ...... 35,580 27,343
Tenant improvements .... 18,733 15,273
- -----------------------------------------------------
1,526,351 1,216,354
Accumulated depreciation (169,522) (124,254)
- -----------------------------------------------------
1,356,829 1,092,100
Land ................... 210,012 176,332
- -----------------------------------------------------
$ 1,566,841 $ 1,268,432
=====================================================
</TABLE>
5. Undeveloped Land and Construction in Progress
During 1998, the Company completed the construction of five multifamily
development projects at a combined total cost of $77.0 million. The multifamily
development projects produced 1,260 new apartment units that were completed
during 1998 and 1997. The completed multifamily developments are as follows:
<TABLE>
<CAPTION>
Total Total
Units Cost
Completed Developments:
<S> <C> <C>
Colonial Village at River Hills II Tampa, FL 276 $14,186
Colonial Village at Inverness Birmingham, AL 84 6,631
Colonial Grand at Hunter's Creek Orlando, FL 496 33,426
Colonial Grand at Bayshore II Bradenton, FL 164 9,289
Colonial Grand at Wesleyan Macon, GA 240 13,503
- --------------------------------------------------------------------------------
1,260 $77,035
================================================================================
</TABLE>
The Company currently has 15 active expansion and development projects in
progress and various parcels of land available for expansion, construction, or
sale. During 1998, the Company completed construction on 596 apartment units
(including the remaining units completed in the projects mentioned above), and
the Company has an additional 2,978 apartment units in progress at December 31,
1998. Undeveloped land and construction in progress is comprised of the
following at December 31, 1998: <TABLE> <CAPTION>
Costs
Estimated Total Costs Capitalized
to Date
Completion(in thousands)(in thousands)
- -----------------------------------------------------------------------------------------------------
Multifamily Projects:
<S> <C> <C> <C> <C>
Colonial Grand at Inverness Lakes II (expansion) 132 1999 $ 8,900 $ 8,838
Colonial Village at Ashley Plantation (expansion) 214 1999 13,800 2,949
Colonial Grand at Edgewater II (expansion) 192 1999 12,600 12,487
Colonial Grand at Wesleyan II (expansion) 88 1999 6,200 5,945
Colonial Grand at Liberty Park 300 2000 26,218 2,924
Colonial Grand at Heather Glen 448 2000 31,234 9,800
Colonial Grand at Citrus Park 176 1999 12,300 9,482
Colonial Grand at Lakewood Ranch 288 1999 20,300 17,839
Colonial Grand at Cypress Crossing 250 1999 20,000 19,176
Colonial Grand at Madison 336 2000 23,000 4,690
Colonial Grand at Promenade 384 2000 27,878 4,320
Colonial Grand at Ridgeland 170 2000 12,400 1,454
- ----------------------------------------------------------------------------------------------
Total Multifamily Projects 2,978 214,830 99,904
- ----------------------------------------------------------------------------------------------
Retail Projects:
Colonial Promenade Trussville 386,000 2001 31,000 5,321
- ----------------------------------------------------------------------------------------------
Total Retail Projects 386,000 31,000 5,321
- ----------------------------------------------------------------------------------------------
Office Projects:
1800 International Park 149,457 1999 16,600 3,950
Colonial Center at Research Park 133,368 1999 13,000 1,373
- ----------------------------------------------------------------------------------------------
Total Office Projects 282,825 29,600 5,323
- ----------------------------------------------------------------------------------------------
Other Projects and Undeveloped Land 17,788
- ----------------------------------------------------------------------------------------------
$275,430 $128,336
==============================================================================================
</TABLE>
Interest capitalized on construction in progress during 1998, 1997, and 1996 was
$3.7 million, $4.1 million, and $3.7 million, respectively.
<PAGE>
6. Investment in Partially Owned Entities
Investment in partially owned entities at December 31, 1998 and 1997 consists of
the following:
<TABLE>
<CAPTION>
Percent
(in thousands) Owned 1998 1997
- -----------------------------------------------------------------------------
Office:
<S> <C> <C> <C>
600 Building Partnership, Birmingham, AL 33.34% $ (30) $ (8)
Anderson Block Properties Partnership,
Montgomery, AL 33.33% (24) (38)
- -----------------------------------------------------------------------------
(54) (46)
Retail:
Orlando Fashion Square, Orlando, FL 50.00% 20,241 --
Parkway Place LP, Huntsville, AL 50.00% 5,858 --
- -----------------------------------------------------------------------------
26,099 --
Other:
Colonial/Polar-BEK Management Company,
Birmingham, AL 50.00% 33 35
Colonial Properties Services, Inc.,
Birmingham, AL 99.00% (897) 696
- -----------------------------------------------------------------------------
(864) 731
- -----------------------------------------------------------------------------
$ 25,181 $ 685
=============================================================================
</TABLE>
During December 1998, the Company entered into two joint ventures. The Parkway
Place Limited Partnership owns and operates the Parkway City Mall in Huntsville,
Alabama. At December 31, 1998, Colonial had invested approximately $5.7 million
in the joint venture and had an ending net investment balance of $5.9 million.
The Orlando Fashion Square Joint Venture owns and operates the Orlando Fashion
Square in Orlando, Florida. The Company's net investment in the joint venture at
December 31, 1998 was $20.2 million. Both joint ventures have been accounted for
using the equity method.
The summarized financial information related to the significant partially owned
entities is as follows:
December 31, 1998 (in thousands)
Balance Sheet
Assets
Land, building, and equipment, net ............. $ 113,799
Construction in progress ....................... 3,369
Other assets ................................... 1,175
------------------------------------------------------------
Total assets .......................... $ 118,343
------------------------------------------------------------
Liabilities and Partners' Equity
Notes payable .................................. $ 65,000
Other liabilities .............................. 392
Partners' Equity ............................... 52,951
------------------------------------------------------------
Total liabilities and partners' capital $ 118,343
------------------------------------------------------------
Statement of Operations
Revenues ......................................... $ 246
Operating expenses ............................... (76)
Depreciation and amortization .................... (14)
- --------------------------------------------------------------
Net income .............................. $ 156
-------------------------------------------------------------
7. Segment Information
The Company is organized into, and manages its business based on the performance
of, three separate and distinct operating divisions: Multifamily, Retail, and
Office. Each division has a separate management team that is responsible for
acquiring, developing, managing, and leasing properties within each division.
The applicable accounting policies of the segments are the same as those
described in the "Summary of Significant Accounting Policies." Management
evaluates the performance of its segments and allocates resources to them based
on net operating income (NOI). NOI consists of revenues in excess of general
operating expenses, salaries and wages, repairs and maintenance, taxes,
licenses, and insurance. Segment information for the years ended December 31,
1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
(in thousands)
1998 Retail Office Multifamily Total
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Divisional revenues $117,572 $ 34,409 $104,462 $ 256,443
NOI 83,059 24,307 68,789 176,155
Divisional assets 683,042 240,161 783,097 1,706,300
1997
- -----------------------------------------------------------------
Divisional revenues $ 71,179 $ 16,224 $ 95,503 $ 182,906
NOI 51,500 11,615 62,658 125,773
Divisional assets 577,954 147,974 652,923 1,378,851
1996
- -----------------------------------------------------------------
Divisional revenues $ 45,775 $ 7,337 $ 80,914 $ 134,026
NOI 33,455 4,813 53,011 91,279
Divisional assets 306,771 32,457 595,397 934,625
</TABLE>
A reconciliation of total segment revenues to total revenues, total segment NOI
to income from operations, and total divisional assets to total assets, for the
years ended December 31, 1998, 1997, and 1996, is presented below:
<TABLE>
<CAPTION>
(in thousands)
Revenues 1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Total divisional revenues $ 256,443 $ 182,906 $ 134,026
Unallocated corporate revenues 924 1,220 855
- ----------------------------------------------------------------------------------
Total revenues $ 257,367 $ 184,126 $ 134,881
- ----------------------------------------------------------------------------------
NOI 1998 1997 1996
- ----------------------------------------------------------------------------------
Total divisional NOI $ 176,155 $ 125,773 $ 91,279
Unallocated corporate revenues 924 1,220 855
General and administrative expenses (7,675) (6,448) (4,071)
Depreciation (46,841) (31,956) (22,025)
Amortization (1,806) (1,322) (1,509)
Other (9) -- --
- ----------------------------------------------------------------------------------
Income from operations $ 120,748 $ 87,267 $ 64,529
- ----------------------------------------------------------------------------------
Assets 1998 1997 1996
- ----------------------------------------------------------------------------------
Total divisional assets $ 1,706,300 $ 1,378,851 $ 934,625
Unallocated corporate assets 49,149(1) 18,227 13,480
- ----------------------------------------------------------------------------------
Total assets $ 1,755,449 $ 1,397,078 $ 948,105
- ----------------------------------------------------------------------------------
</TABLE>
(1) Includes the Company's investment in partially owned entities of $25,181
(see Note 6).
<PAGE>
8. Notes and Mortgages Payable
Notes and mortgages payable at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- --------------------------------------------------
<S> <C> <C>
Revolving credit agreement $174,489 $117,086
Mortgages and other notes:
4.50% to 6.00% 66,305 66,305
6.01% to 7.50% 471,694 316,701
7.51% to 9.00% 179,187 175,207
9.01% to 10.25% 17,647 26,745
- --------------------------------------------------
$909,322 $702,044
--------------------------------------------------
</TABLE>
As of December 31, 1998, the Company has an unsecured bank line of credit
providing for total borrowings of up to $250 million. This line of credit
agreement bears interest at LIBOR plus 80 to 135 basis points, is renewable in
July 2000 and provides for a two-year amortization in the case of nonrenewal.
The line of credit agreement includes a competitive bid feature that will allow
the Company to convert up to $125 million under the line of credit to a fixed
rate, for a fixed term not to exceed 90 days. The credit facility is primarily
used by the Company to finance property acquisitions and development and has an
outstanding balance at December 31, 1998, of $174.5 million. The weighted
average interest rate of this short-term borrowing facility, including the
competitive bid balance, was 6.42% and 6.70% at December 31, 1998 and 1997,
respectively.
During 1998 and 1997, the Company completed five public offerings of unsecured
debt securities totaling $350 million through its subsidiary, CRLP. The proceeds
of the offerings were used to fund acquisitions, development expenditures, repay
balances outstanding on the Company's revolving credit facility, repay certain
notes and mortgages payable, and for general corporate purposes. Details
relating to these debt offerings are as follows: <TABLE>
Gross Proceeds
<CAPTION>
Date Type of Note Maturity Rate (in thousands)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1997 Medium-term January 2003 7.16% $ 50,000
July 1997 Medium-term July 2004 6.96% $ 75,000
August 1997 Medium-term August 2005 6.96 $ 25,000
September 1997 Medium-term September 2005 6.98% $ 25,000
July 1998 Senior July 2007 7.00 $175,000
</TABLE>
Colonial has entered into an interest rate cap agreement which limits debt of
$50 million to an interest rate of 8.00% through May 2, 2000. The Company paid
$227,500 for the interest rate cap, which is being amortized over the life of
the agreement. Subsequent to year-end, the Company entered into two interest
rate swap agreements. On January 4, 1999, Colonial entered into an interest rate
swap for $50 million of its line of credit at 4.97% plus 80 to 135 basis points
and on January 15, 1999, Colonial entered into an interest rate swap for $52
million of tax exempt bonds at a rate of 3.23%. Both of these interest rate swap
agreements have one-year terms and any payments made or received under the
agreements are recognized as adjustments to interest expense as incurred.
Treasury lock agreements are used by the Company's subsidiary, CRLP, to set
interest rates in anticipation of public debt offerings. Colonial is exposed to
credit losses in the event of nonperformance by the counterparties to its
interest rate cap and nonderivative financial assets but has no
off-balance-sheet credit risk of accounting loss. The Company anticipates,
however, that counterparties will be able to fully satisfy their obligations
under the contracts. Colonial does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit
standing of counterparties.
At December 31, 1998, the Company had $704.5 million in unsecured indebtedness
including balances outstanding on its bank line of credit and certain other
notes payable. The remainder of the Company's notes and mortgages payable are
collateralized by the assignment of rents and leases of certain properties and
assets with an aggregate net book value of $320.8 million at December 31, 1998.
<PAGE>
The aggregate maturities of notes and mortgages payable at December 31, 1998,
are as follows:
(in thousands)
- ---------------------------------------------
1999 $ 12,809
2000 224,308
2001 79,128
2002 1,404
2003 108,652
Thereafter 483,021
- ---------------------------------------------
$909,322
- ---------------------------------------------
Based on borrowing rates available to the Company for notes and mortgages
payable with similar terms, the estimated fair value of the Company's notes and
mortgages payable at December 31, 1998 and 1997 was approximately $912.6 million
and $711.0 million, respectively.
Certain loan agreements of the Company contain restrictive covenants which,
among other things, require maintenance of various financial ratios. At December
31, 1998, the Company was in compliance with these covenants.
Certain shareholders and trustees of the Company have guaranteed indebtedness of
the Company totaling $1.5 million at December 31, 1998. The Company has
indemnified these individuals from their guarantees of this indebtedness.
Certain partners of the Company's subsidiary, CRLP, have guaranteed indebtedness
of the Company totaling $33.5 million at December 31, 1998. These individuals
have not been indemnified by the Company.
9. Capital Structure
Company ownership is maintained through common shares of beneficial interest
(Common Shares) and minority interest in the Operating Partnership (Units).
Common shareholders represent public equity owners and unitholders represent
minority interest owners. Each Unit may be redeemed for either one Common Share
or, at the option of the Company, cash equal to the fair market value of a
Common Share at the time of redemption. When a unitholder redeems a Unit for a
Common Share or cash, minority interest is reduced and the Company's interest in
the Operating Partnership is increased. In addition, the Company has acquired
properties since its formation by issuing distribution paying and
nondistribution paying Units. The nondistribution paying Units convert to
distribution paying Units at various dates subsequent to their original
issuance. At December 31, 1998 and 1997, 10,613,966 and 9,976,419 units were
outstanding, respectively, all of which were distribution paying Units.
In November 1997, the Company completed its first public offering of preferred
stock totaling 5,000,000 preferred shares of beneficial interest (Preferred
Shares). The Series A Preferred Shares pay a quarterly dividend at 8.75% per
annum and may be called by the Company on or after November 6, 2002. The
Preferred Shares have no stated maturity, sinking fund or mandatory redemption
and are not convertible into any other securities of the Company. The preferred
shares have a liquidation preference of $25.00 per share. In October 1998, the
Company's Board of Trustees approved a Shareholder Rights Plan (the Rights
Plan). Under this plan, the Board declared a dividend of one Right for each
Common Share outstanding on the record date. The Rights become exercisable only
if an individual or group acquires 15% or more beneficial ownership in the
Company. Ten days after a public announcement that an individual or group has
become the beneficial owner of 15% or more of the Common Shares, each holder of
a Right, other than the acquiring individual or group, would be entitled to
purchase one Common Share for each Right outstanding at one-half of the
Company's current market price. Also, if the Company is acquired in a merger, or
if 50% or more of the Company's assets are sold in one or more related
transactions, each Right would entitle the holder thereof to purchase common
stock of the acquiring company at one-half of the then-current market price of
the acquiring company's common stock.
10. Equity Offerings
During 1998, 1997 and 1996, the Company completed eight public offerings of
common stock totaling 12,575,070 common shares of beneficial interest and one
public offering of preferred stock totaling 5,000,000. The proceeds of the
offerings were used to fund acquisition and development expenditures, repay
balances outstanding on the Company's revolving credit agreement, repay certain
notes and mortgages payable, and for general corporate purposes. Details
relating to these equity offerings are as follows:
<TABLE>
<CAPTION>
(in thousands)
-------------------------------
Number of Price Per Gross Offering Net
Offering Shares Share Proceeds Costs Proceeds
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January 1996 Common 4,600,000 $ 24.63 $ 113,275 $ 6,632 $ 106,643
January 1997 Common 1,500,000 $ 29.88 $ 44,812 $ 1,457 $ 43,355
July 1997 Common 1,700,000 $ 30.94 $ 52,594 $ 2,945 $ 49,649
November 1997 Preferred 5,000,000 $ 25.00 $ 125,000 $ 4,451 $ 120,549
December 1997 Common 165,632 $ 30.19 $ 5,000 $ 330 $ 4,670
February 1998 Common 375,540 $ 30.00 $ 11,266 $ 627 $ 10,639
March 1998 Common 806,452 $ 31.00 $ 25,000 $ 1,389 $ 23,611
March 1998 Common 381,046 $ 31.00 $ 11,812 $ 656 $ 11,156
April 1998 Common 3,046,400 $ 30.13 $ 91,773 $ 4,973 $ 86,800
</TABLE>
11. Share Option and Restricted Share Plans
In September 1993 the Company adopted an Employee Share Option and Restricted
Share Plan (the Employee Plan) designed to attract, retain, and motivate
executive officers of the Company and other key employees. The Employee Plan, as
amended in April 1998, authorizes the issuance of up to 3,200,000 common shares
of beneficial interest (as increased from time to time to equal 10% of the
number of common shares and Operating Partnership units outstanding) pursuant to
options or restricted shares granted or issued under this plan, provided that no
more than 750,000 restricted shares may be issued. In connection with the grant
of options under the Employee Plan, the Executive Compensation Committee of the
Board of Trustees determines the option exercise period and any vesting
requirements. In September 1993 the Company also adopted a Trustee Share Option
Plan (the Trustee Plan). The Trustee Plan authorizes the issuance of up to
125,000 options to purchase common shares of beneficial interest. In April 1997,
the Company increased the number of options to purchase common shares authorized
under the Trustee Plan from 125,000 common shares to 500,000 common shares. In
April 1997, the Company also adopted a Non-Employee Trustee Share Plan (Share
Plan). The Share Plan permits non-employee trustees of the Company to elect to
receive common shares in lieu of all or a portion of their annual trustee fees,
board fees and committee fees. The Share Plan authorizes the issuance of 50,000
common shares under the Plan. The Company issued 4,010 common shares pursuant to
the Share Plan during 1998. In October 1997 the Company adopted an Employee
Share Purchase Plan (Purchase Plan). The Purchase Plan permits eligible
employees of the Company, through payroll deductions, to purchase common shares
at a 5% discount to the market price. The Purchase Plan has no limit on the
number of common shares that may be issued under the plan. The Company issued
1,119 common shares pursuant to the Purchase Plan during 1998.
The Company applies Accounting Principles Board Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation
expense has been recognized for its stock option plans. Had compensation expense
for the Company's stock option plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the methods
prescribed in Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(in thousands, except per share data)
For the Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Net income available to common shareholders:
<S> <C> <C> <C>
As reported $ 39,284 $ 30,277 $ 27,506
Pro forma $ 39,205 $ 30,020 $ 27,412
- --------------------------------------------------------------------------------
Net income per share - basic and diluted:
As reported $ 1.59 $ 1.53 $ 1.58
Pro forma $ 1.59 $ 1.52 $ 1.57
- --------------------------------------------------------------------------------
</TABLE>
The Company uses the Black-Scholes pricing model to calculate the fair values of
the options awarded, which are included in the pro forma results above. The
following assumptions were used to derive the fair values: a 10-year option
term; a volatility rate of 26.13%, 15.24% and 13.16% for 1998, 1997 and 1996,
respectively; a risk-free rate of return of 4.93%, 5.86% and 5.83% for 1998,
1997 and 1996, respectively; and a dividend yield of 7.62%, 7.11% and 7.92% for
1998, 1997 and 1996, respectively.
The Company issued 900, 8,450, and 7,800 restricted shares under the Employee
Plan during 1998, 1997, and 1996, respectively. The value of outstanding
restricted shares is being charged to compensation expense based upon the
earlier of satisfying the vesting period (eight years) or satisfying certain
performance targets. Option activity under both the Employee Plan and the
Trustee Plan combined is presented in the table below: <TABLE> <CAPTION>
Options Outstanding
----------------------
Shares Weighted
Available Average
for Future Price Per
Option Grant Shares Share
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1995 643,105 156,895 $ 23.000
Options granted (103,450) 103,450 24.371
- ------------------------------------------------------------------------
Balance, December 31, 1996 539,655 260,345 23.540
Addition to shares authorized 375,000
Options granted (119,000) 119,000 31.113
Options terminated 12,255 (12,255) 24.781
Options exercised (24,130) 23.263
- ------------------------------------------------------------------------
Balance, December 31, 1997 807,910 342,960 26.136
Addition to shares authorized 2,525,000
Options granted (50,000) 50,000 30.294
Options terminated 12,362 (12,362) 28.959
Options exercised (15,384) 23.359
- ------------------------------------------------------------------------
Balance, December 31, 1998 3,295,272 365,214 $ 26.733
========================================================================
</TABLE>
All options granted to date have a term of 10 years and may be exercised in
installments of one-third of the total number of options issued to any
individual on each of the first three anniversary dates of the grant of the
option. The balance of options that were exercisable totaled 213,691, 132,345,
and 78,425 at December 31, 1998, 1997, and 1996, respectively.
12. Employee Benefits
Employees of the Company and CPSI participate in a noncontributory defined
benefit pension plan designed to cover substantially all employees. Pension
expense includes service and interest costs adjusted by actual earnings on plan
assets and amortization of prior service cost and the transition amount. The
benefits provided by this plan are based on years of service and the employee's
final average compensation. The Company's policy is to fund the minimum required
contribution under ERISA and the Internal Revenue Code.
The table below presents a summary of pension plan status as of
December 31, 1998 and 1997, as it relates to the employees of the Company and
CPSI.
<TABLE>
<CAPTION>
(amounts in thousands) 1998 1997
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
including vested benefits of $1,193 and $828
at December 31, 1998 and 1997, respectively $1,368 $ 961
Actuarial present value of projected benefit obligations
at year end $2,593 $1,957
Fair value of assets at year end $ 981 $ 861
Accrued pension cost $ 868 $ 536
Net pension cost for the year $ 393 $ 310
</TABLE>
<PAGE>
Actuarial assumptions used in determining the actuarial present value of
accumulated benefit obligations at January 1, 1998, are as follows:
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Weighted-average interest rate 6.75% 7.25%
- --------------------------------------------------------------------------------
Increase in future compensation levels 4.00% 4.25%
</TABLE>
The Company and CPSI participate in a salary reduction profit sharing
plan covering substantially all employees. This plan provides, with certain
restrictions, that employees may contribute a portion of their earnings with the
Company and CPSI matching one-half of such contributions, solely at the Company
and CPSI's discretion. Contributions by the Company and CPSI were $178,000,
$159,000 and $164,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
13. Leasing Operations
The Company is in the business of leasing and managing office, retail,
and multifamily property. For properties owned by the Company, minimum rentals
due in future periods under noncancelable operating leases extending beyond one
year at December 31, 1998, are as follows:
(in thousands)
-----------------
1999 $ 107,651
2000 90,435
2001 77,498
2002 67,999
2003 55,640
Thereafter 228,509
-----------------
$ 627,732
=================
The noncancelable leases are with tenants engaged in retail and office
operations in Alabama, Georgia, Florida, North Carolina, South Carolina,
Tennessee, and Virginia. Performance in accordance with the lease terms is in
part dependent upon the economic conditions of the respective areas. No
additional credit risk exposure relating to the leasing arrangements exists
beyond the accounts receivable amounts shown in the December 31, 1998 balance
sheet. Leases with tenants in multifamily properties are generally for one year
or less and are thus excluded from the above table. Substantially all of the
Company's land, buildings, and equipment represent property leased under the
above and other short-term leasing arrangements.
Rental income for 1998, 1997, and 1996 includes percentage rent of $4.0
million, $2.2 million, and $1.8 million, respectively. This rental income was
earned when certain retail tenants attained sales volumes specified in their
respective lease agreements.
14. Related Party Transactions
Colonial has generally used affiliated construction companies to manage
and oversee its development projects. The Company paid $40.0 million, $41.3
million, and $42.6 million ($37.3 million, $39.8 million, and $41.2 million of
which was subsequently then paid to unaffiliated subcontractors, respectively)
for property development costs to Lowder Construction Company, Inc., a
construction company owned by The Colonial Company ("TCC") (an affiliate of
certain shareholders, trustees and minority interest holders), during the years
ended December 31, 1998, 1997, and 1996, respectively. The Company had
outstanding construction invoices and retainage payable to Lowder Construction
Company, Inc. totaling $4.3 million and $2.3 million at December 31, 1998 and
1997, respectively. The Company also paid $0.4 million, $5.2 million, and $27.9
million for property development costs to two construction companies owned by
three trustees during the years ended December 31, 1998, 1997, and 1996,
respectively. The Company had outstanding construction invoices and retainage
payable to these construction companies totaling $1.2 million at December 31,
1998. There were no outstanding construction invoices and retainage payable to
these construction companies at December 31, 1997.
Colonial Commercial Investments, Inc. ("CCI"), which is owned by
trustees James K. Lowder and Thomas H. Lowder has guaranteed indebtedness
totaling $1.3 million at December 31, 1998 for Anderson Block Properties, which
is a partnership accounted for by the Company under the equity method (listed in
Note 6). The Company has indemnified CCI from its guarantees of this
indebtedness.
On July 1, 1998, the Company acquired a 79.8% interest in Colonial
Village at Haverhill (formerly Haverhill Apartments). The remaining 20.2%
interest in this property was acquired by entities that are owned by a trustee
of the Company. The minority owner's operating results will be included in
"Minority interest in income of CRLP" in the consolidated statement of income.
In connection with the Riverchase Center acquisition, the Company
initially acquired a 73% interest in a portion of the office complex. Effective
November 1, 1997, the Company purchased the remaining 27% interest in the
property by issuing 114,798 limited partnership units in Colonial Realty Limited
Partnership ("CRLP Units") to the seller. The seller is a trustee of the
Company.
In November 1997, the Company purchased Polar BEK's 50% interest in
Polar BEK/Colonial Partnership I (a partnership previously accounted for under
the equity method of accounting), a partnership which owned a 168,000 square
foot office building in Birmingham for $7.4 million. This purchase increased the
Company's ownership from 50% to 100%.
Following is a summary of property acquisitions from entities for which
trustees of the Company are involved as a partner or shareholder:
<TABLE>
<CAPTION>
Date Property and Land Acquired Purchase Price Units Issued
- ----------------------- --------------------------------------- --------------------- ----------------------------
<S> <C> <C> <C>
November 1998 Colonial Center at Research Park $1.0 million 36,647 CRLP Units
September 1998 1800 International Park $1.8 million(1)
October 1998 Colonial Grand at Promenade $1.5 million 34,700 CRLP Units
July 1998 Mansell Overlook 200 $27.7 million 396,365 CRLP Units
July 1998 Shoppes at Mansell $3.7 million 76,809 CRLP Units
March 1997 Colonial Shoppes Inverness $3.0 million 16,303 CRLP Units
April 1997 Colonial Village at Trussville $20.5 million 57,072 CRLP Units
July 1997 Colonial Village at Timothy Woods $12.8 million 27,275 CRLP Units
August 1997 Colonial Grand at Inverness Lakes II $0.5 million 10,822 CRLP Units
December 1997 Village at Roswell Summit $3.0 million 34,777 CRLP Units
</TABLE>
(1) In connection with purchase, the Company issued a $1.8 million note payable
to a related entity.
During 1997 the Company, through CPSI, exercised options to purchase
land from a related party in the amount of $366,000. As of December 31, 1998,
all options to purchase land from a related party had expired. In December 1997,
CPSI acquired a parcel of land from CCI and sold the land, along with an
adjoining parcel of land, to an unaffiliated third party for a net gain of
$60,000. Also in December 1997, CPSI sold a separate parcel of land to CCI,
which resulted in a net gain of $120,000.
The Company and its subsidiaries provided certain services to and
received certain services from related entities which resulted in the following
income (expense) included in the accompanying statements of income:
<TABLE>
(Amounts in thousands)
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
Rental income $1,027 $879 $758
Management/leasing fee income 289 368 356
Insurance brokerage expense (131) (182) (187)
Rental expense 0 (156) (211)
</TABLE>
<PAGE>
15. Net Income Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
(Amounts in thousands,
except per share data)
-----------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted net
income per share - net income
available to common shareholders $ 39,284 $ 30,277 $ 27,506
============ =========== ===========
Denominator:
Denominator for basic net income per
share - weighted average common shares 24,641 19,808 17,378
Effect of dilutive securities:
Trustee and employee stock options 37 46 17
============ =========== ===========
Denominator for diluted net income per
shares - adjusted weighted average
common shares 24,678 19,854 17,395
============ =========== ===========
Basic and Diluted net income per share $ 1.59 $ 1.53 $ 1.58
============ =========== ===========
</TABLE>
Options to purchase 169,000 Common Shares at a weighted average exercise price
of $30.83 per share were outstanding during 1998 but were not included in the
computation of diluted net income per share because the options' exercise price
was greater than the average market price of the common shares and, therefore,
the effect would be antidilutive.
16. Subsequent Event
On January 23, 1999, the Board of Trustees declared a cash distribution
to shareholders of the Company and partners of Colonial Realty Limited
Partnership in the amount of $.58 per share and per partnership unit, totaling
$21.3 million. The distribution was made to shareholders and partners of record
as of February 3, 1999, and was paid on February 10, 1999.
17. Revision of Prior Financial Statements
The accompanying consolidated financial statements for 1998 have been
revised to reflect an adjustment for the application of dividends paid on the
preferred shares of beneficial interest that were issued by the Company in
November 1997. The effect of the adjustment is to apply a weighted-average pro
rata portion of the preferred dividends to the minority interest in income of
CRLP, resulting in a decrease in the minority interest in income of CRLP of
approximately $3.2 million. Consequently, for the year ended December 31, 1998
net income and net income available to common shareholders have been increased
by approximately $3.2 million and net income per common share has been increased
by $0.13.
Additionally, the unaudited quarterly financial information has been revised as
reflected in Note 18.
<PAGE>
18. Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 1998 and 1997:
<TABLE>
1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
(Amounts in thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $58,310 $59,583 $68,162 $71,292
Income before minority interest 14,045 16,913 17,201 18,528
Minority interest (1) 3,607 4,293 4,309 4,256
Net income (1) 10,438 12,620 12,892 14,272
Preferred Dividends (2,734) (2,735) (2,735) (2,734)
Net income available to common
shareholders (1) $7,704 $9,885 $10,157 $11,538
Net income per share:
Basic (1) $0.36 $0.40 $0.39 $0.44
Diluted (1) $0.36 $0.40 $0.39 $0.44
Weighted average common
shares outstanding 21,411 24,984 26,000 26,104
</TABLE>
(1) For 1998, minority interest reflects a decrease and net income and net
income available to common shareholders reflect an increase for the adjustment
described in Note 17 of $872, $829, $816 and $737 for the first, second, third,
and fourth quarters, respectively. Additionally, basic and diluted net income
per share amounts reflect an increase of $0.04, $0.03, $0.03 and $0.02 for the
first, second, third and fourth quarters, respectively.
<TABLE>
1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
(Amounts in thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $39,170 $42,823 $47,479 $54,654
Income before minority interest 9,905 10,349 8,207 17,847
Minority interest 3,092 3,209 2,531 5,528
Net income 6,813 7,140 5,676 12,319
Preferred Dividends -0- -0- -0- 1,671
Net income available to common
shareholders $6,813 $7,140 $5,676 $10,648
Net income per share:
Basic $0.37 $0.37 $0.28 $0.51
Diluted $0.36 $0.37 $0.28 $0.51
Weighted average common
shares outstanding 18,657 19,195 20,372 20,977
</TABLE>
<PAGE>
Item 14. Exhibits, Financial Schedules, and Reports of Form 8-K
14(a)(1) and (2) Financial Statements and Schedules
Index to Financial Statements and Financial Statement Schedules
Financial Statements:
The following financial statements of the Company are included herein:
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended December 31,
1998, 1997, and 1996
Consolidated Statements of Shareholder's Equity for the years ended
December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
Financial Statement Schedule:
Schedule III Real Estate and Accumulated Depreciation
Report of Independent Accountants
All other schedules have been omitted because the required information
of such other schedules is not present in amounts sufficient to require
submission of the schedule or because the required information is included in
the consolidated financial statements.
14(a)(3) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule (EDGAR Version Only)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on May
10, 1999.
Colonial Properties Trust
By:/s/ Thomas H. Lowder
Thomas H. Lowder
Chairman of the Board,
President, and
Chief Executive Officer
<PAGE>
Report of Independent Accountants on
Financial Statements and Financial Statement Schedule
To the Board of Trustees and Shareholders of
Colonial Properties Trust
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 32 after the restatement described in Note
17 present fairly, in all material respects, the financial position of Colonial
Properties Trust and subsidiaries(the "Company") at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(2) on page 32
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers L.L.P.
PricewaterhouseCoopers L.L.P.
Birmingham, Alabama
January 13, 1999, except for Notes 16 and 17,
as to which the date is April 21, 1999
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Colonial Properties Trust on Form S-8 related to certain restricted shares and
stock options filed on September 29, 1994; Form S-8 related to the Non-Employee
Trustee Share Plan filed on May 15, 1997; Form S-8 related to the Employee Share
Purchase Plan filed on May 15, 1997; Form S-8 related to changes to First
Amended and Restated Employee Share Option and Restricted Share Plan and the
Non-Employee Trustee Share Option Plan filed on May 15, 1997; Form S-3 related
to the Shelf Registration filed on November 20, 1997; Form S-3 related to the
Dividend Reinvestment Plan filed on April 11, 1995, as amended; and Form S-8
related to the registration of common shares issuable under the Colonial
Properties Trust 401(K)/Profit-Sharing Plan filed on October 15, 1996, of our
report dated January 13, 1999, except for Notes 16 and 17, as to which the date
is April 21, 1999, on our audits of the consolidated financial statements and
financial statement schedules of Colonial Properties Trust as of December 31,
1998 and 1997, and for the years ended December 31, 1998, 1997, and 1996, which
report is included in this Form 10-K/A.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
May 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,583
<SECURITIES> 0
<RECEIVABLES> 9,428
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,736,363
<DEPRECIATION> (169,522)
<TOTAL-ASSETS> 1,755,449
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
50
<COMMON> 261
<OTHER-SE> 610,136
<TOTAL-LIABILITY-AND-EQUITY> 1,755,449
<SALES> 257,367
<TOTAL-REVENUES> 257,367
<CGS> 136,619
<TOTAL-COSTS> 136,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,063
<INCOME-PRETAX> 67,088
<INCOME-TAX> 0
<INCOME-CONTINUING> 67,088
<DISCONTINUED> 0
<EXTRAORDINARY> (401)
<CHANGES> 0
<NET-INCOME> 39,284
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
</TABLE>
