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Previous: TIMBER LODGE STEAKHOUSE INC, 10QSB, 1997-05-12 |
Next: SINCLAIR BROADCAST GROUP INC, 10-Q, 1997-05-12 |
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/x/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
/ / Transition pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
COMMISSION FILE NUMBER 1-12616
SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland 38-2730780
(State of Incorporation) (I.R.S. Employer Identification No.)
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (810) 932-3100
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
15,959,509 shares of Common Stock, $.01 par value as of April 30, 1997
Page 1 of 13
<PAGE> 2
SUN COMMUNITIES, INC.
INDEX
___________
<TABLE>
<CAPTION>
PAGES
-----
PART I
- ------
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II
Item 5. Ratios of Earnings to Fixed Charges 12
Item 6.(a) Exhibits required by Item 601 of Regulation S-K 12
Item 6.(b) Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
SUN COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
__________
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ -----------
<S> <C> <C>
Investment in rental property, net $ 562,955 $ 558,278
Cash and cash equivalents 10,552 9,236
Investment in Sun Home Services, Inc. ("SHS") 9,592 5,103
Other assets 12,864 12,439
------------ -----------
Total assets $ 595,963 $ 585,056
============ ===========
LIABILITIES AND EQUITY
Liabilities:
Debt $ 185,000 $ 185,000
Accounts payable and accrued expenses 10,899 7,718
Deposits and other liabilities 9,487 9,123
Distributions payable 9,113 --
------------ -----------
Total liabilities 214,499 201,841
------------ -----------
Minority interests 81,136 82,283
------------ -----------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued
Common stock, $.01 par value, 100,000 shares
authorized, 15,700 and 15,389 issued and
outstanding in 1997 and 1996, respectively 157 154
Paid-in capital 336,527 328,321
Officers' notes (9,173) (9,173)
Distributions in excess of accumulated earnings (27,183) (18,370)
------------ -----------
Total stockholders' equity 300,328 300,932
------------ -----------
Total liabilities and equity $ 595,963 $ 585,056
============ ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE> 4
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenues:
Rental income $ 22,638 $ 11,995
Other income 755 447
--------- --------
Total revenues 23,393 12,442
--------- --------
Expenses:
Property operating and maintenance 5,147 2,621
Real estate taxes 1,863 868
General and administrative 1,078 699
Depreciation and amortization 4,821 2,760
Interest 3,445 2,038
--------- --------
Total expenses 16,354 8,986
--------- --------
Income before minority interests 7,039 3,456
Less income allocated to minority interests:
Preferred OP Units 626 --
Common OP Units 845 519
--------- --------
Net income $ 5,568 $ 2,937
========= ========
Earnings per weighted average common
share outstanding $ .36 $ .29
========= ========
Distributions declared per common share
outstanding $ .47 $ .455
========= ========
Weighted average common shares outstanding 15,632 10,013
========= ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,568 $ 2,937
Adjustments to reconcile net income to net
cash provided by operating activities:
Income allocated to minority interests 845 519
Depreciation and amortization costs 4,821 2,760
Deferred financing costs 39 113
Increase in prepaid expenses and other assets (669) (27)
Increase (decrease) in accounts payable and
other liabilities 4,171 (361)
---------- ----------
Net cash provided by operating activities 14,775 5,941
---------- ----------
Cash flows from investing activities:
Investment in rental properties (9,277) (1,577)
Investment in SHS (4,489) 70
----------- ----------
Net cash used in investing activities (13,766) (1,507)
---------- ----------
Cash flows from financing activities:
Distributions (7,886) (5,211)
Proceeds from borrowings -- 4,524
Repayments on borrowings -- (370)
Payments for deferred financing costs (16) (35)
Stock options and dividend reinvestment plan 8,209 765
---------- ----------
Net cash provided by (used in) financing
activities 307 (327)
---------- ----------
Net increase in cash and cash equivalents 1,316 4,107
Cash and cash equivalents, beginning of period 9,236 121
---------- ----------
Cash and cash equivalents, end of period $ 10,552 $ 4,228
========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
5
<PAGE> 6
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION: These unaudited condensed consolidated
financial statements of Sun Communities, Inc., a Maryland corporation (the
"Company"), have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the financial statements and notes thereto of the Company as of December 31,
1996. The following notes to consolidated financial statements present interim
disclosures as required by the SEC. The accompanying consolidated financial
statements reflect, in the opinion of management, all adjustments necessary for
a fair presentation of the interim financial statements. All such adjustments
are of a normal and recurring nature. Certain reclassifications have been made
to the prior period financial statements to conform with current period
presentation.
2. RENTAL PROPERTY: The following summarizes rental property (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Land $ 59,809 $ 58,943
Land improvements and buildings 518,856 510,726
Furniture, fixtures, equipment 10,477 9,826
Property under development 8,948 9,318
--------------- --------------
598,090 588,813
Accumulated depreciation (35,135) (30,535)
--------------- --------------
Rental property, net $ 562,955 $ 558,278
=============== ==============
</TABLE>
3. DEBT:
The following table sets forth certain information regarding debt at
March 31, 1997 (in thousands):
<TABLE>
<S> <C>
Secured term loan, interest at LIBOR
plus 1.50%, due November 1, 1997 $ 35,000
Senior notes, interest at 7.375%, due
May 1, 2001 65,000
Senior notes, interest at 7.625%, due
May 1, 2003 85,000
-----------
$ 185,000
===========
</TABLE>
6
<PAGE> 7
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
4. OTHER INCOME:
The components of other income are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
1997 1996
----------- -----------
<S> <C> <C>
Interest:
Notes and mortgages $ 436 $ 366
Other 124 39
Other property revenues 152 112
Equity earnings (loss) - SHS 43 (70)
----------- -----------
$ 755 $ 447
========== ===========
</TABLE>
7
<PAGE> 8
SUN COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________
OVERVIEW
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and Notes thereto. Capitalized terms are used as defined
elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 1997 and 1996
For the three months ended March 31, 1997, net income before minority
interests increased by 103.7 percent from $3.5 million to $7.0 million,
when compared to the three months ended March 31, 1996. The increase was
due to increased revenues of $10.9 million while expenses increased by $7.4
million.
Rental income increased by $10.6 million from $12.0 million to $22.6 million or
88.7 percent, due to acquisitions ($9.7 million), lease up of sites ($0.3
million) and increases in rents and other community revenues ($0.6 million).
Other income increased by $.3 million from $.4 million to $.7 million or 68.9
percent due primarily to increased interest income and improved results at SHS.
Property operating and maintenance increased by $2.5 million from $2.6 million
to $5.1 million or 96.4 percent due primarily to acquisitions ($2.2 million).
Real estate taxes increased by $1.0 million from $.9 million to $1.9 million or
114.6 percent due primarily to acquisitions ($.9 million).
General and administrative expenses increased by $.4 million from $.7 million
to $1.1 million or 54.2 percent due primarily to increased staffing to manage
the growth of the company. General and administrative expenses as a percentage
of rental income declined from 5.8 percent to 4.8 percent of rental revenues as
a result of economies of scale resulting from the company's growth.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $7.0 million from $8.3 million to $15.3 million or 85.4 percent.
EBITDA decreased as a percentage of revenues from 66.3 percent to 65.4 percent.
Depreciation and amortization increased by $2.0 million from $2.8 million to
$4.8 million or 74.7 percent due primarily to acquisitions.
Interest expense increased by $1.4 million from $2.0 million to $3.4 million or
69.0 percent primarily due to increased average debt outstanding.
8
<PAGE> 9
SUN COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of and for
the three months ended March 31, 1997 and 1996. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1996. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The table excludes the
1,200 sites where the Company's interest is in the form of a shared
appreciation mortgage note.
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
---------------- -------------------
1997 1996 1997 1996
-------- --------- --------- --------
<S> <C> <C>
Property revenues, including other $ 13,007 $ 12,107 $ 22,790 $ 12,107
--------- ---------- ---------- ---------
Property operating expenses:
Property operating and maintenance 2,859 2,621 5,147 2,621
Real estate taxes 964 868 1,863 868
--------- ---------- ---------- ---------
Property operating expenses 3,823 3,489 7,010 3,489
--------- ---------- ---------- ---------
Property EBITDA $ 9,184 $ 8,618 $ 15,780 $ 8,618
========= ========== ========== =========
Number of properties 52 52 84 52
Developed sites 17,400 16,900 30,000 16,900
Occupied sites 16,370 15,969 27,458 15,969
Occupancy % 94.1% 94.5% 94.7%(1) 94.5%
Weighted average monthly rent per site $ 250 $ 240 $ 254 $ 240
Sites available for development 1,889 2,368 3,552 2,368
Sites in development 481 412 849 412
</TABLE>
(1)
Occupancy % relates to manufactured housing sites, excluding recreational
vehicle sites.
On a same property basis, property revenues increased by $.9 million from $12.1
million to $13.0 million, or 7.4 percent, due primarily to increases in rents
and occupancy related charges including water and property tax pass through.
Also contributing to revenue growth was the increase of 401 leased sites at
March 31, 1997 compared to March 31, 1996.
Property operating expenses increased by $.3 million from $3.5 million to $3.8
million, or 9.6 percent, due to increased occupancies and costs and increases
in assessments and millage rates by local taxing authorities. Property EBITDA
increased by $.6 million from $8.6 million to $9.2 million, or 6.6 percent.
Sites available for development in the total portfolio increased by 1,184 from
2,368 to 3,552 with 778 sites added in conjunction with acquisitions in
Michigan, Florida and Indiana, and 885 in new communities under development in
Texas and Michigan.
9
<PAGE> 10
SUN COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1.3 million to $10.5 million at March
31, 1997 compared to $9.2 million at December 31, 1996 primarily because cash
provided by operating and financing activities exceeded cash used in investing
activities.
Net cash provided by operating activities increased by $8.8 million to $14.8
million for the three months ended March 31, 1997 compared to $6.0 million for
the same period in 1996. $5.0 million of this increase was due to increases in
net income before depreciation and amortization and minority interests with the
remaining balance attributable to changes in working capital.
Net cash used in investing activities was $13.8 million for the three months
ended March 31, 1997 compared to $1.5 million for the same period in 1996. $7.7
million of this increase was due to acquisition related activities with the
remaining balance attributable to the Company's investment in SHS.
Net cash provided by financing activities was $.3 million for the three months
ended March 31, 1997 and net cash used in financing activities for the three
months ended March 31, 1996 was $.3 million. The change was primarily due to a
$7.4 million increase in proceeds from sale of common stock pursuant to the
Company's Dividend Reinvestment Plan offset by a $4.5 million decrease in
proceeds from borrowings and a $2.7 million increase in distributions paid.
The Company expects to meet its short-term liquidity requirements generally
through its working capital provided by operating activities and proceeds from
the Company's Dividend Reinvestment Plan. The Company considers these sources
to be adequate and anticipates they will continue to be adequate to meet
operating requirements, capital improvements, investment in expansions, and
payment of distributions by the Company in accordance with REIT requirements in
both the short and long term.
The Company expects to meet certain long-term liquidity requirements such as
scheduled debt maturities and property acquisitions through the issuance of
equity or debt securities, or interests in the Sun Communities Operating
Limited Partnership. The Company can also meet these requirements by utilizing
its $75 million line of credit which bears interest at LIBOR plus 1.25%
(effective May 1 1997) and is due November 1, 1999.
At March 31, 1997, the Company's debt to total market capitalization
approximated 23% (assuming conversion of all Common and Preferred OP Units to
shares of common stock), with a weighted average maturity of approximately 4.3
years and a weighted average interest rate of 7.4%.
Recurring capital expenditures approximated $.8 million for the three months
ended March 31, 1997.
10
<PAGE> 11
SUN COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________
OTHER
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as "net income (computed in accordance with
generally accepted accounting principles) excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures."
Industry analysts consider FFO to be an appropriate supplemental measure of the
operating performance of an equity REIT primarily because the computation of
FFO excludes historical cost depreciation as an expense and thereby facilitates
the comparison of REITs which have different cost bases in their assets.
Historical cost accounting for real estate assets implicitly assumes that the
value of real estate assets diminishes predictably over time, whereas real
estate values have instead historically risen or fallen based upon market
conditions. FFO does not represent cash flow from operations as defined by
generally accepted accounting principles and is a supplemental measure of
performance that does not replace net income as a measure of performance or net
cash provided by operating activities as a measure of liquidity. In addition,
FFO is not intended as a measure of a REIT's ability to meet debt principal
repayments and other cash requirements, nor as a measure of working capital.
The following table calculates FFO for the periods ended March 31, 1997 and
1996:
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
1997 1996
----------------
<S> <C> <C>
Income before allocation to minority
interests $ 7,039 $ 3,456
Add depreciation and amortization, net
of corporate office depreciation 4,791 2,745
Deduct distribution to Preferred OP Units (626) --
---------- ----------
Funds from operations $ 11,204 $ 6,201
========== ==========
Weighted average shares and common
OP units outstanding 18,005 11,766
========== ==========
FFO, per share/unit $ 0.62 $ 0.53
========== ==========
</TABLE>
11
<PAGE> 12
PART II
ITEM 5. - RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the years December 31,
1992, 1993, 1994, 1995 and 1996, and the three months ended March 31, 1997 were
1.05:1, 1.05:1, 2.79:1, 3.03:1, 2.49:1, and 2.52:1, respectively.
ITEM 6.(a) - EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT NO. DESCRIPTION
----------- -----------
12.1 Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
ITEM 6.(b) - REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the period covered by
this Form 10-Q.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 9, 1997
SUN COMMUNITIES, INC.
BY: /s/ Gary A. Shiffman
---------------------
Gary A. Shiffman, President
BY: /s/ Jeffrey P. Jorissen
------------------------
Jeffrey P. Jorissen, Chief
Financial Officer and
Secretary
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
FILED NUMBER
EXHIBIT NO. DESCRIPTION HEREWITH HEREIN
- ----------- ----------- -------- ------
<S> <C> <C>
12.1 Ratio of Earnings to Fixed Charges X
27 Financial Data Schedule X
</TABLE>
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The ratio of earnings to fixed charges for the Company (including its
predecessor-in-interest, Sundance Enterprises, Inc., the partnerships affiliated
with Sundance Enterprises, Inc., and the Company's subsidiaries and
majority-owned partnerships) presents the relationship of the Company's earnings
to its fixed charges. "Earnings" as used in the computation, is based on net
income (loss) from continuing operations (which includes a charge to income for
depreciation and amortization expense) before income taxes, plus fixed charges.
"Fixed charges" is comprised of (i) interest charges, whether expensed or
capitalized, and (ii) amortization of loan costs and discounts or premiums
relating to indebtedness of the Company and its subsidiaries and majority-owned
partnerships, excluding in all cases items which would be or are eliminated in
consolidation.
<TABLE>
<CAPTION> YEAR ENED
3 MONTHS DECEMBER 31,
ENDED ---------------------------------------------------------------
3/31/97 1996 1995 1994 1993 1992
---------- ---------- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
(UNAUDITED, IN THOUSANDS)
Earnings:
Net income (loss) $ 7,039 $ 21,953 (1) $ 13,591 $ 8,924 $ 288 $ 272
Add fixed charges other
than capitalized interest 3445 11,277 6,420 4,894 5,280 5,522
-------- --------- ---------- --------- ------- ------
$ 10,484 $ 33,230 $ 20,011 $ 13,818 $ 5,568 $ 5,794
======== ========= ========== ========= ======= ======
Fixed Charges:
Interest expense $ 3,445 $ 11,277 $ 6,420 $ 4,894 $ 5,280 $ 5,522
Preferred OP distribution 626 1,670 -- --- ---- ----
Capitalized interest 90 380 192 58 ---- ----
-------- --------- -------- ------ -------- --------
Total fixed charges $ 4,161 $ 13,327 $ 6,612 $ 4,952 $ 5,280 $5,522
======== ========= ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges: 2.52:1 2.49:1 3.03:1 2.79:1 1.05:1 1.05:1
</TABLE>
(1)
Before extraordinary item
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,552
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 598,090
<DEPRECIATION> 35,135
<TOTAL-ASSETS> 595,963
<CURRENT-LIABILITIES> 0
<BONDS> 185,000
0
0
<COMMON> 157
<OTHER-SE> 300,171
<TOTAL-LIABILITY-AND-EQUITY> 595,963
<SALES> 0
<TOTAL-REVENUES> 23,393
<CGS> 0
<TOTAL-COSTS> 7,010
<OTHER-EXPENSES> 4,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,445
<INCOME-PRETAX> 7,039
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,568
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
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