<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-Q
<TABLE>
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
</TABLE>
COMMISSION FILE NUMBER 1-12792
---------------------
SUMMIT PROPERTIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 56-1857807
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
212 S. TRYON STREET, SUITE 500, CHARLOTTE, NORTH CAROLINA 28281
(Address of principal executive offices -- zip code)
(704) 334-9905
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check 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.
25,217,136 shares outstanding as of August 10, 1998.
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<PAGE> 2
SUMMIT PROPERTIES INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30,
1998 and December 31, 1997 (Unaudited).................... 3
Consolidated Statements of Earnings for the three months and
six months ended
June 30, 1998 and 1997 (Unaudited)........................ 4
Consolidated Statement of Stockholders' Equity for the six
months ended
June 30, 1998 (Unaudited)................................. 5
Consolidated Statements of Cash Flows for the six months
ended
June 30, 1998 and 1997 (Unaudited)........................ 6
Notes to Consolidated Financial Statements.................. 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
PART II OTHER INFORMATION
Item 2 Changes in Securities....................................... 24
Item 4 Submission of Matters to a Vote of Security Holders......... 24
Item 6 Exhibits and Reports on Form 8-K............................ 25
SIGNATURES.......................................................... 26
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Real estate assets:
Land and land improvements................................ $ 141,143 $ 133,316
Buildings and improvements................................ 710,308 643,812
Furniture, fixtures and equipment......................... 58,214 53,573
--------- ---------
909,665 830,701
Less: accumulated depreciation............................ (114,258) (105,979)
--------- ---------
Operating real estate assets...................... 795,407 724,722
Construction in progress.................................. 102,086 82,332
--------- ---------
Net real estate assets............................ 897,493 807,054
Cash and cash equivalents................................... 2,387 3,563
Restricted cash............................................. 9,597 3,180
Deferred financing costs, net............................... 7,490 7,378
Other assets................................................ 5,823 4,118
--------- ---------
Total assets................................................ $ 922,790 $ 825,293
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable............................................. $ 539,201 $ 474,673
Accrued interest payable.................................. 4,726 4,916
Accounts payable and accrued expenses..................... 23,964 19,945
Dividends and distributions payable....................... 11,793 11,030
Security deposits and prepaid rents....................... 4,003 3,561
--------- ---------
Total liabilities................................. 583,687 514,125
--------- ---------
Commitments and contingencies
Minority interest........................................... 49,257 45,329
--------- ---------
Stockholders' equity:
Common stock, $.01 par value -- 100,000,000 authorized,
24,672,932 and 23,411,086 shares issued and
outstanding in 1998 and 1997, respectively............ 247 234
Additional paid-in capital............................. 387,360 361,731
Dividends in excess of accumulated earnings............ (95,901) (95,120)
Unamortized restricted stock compensation.............. (912) (1,006)
--------- ---------
290,794 265,839
Less employee notes receivable......................... (948) --
--------- ---------
Total stockholders' equity........................ 289,846 265,839
--------- ---------
Total liabilities and stockholders' equity.................. $ 922,790 $ 825,293
========= =========
</TABLE>
See notes to consolidated financial statements (unaudited).
3
<PAGE> 4
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental.................................... $ 32,423 $ 26,328 $ 63,796 $ 52,108
Other property income..................... 1,894 1,577 3,589 2,898
Interest.................................. 180 132 278 208
Other income.............................. 74 66 147 138
----------- ----------- ----------- -----------
Total revenues.................... 34,571 28,103 67,810 55,352
----------- ----------- ----------- -----------
Expenses:
Property operating and maintenance:
Personnel............................ 2,681 2,306 5,110 4,472
Advertising and promotion............ 595 442 1,106 822
Utilities............................ 1,450 1,144 2,883 2,311
Building repairs and maintenance..... 2,408 2,113 4,478 4,056
Real estate taxes and insurance...... 3,401 2,843 6,870 5,538
Depreciation......................... 6,861 5,430 13,401 10,611
Property supervision................. 842 678 1,641 1,340
Other operating expenses............. 915 758 1,840 1,559
----------- ----------- ----------- -----------
19,153 15,714 37,329 30,709
Interest.................................. 7,661 5,042 14,959 9,592
General and administrative................ 735 596 1,536 1,242
Loss (income) in equity investment in
Summit Management Company.............. (115) (105) (43) 25
----------- ----------- ----------- -----------
Total expenses.................... 27,434 21,247 53,781 41,568
----------- ----------- ----------- -----------
Income before gain on sale of real estate
assets, minority interest of unitholders
in Operating Partnership and extraordinary
items..................................... 7,137 6,856 14,029 13,784
Gain on sale of real estate assets.......... 8,731 4,366 8,731 4,366
Minority interest of unitholders in
Operating Partnership..................... (2,315) (1,729) (3,310) (2,781)
----------- ----------- ----------- -----------
Income before extraordinary items........... 13,553 9,493 19,450 15,369
Extraordinary items, net of minority
interest of unitholders in Operating
Partnership............................... -- -- (158) --
----------- ----------- ----------- -----------
Net income.................................. $ 13,553 $ 9,493 $ 19,292 $ 15,369
=========== =========== =========== ===========
Per share data:
Income before extraordinary items -- basic
and diluted............................ $ 0.55 $ 0.41 $ 0.80 $ 0.67
=========== =========== =========== ===========
Net income -- basic and diluted........... $ 0.55 $ 0.41 $ 0.79 $ 0.67
=========== =========== =========== ===========
Dividends declared........................ $ 0.41 $ 0.40 $ 0.82 $ 0.80
=========== =========== =========== ===========
Weighted average common shares -- basic... 24,586,476 23,091,608 24,318,854 23,000,032
=========== =========== =========== ===========
Weighted average common
shares -- diluted...................... 24,611,928 23,122,778 24,347,142 23,031,445
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
4
<PAGE> 5
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DIVIDENDS IN UNAMORTIZED
ADDITIONAL EXCESS OF RESTRICTED EMPLOYEE
COMMON PAID IN ACCUMULATED STOCK NOTES
STOCK CAPITAL EARNINGS COMPENSATION RECEIVABLE TOTAL
------ ---------- ------------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998........ $234 $361,731 $(95,120) $(1,006) $ -- $265,839
Dividends..................... -- -- (20,073) -- -- (20,073)
Exercise of stock options..... -- 499 -- -- -- 499
Conversion of units to
shares..................... -- 413 -- -- 413
Issuance of restricted stock
grants..................... -- 106 -- (106) -- --
Amortization of restricted
stock grants............... -- -- -- 200 -- 200
Proceeds from dividend
reinvestment and stock
purchase plans............. 13 23,855 -- -- -- 23,868
Adjustment for minority
interest in Operating
Partnership................ -- 756 -- -- -- 756
Issuance of employee notes
receivable................. (948) (948)
Net income.................... -- -- 19,292 -- 19,292
---- -------- -------- ------- ------ --------
Balance, June 30, 1998.......... $247 $387,360 $(95,901) $ (912) $ (948) $289,846
==== ======== ======== ======= ====== ========
</TABLE>
See notes to consolidated financial statements (unaudited).
5
<PAGE> 6
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED,
JUNE 30,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 19,292 $ 15,369
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary items.................................... 158 --
(Income) loss on equity method investments............. (43) 25
Gain on sale of real estate assets..................... (8,731) (4,366)
Depreciation and amortization.......................... 14,097 11,130
Increase in restricted cash............................ (104) (660)
Increase in other assets............................... (1,494) (773)
Increase (decrease) in accrued interest payable........ (190) 526
Increase in accounts payable and accrued expenses...... 3,428 3,185
Increase (decrease) in security deposits and prepaid
rents................................................. 361 (56)
Minority interest of unitholders in Operating
Partnership........................................... 3,310 2,781
-------- --------
Net cash provided by operating activities......... 30,084 27,161
-------- --------
Cash flows from investing activities:
Construction of real estate assets, net of payables....... (56,921) (39,562)
Purchase of Communities................................... (48,930) (40,408)
Proceeds from sale of a Community, net of escrow funds.... 17,619 --
Capitalized interest...................................... (2,628) (2,948)
Recurring capital expenditures............................ (2,761) (1,471)
Non-recurring capital expenditures........................ (1,487) (2,147)
-------- --------
Net cash used in investing activities............. (95,108) (86,536)
-------- --------
Cash flows from financing activities:
Net borrowings on line of credit.......................... 78,575 76,424
Repayments of mortgage debt............................... (14,060) (1,888)
Repayments of tax exempt bonds............................ (840) (836)
Net proceeds from dividend reinvestment and stock purchase
plans.................................................. 23,368 1,024
Dividends and distributions to unitholders................ (22,746) (21,199)
Issuance of stock......................................... -- 6,813
Exercise of stock options................................. 499 718
Increase in employee notes................................ (948) --
-------- --------
Net cash provided by financing activities......... 63,848 61,056
-------- --------
Net (decrease) increase in cash and cash
equivalents...................................... (1,176) 1,681
Cash and cash equivalents, beginning of period.............. 3,563 3,665
-------- --------
Cash and cash equivalents, end of period.................... $ 2,387 $ 5,346
======== ========
Supplemental disclosure of cash flow information -- Cash
paid for interest, net of capitalized interest............ $ 14,637 $ 8,573
======== ========
</TABLE>
See notes to consolidated financial statements (unaudited).
6
<PAGE> 7
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
management of Summit Properties Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information and
in conformity with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the six months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's December 31, 1997 audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 "Earnings Per Share." This pronouncement
specifies the computation, presentation and disclosure requirements for earnings
per share. The new standard had no impact on the Company's financial statements
as the "basic" and "diluted" earnings per share disclosure required by the
pronouncement were the same as "primary" earnings per share previously reported.
The only difference in "basic" and "diluted" weighted average shares is the
dilutive effect of the Company's stock options outstanding (25,452 and 31,170
shares added to weighted shares outstanding for the three months ended June 30,
1998 and 1997, respectively, and 28,288 and 31,413 shares added to weighted
shares outstanding for the six months ended June 30, 1998 and 1997,
respectively).
2. ACQUISITIONS, DISPOSITIONS AND COMMITMENTS
The Company completed the acquisition of two communities in 1998 located in
Atlanta, Georgia: Summit St. Clair, purchased effective March 1, 1998, and
Summit Club at Dunwoody, purchased on May 22, 1998 (the "1998 Acquisitions").
The 1998 Acquisitions added a total of 660 apartment homes to the Company's
portfolio at an aggregate purchase price of $54.5 million.
The 1998 Acquisitions were financed with the issuance of 259,871 units of
limited partnership interest ("Units") in Summit Properties Partnership, L.P.
(the "Operating Partnership") valued at $5.2 million. The balance of the
purchase price was paid in cash.
The following summary of selected unaudited pro forma results of operations
presents information as if the 1998 Acquisitions had occurred as of January 1,
1998. Pro forma information for the six months ended June 30, 1997 has not been
presented as the 1998 Acquisitions were under construction during that period
and had insignificant rental operations. The pro forma information for the six
months ended June 30, 1998 is provided for
7
<PAGE> 8
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
informational purposes only and is not indicative of results that would have
occurred or which may occur in the future (dollars in thousands, except per
share amounts):
<TABLE>
<S> <C>
Pro forma information for the six months ended June 30,
1998:
Net revenues................................................ $ 69,631
===========
Income before gain on sale of real estate assets, minority
interest of unitholders in Operating Partnership and
extraordinary items....................................... $ 13,900
===========
Net income.................................................. $ 19,083
===========
Net income per share -- basic and diluted................... $ 0.78
===========
Weighted average shares -- basic............................ 24,318,854
===========
Weighted average shares and units........................... 28,604,626
===========
</TABLE>
On May 18, 1998, the Company sold a community in Brandon, Florida formerly known
as Summit Providence for net proceeds of $23.9 million. A gain on the sale of
$8.7 million was recognized. Proceeds from the sale were used to partially fund
the acquisition of Summit Club at Dunwoody.
On July 8, 1998, the Company purchased Summit at Lenox (formerly Lenox Forest),
a 432-apartment community located in Atlanta, Georgia. The purchase price was
approximately $32.7 million. The acquisition was financed by the assumption of
$8.8 of mortgage debt with the balance paid in cash.
The Company has eight development projects currently under construction with a
total estimated cost of $147.2 million. The estimated cost to complete the
projects is $69.0 million.
3. NOTES PAYABLE
Line of Credit
The Company obtained a new syndicated unsecured line of credit (the "Unsecured
Credit Facility") in the amount of $175 million in March 1998 which replaced the
existing $150 million credit facility. The Unsecured Credit Facility provides
funds for new development, acquisitions and general working capital purposes.
The Unsecured Credit Facility has a three year term with two one-year extension
options and will initially bear interest at LIBOR + 90 basis points based upon
the Company's current credit rating of BBB- by Standard & Poor's Rating Services
and Baa3 by Moody's Investors Service. The interest rate will be reduced in the
event an upgrade of the Company's unsecured credit rating is obtained. The
Unsecured Credit Facility also provides a bid option sub-facility equal to a
maximum of fifty percent of the total facility ($87.5 million). This
sub-facility provides the Company with the option to place borrowings in a fixed
LIBOR contract up to 180 days.
Mortgage Notes
The Company has a commitment to refinance two mortgage loans which have a $148.0
million balance at June 30, 1998. The existing loans mature in February 2001
($119.0 million at 5.88%) and December 2005 ($29.0 million at 7.71%). The
refinancing will combine the two mortgage loans into one loan at an interest
rate equal to the weighted average interest rate of the two previous mortgage
loans (6.24%) with a February 2001 maturity. At the 2001 maturity, the lender
has committed to a new loan that will mature in the second quarter of 2008 with
an interest rate of 6.76%.
Medium-Term Notes
The Company has established a program for the sale of up to $95 million
aggregate principal amount of Medium-Term Notes due nine months or more from the
date of issuance (the "MTN Program"). On July 28, 1998, the
8
<PAGE> 9
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
Company sold $30 million of notes under the MTN Program. The notes are due on
July 30, 2001 and bear interest at 6.75% per year. Proceeds from the notes were
used to reduce the Unsecured Credit Facility.
4. RESTRICTED STOCK
In the six months ended June 30, 1998 and 1997, the Company granted 5,092 and
26,278 shares, respectively, of restricted stock to employees under the
Company's 1994 Stock Option and Incentive Plan. The market value of the
restricted stock grants in 1998 and 1997 totaled $106,000 and $565,000,
respectively, which has been recorded as unamortized restricted stock
compensation and is shown as a separate component of stockholders' equity.
Unearned compensation is being amortized to expense over the vesting period
which ranges from three to five years.
5. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the six months ended June 30,
1998 and 1997 are as follows:
A. The Company purchased the 1998 Acquisitions by issuing 259,871 Units,
assuming certain liabilities and the payment of cash. The recording of the
purchase is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fixed assets................................................ $54,465
Current liabilities assumed................................. (322)
Value of Units issued....................................... (5,213)
-------
Cash invested..................................... $48,930
=======
</TABLE>
B. The Company sold a community on May 18, 1998 for net proceeds of
approximately $23.9 million. The proceeds of the sale were put in escrow in
accordance with like-kind exchange rules and regulations. On May 22, 1998,
$17.6 million of the escrow was used to fund the acquisition of an
apartment community (see Note 2). The remaining $6.3 million escrow funds
are shown in the balance sheet caption "Restricted Cash".
C. In the six months ended June 30, 1997, the Company purchased three
communities (Summit Mayfaire, Summit Portofino and Summit Sand Lake). The
Company completed the purchase of the three Communities by assuming debt,
issuing 194,495 Units, issuing 243,608 shares of Common Stock, assuming
certain liabilities and current assets, and the payment of cash. The
recording of the purchase is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fixed assets................................................ $65,170
Other assets................................................ 30
Debt assumed................................................ (15,226)
Current liabilities assumed................................. (694)
Value of Units issued....................................... (3,939)
Value of Common Stock issued................................ (4,933)
-------
Cash invested..................................... $40,408
=======
</TABLE>
D. The Company accrued a dividend and distribution payable in the amount of
$11.8 million and $10.9 million at June 30, 1998 and 1997, respectively.
E. The Company issued 5,092 and 26,278 shares of restricted stock valued at
$106,000 and $565,000 during the six months ended June 30, 1998 and 1997,
respectively.
9
<PAGE> 10
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
6. CHANGES IN OWNERSHIP OF OPERATING PARTNERSHIP
As of June 30, 1998, there were 28,938,737 Units outstanding, of which
24,672,932, or 85.3% were owned by the Company and 4,265,805, or 14.7% were
owned by other partners (including certain officers and directors of the
Company). Minority interest of unitholders in the Operating Partnership is
calculated at the balance sheet date based upon the percentage of Units
outstanding owned by partners other than the Company to the total number of
Units outstanding. Minority interest of unitholders in Operating Partnership
earnings is calculated based on the weighted average Units outstanding during
the period.
Proceeds from Common Stock issued by the Company are contributed to the
Operating Partnership for an equivalent number of Units. The following is a
summary of significant Units issued and the Company's ownership percentage
before and after each transaction for the six months ended June 30, 1998 and
1997:
<TABLE>
<CAPTION>
COMPANY'S OWNERSHIP
AS A PERCENTAGE OF THE
NET OPERATING PARTNERSHIP
NUMBER OF PRICE PER DOLLAR ----------------------
DATE DESCRIPTION UNITS UNIT VALUE BEFORE AFTER
- ---- ----------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997 Issuance of stock............. 315,029 $21.62 $6,812,500 84.81% 84.99%
1997 Summit Sand Lake purchase..... 438,103 20.25 8,871,581 85.02 84.54
1998 Issuance of stock............. 316,749 20.52 6,500,000 85.32 85.49
1998 Issuance of stock............. 331,058 19.63 6,500,000 85.52 85.69
1998 Summit St. Clair purchase..... 119,000 20.29 2,414,272 85.75 85.39
1998 Issuance of stock............. 256,345 19.50 5,000,000 85.41 85.54
1998 Summit at Dunwoody purchase... 140,871 19.87 2,798,961 85.62 85.20
</TABLE>
Units issued for the property purchases were valued based upon the market value
of the Company's Common Stock at the date of issuance as the Units can be
exchanged for shares on a one-to-one basis. In addition, of the 438,103 Units
issued for the Summit Sand Lake purchase, 243,608 Units were issued to the
Company in exchange for the Company issuing 243,608 shares of Common Stock to
the seller of Summit Sand Lake.
In addition to the amounts in the above table, the Company issued shares of
Common Stock in exchange for Units owned by other partners on a one-for-one
basis. An aggregate of 21,380 shares and 54,665 shares were issued for Units
during the six months ended June 30, 1998 and 1997, respectively. The shares
exchanged were valued based upon the market value of the Company's Common Stock
at the date of exchange and had an aggregate value of $413,000 and $1.1 million
for the six months ended June 30, 1998 and 1997, respectively.
The Company issued additional stock under its dividend reinvestment and stock
purchase plans which is not included in the above table as the individual
transaction amounts did not significantly change the Company's ownership
percentage. An aggregate of 304,013 and 56,050 shares valued at $5.9 million and
$1.2 million were issued in 1998 and 1997, respectively.
7. NOTES RECEIVABLE FROM EMPLOYEES
On September 8, 1997, the Board of Directors approved a Statement of Company
Policy, which has subsequently been amended and restated by the Board, on loans
to executive officers and certain key employees relating to purchases of Common
Stock (the "Loan Program"). Pursuant to the Loan Program, the Company may lend
amounts to certain of the Company's executive officers and certain of its key
employees for one or more of the following purposes: (i) to finance the purchase
of Common Stock (a) by certain executive officers on the open market at the
then-current market prices and (b) by other eligible employees through the
Company's 1996 Non-Qualified Employee Stock Purchase Plan; (ii) to finance an
executive officer's or key employee's payment of the exercise price of one or
more stock options to purchase shares of Common Stock granted to such employees
under the Company's 1994 Stock Option Plan; or (iii) to finance the annual tax
liability of certain executive officers related to the vesting of shares of
Common Stock which constitute a portion of a restricted stock award
10
<PAGE> 11
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
granted to such employees under the 1994 Stock Option Plan. The maximum
aggregate amount the Company may loan to an executive officer is determined on a
case-by-case basis by the Board of Directors or the Compensation Committee
thereof, and the maximum aggregate amount the Company may loan to a qualified
employee is $100,000. Shares of Common Stock which are the subject of a loan
serve as collateral for the note until the note has been paid in full. Each note
bears interest at the applicable federal rate, as established by the Internal
Revenue Service in effect on the date of the note. The notes are payable through
the application to the outstanding loan balance of all dividends and
distributions related to the collateral stock, first to interest, with the
remainder, if any, to outstanding principal. Each note becomes due and payable
in full on the tenth anniversary of the respective note. As of June 30, 1998,
the Company had issued loans in the net amount of $948,000.
8. EXTRAORDINARY ITEMS
The extraordinary items in the six months ended June 30, 1998 resulted from the
write-off of deferred financing cost in conjunction with the replacement by the
Company of its prior credit facility with the Unsecured Credit Facility and
prepayment penalties on four mortgage notes which were repaid during the period.
The extraordinary items are net of $27,000 which was allocated to the minority
interest of unitholders in the Operating Partnership, calculated on the weighted
average number of Units outstanding.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including without limitation statements relating to the
operating performance of stabilized communities and to development activities of
the Company. The Company intends such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in the
Private Securities Reform Act of 1995, and is including this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Company are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Although the
Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, the Company's actual results and
performance of stabilized and development Communities could differ materially
from those set forth in the forward-looking statements. Factors which could have
a material adverse effect on the operations and future prospects of the Company
include, but are not limited to, changes in: economic conditions generally and
the real estate market specifically, legislative/regulatory changes (including
changes to laws governing the taxation of real estate investment trusts
("REITs")), availability of capital, interest rates, construction delays due to
unavailability of materials, weather conditions or other delays, competition,
supply and demand for apartment communities in the Company's current and
proposed market areas, generally accepted accounting principles, policies and
guidelines applicable to REITs, and those factors discussed in the last
paragraph under the heading "Operating Performance of the Company's Fully
Stabilized Communities", the section entitled "Development Activity -- Certain
Factors Affecting the Performance of Development Communities" and the section
"Year 2000" on pages 14, 20 and 21, respectively, of this Form 10-Q. These risks
and uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Summit Properties Inc. and the Notes thereto appearing
elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
The Company's net income is generated primarily from operations of its apartment
communities (the "Communities"). The changes in operating results from period to
period reflect changes in existing Community performance and increases in the
number of apartment homes due to development and acquisition of new Communities.
Where appropriate, comparisons are made on a "fully stabilized Communities,"
"acquisition Communities," "stabilized development Communities" and "Communities
in lease-up" basis in order to adjust for changes in the number of apartment
homes. A Community is deemed to be "stabilized" when it has attained a physical
occupancy level of at least 93%. A Community is deemed "fully stabilized" when
stabilized for the two prior years as of the beginning of the current year. A
Community is deemed to be a "stabilized development" when stabilized as of the
beginning of the current year but not the entire two prior years.
Results of Operations for the Three and Six Months Ended June 30, 1998 and
1997
For the three and six months ended June 30, 1998, income before gain on sale of
real estate assets, minority interest and extraordinary items increased $281,000
and $245,000, respectively, to approximately $7.1 million and $14.0 million,
respectively, from the three and six months ended June 30, 1997.
12
<PAGE> 13
OPERATING PERFORMANCE OF THE COMPANY'S PORTFOLIO OF COMMUNITIES
The operating performance of the Communities for the three and six months ended
June 30, 1998 and 1997 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
% %
1998 1997 CHANGE 1998 1997 CHANGE
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized communities.... $20,812 $20,499 1.5% $41,576 $41,073 1.2%
Acquisition communities... 4,498 1,908 135.7 7,947 3,269 143.1
Stabilized development
communities............ 5,415 4,481 20.8 10,837 8,477 27.8
Communities in lease-up... 3,108 29 10,617.2 5,653 29 19,393.1
Communities sold.......... 484 988 (51.0) 1,372 2,158 (36.4)
------- ------- ------- -------
Total property revenues..... 34,317 27,905 23.0 67,385 55,006 22.5
------- ------- ------- -------
Property operating and
maintenance expense:(1)
Stabilized communities.... 7,778 7,698 1.0 15,367 15,332 0.2
Acquisition communities... 1,444 624 131.4 2,549 1,058 140.9
Stabilized development
communities............ 1,811 1,486 21.9 3,562 2,753 29.4
Communities in lease-up... 1,063 65 1,535.4 1,916 65 2,847.7
Communities sold.......... 196 411 (52.3) 534 890 (40.0)
------- ------- ------- -------
Total property operating and
maintenance expense....... 12,292 10,284 19.5 23,928 20,098 19.1
------- ------- ------- -------
Property operating income... $22,025 $17,621 25.0 $43,457 $34,908 24.5
======= ======= ======= =======
Apartment homes, end of
period.................... 16,263 14,072 15.6 16,263 14,072 15.6
======= ======= ======= =======
</TABLE>
- ---------------
(1) Before real estate depreciation expense.
A summary of the Company's apartment homes for the six months ended June 30,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Apartment homes at the beginning of period.................. 14,980 12,454
Acquisitions................................................ 660 882
Developments which began rental operations during the
period.................................................... 1,067 950
Sale of apartment homes..................................... (444) (214)
------ ------
Apartment homes at the end of the period.................... 16,263 14,072
====== ======
</TABLE>
13
<PAGE> 14
OPERATING PERFORMANCE OF THE COMPANY'S FULLY STABILIZED COMMUNITIES
The operating performance of the 46 Communities stabilized since January 1, 1996
in each of the three and six months ended June 30, 1998 and 1997, respectively,
are summarized below (dollars in thousands except average monthly rental
revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
1998 1997 % CHANGE 1998 1997 % CHANGE
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Rental....................... $19,745 $19,484 1.3% $39,491 $39,145 0.9%
Other........................ 1,067 1,015 5.1 2,085 1,928 8.1
------- ------- ------- -------
Total property
revenues........... 20,812 20,499 1.5 41,576 41,073 1.2
------- ------- ------- -------
Property operating and
maintenance expense(1):
Personnel.................... 1,711 1,784 (4.1) 3,314 3,498 (5.3)
Advertising and promotion.... 323 273 18.3 606 511 18.6
Utilities.................... 919 857 7.2 1,855 1,768 4.9
Building repairs and
maintenance............... 1,690 1,708 (1.1) 3,220 3,319 (3.0)
Real estate taxes and
insurance................. 2,018 2,006 0.6 4,114 4,031 2.1
Property supervision......... 517 516 0.2 1,031 1,030 0.1
Other operating expense...... 600 554 8.3 1,227 1,175 4.4
------- ------- ------- -------
Total property
operating and
maintenance
expense............ 7,778 7,698 1.0 15,367 15,332 0.2
------- ------- ------- -------
Property operating income...... $13,034 $12,801 1.8 $26,209 $25,741 1.8
======= ======= ======= =======
Average physical
occupancy(2)................. 92.0% 93.0% (1.1) 92.2% 93.1% (1.0)
======= ======= ======= =======
Average monthly rental
revenue(3)................... $ 750 $ 725 3.5 $ 747 $ 724 3.1
======= ======= ======= =======
Number of apartment homes...... 9,834 9,834 9,834 9,834
======= ======= ======= =======
</TABLE>
- ---------------
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(3) Represents the average monthly net rental revenue per occupied apartment
home.
The increase in rental revenue from fully stabilized Communities for the second
quarter and first six months of 1998 compared to 1997 was primarily the result
of increases in average rental rates offset by a decline in average physical
occupancy. Property operating and maintenance expenses increased as a result of
increases in advertising and promotion and utilities, offset by a decrease in
personnel expense and building repair and maintenance expense. The increase in
advertising and promotion was primarily due to marketing efforts necessary to
compete with increased supply of multi-family apartment homes. The increase in
utilities was primarily due to rate increases and increased vacancy. The
decrease in building repair and maintenance expense was primarily due to prior
year capital expenditures which decreased repair and maintenance requirements in
the current year. As a percentage of total property revenue, property operating
and maintenance expenses decreased for the three month period from 37.6% in 1997
to 37.4% in 1998 and for the six month period from 37.3% in 1997 to 37.0% in
1998.
The 1.5% and 1.2% rates of growth in property revenues were lower than the 1.7%
and 2.1% rates of growth in property revenues achieved from the second quarter
of 1996 compared to second quarter 1997 and the first six months of 1996
compared to the first six months of 1997, respectively. The growth rates were
lower primarily as
14
<PAGE> 15
a result of a new supply of competing multi-family communities and the increase
in home affordability in some of the markets in which the Company operates. This
lower growth rate was especially noticeable in the Sarasota, Florida and
Southeast Florida markets. The Company expects property growth rates for the
remainder of 1998 to be similar to the first six months of 1998 as the supply of
new multi-family communities continues to increase, balanced by the continued
strength of the local economies in which the Company operates. The Company
believes its expectations with respect to property revenue growth are based on
reasonable assumptions as to future economic conditions and the quantity of
competitive multi-family communities in the markets in which the Company does
business. However, there can be no assurance that actual results will not differ
from these assumptions, which could result in lower property revenue.
OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITION COMMUNITIES
Acquisition Communities consist of Summit Fair Oaks, Summit Portofino, Summit
Sand Lake and Summit Windsor II acquired in 1997 (1,290 apartment homes) and
Summit St. Clair and Summit Club at Dunwoody acquired in 1998 (660 apartment
homes). Summit Portofino and Summit Sand Lake were acquired in the first quarter
of 1997 and Summit Windsor II and Summit Fair Oaks were acquired in the third
and fourth quarters of 1997, respectively. Summit St. Clair and Summit Club at
Dunwoody were acquired in the first and second quarters of 1998, respectively.
Summit Mayfaire was purchased effective January 1, 1997 and therefore is
included in stabilized Communities. The operations of these Communities for the
three and six months ended June 30, 1998 and 1997 are summarized as follows
(dollars in thousands except average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues............................... $4,252 $1,761 $7,534 $3,043
Other property revenue........................ 246 147 413 226
------ ------ ------ ------
Total property revenues......................... 4,498 1,908 7,947 3,269
------ ------ ------ ------
Property operating and maintenance expense(1)... 1,444 624 2,549 1,058
------ ------ ------ ------
Property operating income....................... $3,054 $1,284 $5,398 $2,211
====== ====== ====== ======
Average physical occupancy(2)................... 94.1% 93.8% 94.4% 94.1%
====== ====== ====== ======
Average monthly rental revenue(3)............... $ 869 $ 862 $ 863 $ 860
====== ====== ====== ======
Number of apartment homes....................... 1,950 738 1,950 738
====== ====== ====== ======
</TABLE>
- ---------------
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(3) Represents the average monthly net rental revenue per occupied apartment
home.
The unleveraged yield on investment for the acquisition Communities, defined as
property operating income for the three and six months ended June 30, 1998 on an
annualized basis over total acquisition cost, was 9.23% and 9.18%, respectively.
15
<PAGE> 16
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED DEVELOPMENT COMMUNITIES
The Company had seven development communities (Summit Aventura, Summit Hill II,
Summit Green, Summit River Crossing, Summit Fairways, Summit on the River and
Summit Russett) which were stabilized during the entire three and six months
ended June 30, 1998 but were stabilized subsequent to January 1, 1996. The
operating performance of these seven Communities for the three and six months
ended June 30, 1998 and 1997 is summarized below (dollars in thousands except
average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues.............................. $5,068 $4,123 $10,162 $7,902
Other property revenue....................... 347 358 675 575
------ ------ ------- ------
Total property revenues........................ 5,415 4,481 10,837 8,477
------ ------ ------- ------
Property operating and maintenance
expense(1)................................... 1,811 1,486 3,562 2,753
------ ------ ------- ------
Property operating income...................... $3,604 $2,995 $ 7,275 $5,724
====== ====== ======= ======
Average physical occupancy(2).................. 91.9% 77.0% 92.1% 73.8%
====== ====== ======= ======
Average monthly rental revenue(3).............. $ 888 $ 866 $ 887 $ 864
====== ====== ======= ======
Number of apartment homes...................... 2,106 2,106 2,106 2,106
====== ====== ======= ======
</TABLE>
- ---------------
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(3) Represents the average monthly net rental revenue per occupied apartment
home.
The unleveraged yield on investment for the stabilized development Communities,
defined as property operating income for the three and six months ended June 30,
1998 on an annualized basis over total development cost, was 10.11% and 10.12%,
respectively.
16
<PAGE> 17
OPERATING PERFORMANCE OF THE COMPANY'S COMMUNITIES IN LEASE-UP
The Company had ten Communities in lease-up during the six months ended June 30,
1998. A Community in lease-up is defined as one which has commenced rental
operations but was not stabilized as of the beginning of the current year. A
summary of the ten Communities in lease-up as of June 30, 1998 is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ACTUAL/ HOMES % LEASED
NUMBER OF ACTUAL/ ANTICIPATED ACTUAL/ COMPLETED Q2 1998 AS OF
APARTMENT ESTIMATED CONSTRUCTION ANTICIPATED AT JUNE 30, AVERAGE JUNE 30,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1998 OCCUPANCY 1998
- --------- --------- --------- ------------ ------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit Stonefield...... 216 $ 19,660 Q1 1998 Q1 1998 216 98.95% 100.00%
Summit Ballantyne I.... 246 16,330 Q4 1997 Q2 1998 246 82.79 95.10
Summit Sedgebrook I.... 248 16,320 Q4 1997 Q3 1998 248 81.14 91.50
Summit Plantation II... 240 21,264 Q4 1997 Q3 1998 240 80.10 92.50
Summit Norcroft II..... 54 3,500 Q4 1997 Q1 1998 54 94.08 96.80
Summit Lake I.......... 302 20,172 Q2 1998 Q3 1998 302 65.28 76.80
Summit Ballantyne
II(1)................ 154 10,100 Q3 1998 Q1 1999 28 5.44 9.70
Summit Fair Lakes
I(1)................. 370 32,900 Q1 1999 Q2 1999 28 2.83 7.00
Summit New Albany
I(1)................. 301 22,600 Q1 1999 Q4 1999 38 5.33 9.00
Summit Governor's
Village(1)........... 242 16,400 Q1 1999 Q2 1999 70 2.22 4.10
----- --------
2,373 $179,246
===== ========
</TABLE>
- ---------------
(1) These properties are included in the Construction in Progress category at
June 30, 1998.
Property operating income after interest expense for the three and six months
ended June 30, 1998 was $351,000 and $545,000, respectively, for the ten
Communities in lease-up.
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
The operating performance of Summit Management Company (the "Management
Company") and its wholly-owned subsidiary, Summit Apartment Builders Inc. (the
"Construction Company"), for the three and six months ended June 30, 1998 and
1997 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1998 1997 1998 1997
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenue......................................... $1,597 $1,500 $3,055 $2,898
Expenses:
Operating..................................... 1,276 1,196 2,601 2,529
Depreciation.................................. 59 48 118 96
Amortization.................................. 72 76 143 148
Interest...................................... 75 75 150 150
------ ------ ------ ------
Total expenses........................ 1,482 1,395 3,012 2,923
------ ------ ------ ------
Net income (loss) of Summit Management
Company....................................... $ 115 $ 105 $ 43 $ (25)
====== ====== ====== ======
</TABLE>
The increase in revenue was a result of higher revenues from managing the
Company's Communities and higher revenues from construction activity, offset by
lower revenues for managing third party communities.
Total average third party apartment homes under management were 3,000 and 5,398
at June 30, 1998 and 1997, respectively. The decrease was primarily due to the
termination of two of the Management Company's contracts which provided for the
management of six apartment communities. The contracts were terminated as a
result of a change in ownership of the apartment communities. Property
management fees include $357,000 and $432,000 of fees from third parties for the
three months ended June 30, 1998 and 1997, respectively, and $658,000 and
$906,000 of fees from third parties for the six months ended June 30, 1998 and
1997, respectively. Property
17
<PAGE> 18
management fees from third parties as a percentage of total property management
revenues were 21.2% and 28.8% for the three months ended June 30, 1998 and 1997,
respectively, and 21.0% and 31.3% for the six months ended June 30, 1998 and
1997, respectively. The Company expects third party management revenue as a
percentage of total property management revenues to continue to decline as
revenues from the Company's Communities continue to increase.
Construction Company revenues increased in 1998 compared to 1997 as a result of
the Company's decision to expand its in-house construction operations in the
state of Florida to cover the entire geographic area in which the Company
operates. All of the Construction Company's revenues are from contracts with the
Company.
OTHER INCOME AND EXPENSES
Interest expense, including amortization of deferred financing costs, increased
by $2.6 million and $5.4 million for the three and six months ended June 30,
1998, respectively. This increase was primarily the result of an increase in the
Company's average indebtedness outstanding. Average indebtedness outstanding and
effective interest cost increased $148.6 million and .05% (6.68% to 6.73%) for
the three months ended June 30, 1998 and $143.5 million and .12% (6.59% to
6.71%) for the six months ended June 30, 1998.
Depreciation expense increased $1.4 million and $2.8 million or 26.4% and 26.3%
for the three and six months ended June 30, 1998, respectively, primarily due to
depreciation on recently acquired or developed Communities.
General and administrative expenses increased $139,000 and $294,000 or 23.3% and
23.7% for the three and six months ended June 30, 1998, primarily due to
expenses related to the Company's overall growth. As a percentage of revenues,
general and administrative expenses were 2.1% for both the three months ended
June 30, 1998 and 1997, and 2.3% and 2.2% for the six months ended June 30, 1998
and 1997, respectively.
EXTRAORDINARY ITEMS
The extraordinary items in the six months ended June 30, 1998 resulted from the
write-off of deferred financing cost in conjunction with the replacement by the
Company of its prior credit facility with the Unsecured Credit Facility (as
hereafter defined) and prepayment penalties on four mortgage notes which were
repaid during the period.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities increased from $27.2
million for the six months ended June 30, 1997 to $30.1 million for the same
period in 1998, primarily due to a $8.5 million increase in property income
offset by a $6.1 million increase in interest paid. The increase in interest
paid was primarily due to an increase in the average indebtedness outstanding.
Net cash used in investing activities increased from $86.5 million for the six
months ended June 30, 1997 to $95.1 million for the same period in 1998 due to
an increase in the acquisition of Communities, an increase in the construction
of Communities and higher recurring capital expenditures, partially offset by
proceeds from the sale of a Community. In 1998 the Company acquired two
apartment Communities containing 660 apartment homes for a total cost of $54.4
million which included the issuance of $5.2 million of Units. In addition, the
Company funded $59.5 million in development costs and $4.2 million in capital
improvements in 1998. The Company also received net cash proceeds of
approximately $17.6 million of total net cash proceeds of $23.9 million from the
sale of an apartment community. The remaining $6.3 million in proceeds from the
sale were being held in escrow in accordance with like-kind exchange rules and
regulations.
Net cash provided by financing activities increased from $61.1 million for the
six months ended June 30, 1997 to $63.8 million for the same period in 1998,
primarily due to an increase in equity proceeds from the Company's dividend
reinvestment and stock purchase plans offset by a higher repayment of debt, the
issuance of notes receivable from employees, the payment of higher dividend and
distributions to unitholders and a decrease in stock issuance. Financing
activities in 1998 included $78.6 million in net borrowings from the Company's
credit
18
<PAGE> 19
facility and $23.4 million in net proceeds from the Company's dividend
reinvestment and stock purchase plans. Dividend reinvestment and stock purchase
proceeds increased from 1997 primarily due to the dividend reinvestment plan
being revised to allow direct stock purchases. These cash inflows were offset by
$22.7 million of dividends and distributions and the repayment of mortgage debt
of $14.1 million. Mortgage debt repayment included $11.9 million for the
prepayment of four mortgage notes.
The ratio of earnings to fixed charges was 2.14 for the six months ended June
30, 1998 compared to 2.02 for the six months ended June 30, 1997. The increase
is primarily due to an increase in the gain on real estate assets offset by
increased interest expense as discussed in "Historical Results of
Operations -- Other Income and Expenses" above.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 and 860 of the Internal Revenue Code of 1986, as amended.
REITs are subject to a number of organizational and operational requirements,
including a requirement that they currently distribute 95% of their ordinary
taxable income. As a REIT, the Company generally will not be subject to federal
income tax on net income.
The Company's outstanding indebtedness at June 30, 1998 totaled $539.2 million.
This amount includes approximately $191.0 million in fixed rate conventional
mortgages, $52.0 million of variable rate tax-exempt bonds, $186.0 million of
unsecured notes, $9.2 million of tax-exempt fixed rate loans, and $101.0 million
under the Unsecured Credit Facility (as hereinafter defined).
The Company repaid four mortgage notes with a balance of $11.9 million during
the first quarter of 1998. The mortgage notes had an 8% interest rate and were
repaid from the borrowings under the Company's credit facility.
The Company expects to meet its short-term liquidity requirements (i.e.,
liquidity requirements arising within 12 months) including capital expenditures
relating to maintaining its existing properties (recurring capital
expenditures), generally through its working capital, net cash provided by
operating activities and borrowings under its line of credit. The Company
considers its cash provided by operating activities to be adequate to meet
operating requirements and payments of dividends and distributions. The Company
expects to meet its long-term liquidity requirements (i.e., liquidity
requirements arising after 12 months), such as scheduled mortgage debt
maturities, property acquisitions, financing of construction and development
activities and other non-recurring capital improvements, through the issuance of
unsecured notes and equity securities, from undistributed Funds from Operations
(see page 22), from proceeds received from the disposition of certain
properties, and in connection with the acquisition of land or improved property,
through the issuance of units of limited partnership interest ("Units") of
Summit Properties Partnership, L.P. (the "Operating Partnership").
Line of Credit
The Company obtained a new syndicated unsecured line of credit (the "Unsecured
Credit Facility") in the amount of $175 million in March 1998 which replaced the
existing $150 million credit facility. The Unsecured Credit Facility provides
funds for new development, acquisitions and general working capital purposes.
The Unsecured Credit Facility has a three year term with two one-year extension
options and will initially bear interest at LIBOR + 90 basis points based upon
the Company's current credit rating of BBB- by Standard & Poor's Rating Services
and Baa3 by Moody's Investors Service. The interest rate will be reduced in the
event an upgrade of the Company's unsecured credit rating is obtained. The
Unsecured Credit Facility also provides a bid option sub-facility equal to a
maximum of fifty percent of the total facility ($87.5 million). This
sub-facility provides the Company with the option to place borrowings in a fixed
LIBOR contract up to 180 days.
Mortgage Notes
The Company has a commitment to refinance two mortgage loans which have a $148.0
million balance at June 30, 1998. The original loans mature in February 2001
($119.0 million at 5.88%) and December 2005 ($29.0 million at 7.71%). The
refinancing will combine the two mortgage loans into one loan at an interest
rate equal to the weighted average interest rate of the two previous mortgage
loans (6.24%) with a February 2001 maturity. At the 2001 maturity, the lender
has committed to a new loan that will mature in the second quarter of 2008 with
an interest rate of 6.76%.
19
<PAGE> 20
Medium-Term Notes
The Company has established a program for the sale of up to $95 million
aggregate principal amount of Medium-Term Notes due nine months or more from the
date of issuance (the "MTN Program"). On July 28, 1998, the Company sold $30
million of notes under the MTN Program. The notes are due on July 30, 2001 and
bear interest at 6.75% per year. Proceeds from the notes were used to reduce the
Unsecured Credit Facility.
ACQUISITIONS AND DISPOSITION
The Company completed the acquisition of two communities located in Atlanta,
Georgia: Summit St. Clair, purchased effective March 1, 1998, and Summit Club at
Dunwoody, purchased on May 22, 1998 (the "1998 Acquisitions"). The 1998
Acquisitions added a total of 660 apartment homes to the Company's portfolio at
an aggregate purchase price of $54.5 million.
The 1998 Acquisitions were financed with the issuance of 259,871 Units valued at
$5.2 million. The balance of the purchase price was paid in cash.
On May 18, 1998, the Company sold a community in Brandon, Florida formerly known
as Summit Providence for net proceeds of $23.9 million. A gain on the sale of
$8.7 million was recognized. Proceeds from the sale were used to partially fund
the acquisition of Summit Club at Dunwoody.
On July 8, 1998, the Company purchased Summit at Lenox (formerly Lenox Forest),
a 432-apartment community located in Atlanta, Georgia. The purchase price was
approximately $32.7 million. The acquisition was financed by the assumption of
$8.8 of mortgage debt with the balance paid in cash.
DEVELOPMENT ACTIVITY
The Company's construction in progress at June 30, 1998 is summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ESTIMATED ANTICIPATED
APARTMENT ESTIMATED COST TO COST TO CONSTRUCTION
COMMUNITY HOMES COSTS DATE COMPLETE COMPLETION
- --------- --------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Summit Doral -- Miami, FL.................. 260 $ 22,800 $ 7,035 $15,765 Q1 1999
Summit Westwood -- Raleigh, NC............. 354 24,400 8,745 15,655 Q2 1999
Summit Fair Lakes I -- Fairfax, VA(2)...... 370 32,900 21,571 11,329 Q1 1999
Summit New Albany I -- Columbus, OH(2)..... 301 22,600 17,144 5,456 Q1 1999
Summit Governor's Village -- Chapel Hill,
NC(2).................................... 242 16,400 12,315 4,085 Q1 1999
Summit Ballantyne II -- Charlotte, NC(2)... 154 10,100 8,376 1,724 Q3 1998
Summit Lake II -- Raleigh, NC.............. 144 10,200 1,897 8,303 Q2 1999
Summit Sedgebrook II -- Charlotte, NC...... 120 7,800 1,133 6,667 Q3 1999
----- -------- -------- -------
1,945 $147,200 78,216 $68,984
===== ======== =======
Other development and construction
costs(1)................................. 23,870
--------
$102,086
========
</TABLE>
- ---------------
(1) Consists primarily of land held for development and other predevelopment
costs.
(2) These communities were in lease-up at June 30, 1998.
Estimated costs to complete the development communities represent all of the
Company's material commitments for capital expenditures.
Certain Factors Affecting the Performance of Development Communities
The Company is optimistic about the operating prospects of the Communities under
construction even with the increased supply of newly constructed apartment homes
of comparable quality in many of its markets. As with any development community,
there are uncertainties and risks associated with the development of the
Communities described above. While the Company has prepared development budgets
and has estimated
20
<PAGE> 21
completion and stabilization target dates based on what it believes are
reasonable assumptions in light of current conditions, there can be no assurance
that actual costs will not exceed current budgets or that the Company will not
experience construction delays due to the unavailability of materials, weather
conditions or other events.
Other development risks include the possibility of incurring additional cost or
liability resulting from defects in construction material and the possibility
that financing may not be available on favorable terms, or at all, to pursue or
complete development activities. Similarly, market conditions at the time these
Communities become available for leasing will affect the rental rates that may
be charged and the period of time necessary to achieve stabilization, which
could make one or more of the development Communities unprofitable or result in
achieving stabilization later than currently anticipated. In addition, the
Company is conducting feasibility and other pre-development work for seven
Communities. The Company could abandon the development of any one or more of
these potential Communities in the event that it determines that market
conditions do not support development, financing is not available on favorable
terms or other circumstances prevent development. Similarly, there can be no
assurance that if the Company does pursue one or more of these potential
Communities that it will be able to complete construction within the currently
estimated development budgets or that construction can be started at the time
currently anticipated.
Year 2000
The Year 2000 compliance issue concerns the inability of computer systems to
accurately calculate, store or use a date after 1999. This could result in a
system failure or miscalculations causing disruptions of operations. The Year
2000 issue affects virtually all companies and all organizations.
The Company has substantially completed an assessment of its core computer
information systems and is now taking the further necessary steps to make such
systems, in those situations in which the Company is required to do so, Year
2000 compliant. In addition, the Company is currently evaluating and assessing
those computer systems that do not relate to information technology (such as
telecommunications, security, HVAC, elevator, fire and safety systems, which
typically include embedded technology such as microcontrollers that may be
harder to test, and may require complete replacement because they cannot be
repaired).
The Company's primary uses of software systems are its corporate accounting and
property on-site software. The Company's corporate accounting system is widely
used in the real estate industry. A version upgrade, installed in the second
quarter of 1998, is designed to be Year 2000 compliant. The Company is replacing
its current property on-site software with a new software system designed to be
Year 2000 compliant. This new software is also widely used in the real estate
industry. The implementation of the new on-site software system started in the
first quarter of 1998 and is expected to be completed by the fourth quarter of
1998. The Company has converted approximately 46 Communities to the new
software. The replacement of the current property on-site software is proceeding
on schedule. The Company has received written notification from the vendor of
each of the corporate accounting system and on-site system that the relevant
software is Year 2000 compliant. The Company had previously planned both the
upgrade of the corporate accounting system and implementation of the new
property on-site system, and such changes would have been undertaken without
regard to Year 2000 remediation issues. Accordingly, the Company has not
deferred any planned information or software projects due to such Year 2000
projects.
Based on its review to date, the Company believes that the primary cost of Year
2000 compliance will be the cost of the installation of the new property on-site
software. The Company currently expects that the installation of the new
property on-site software will cost approximately $400,000, and as of June 30,
1998, the Company had spent approximately $150,000 in connection therewith.
Because the Company's Year 2000 assessment is ongoing, the total cost of
bringing all internal systems, equipment and operations into Year 2000
compliance has not been fully quantified. While these efforts involve additional
costs, the Company believes, based on available information, that these costs
will not have a material adverse effect on its business, financial condition or
results of operations. While the Company believes that it will be Year 2000
compliant by December 31, 1999, if these efforts are not completed on time, or
if the costs associated with updating or replacing the Company's computer
systems exceeds the Company's current estimates, the Year 2000 issue could have
a material impact on the Company's ability to meet its financial and reporting
requirements and/or on its financial results.
21
<PAGE> 22
The Company rents apartments in its Communities to individuals and does not have
a single customer or group of customers who rents a significant number of
apartments. The Company's primary purchases are building-related products (e.g.,
carpets, paint and blinds) and services (e.g., lawn services), all of which are
available from numerous suppliers. For the foregoing reasons, the Company does
not believe that there is a significant risk related to the failure of
residents, vendors or third-party service providers to prepare for the Year
2000; however, the costs and timing of third-party Year 2000 compliance is not
within the Company's control and no assurances can be given with respect to the
cost or timing of such efforts or the potential effects of any failure to
comply.
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with generally accepted accounting principles ("GAAP")),
excluding gains (or losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. The Company computes Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Funds Available for Distribution is defined as Funds from
Operations less capital expenditures funded by operations (recurring capital
expenditures). The Company's methodology for calculating Funds Available for
Distribution may differ from the methodology for calculating Funds Available for
Distribution utilized by other REITs, and accordingly, may not be comparable to
other REITs. Funds from Operations and Funds Available for Distribution do not
represent amounts available for management's discretionary use because of needed
capital replacement or expansion, debt service obligations, property
acquisitions, development, dividends and distributions or other commitments and
uncertainties. Funds from Operations and Funds Available for Distribution should
not be considered as alternatives to net income (determined in accordance with
GAAP) as an indication of the Company's financial performance or to cash flows
from operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor are they indicative of funds available to fund the
Company's cash needs, including its ability to make dividends/distributions. The
Company believes Funds from Operations and Funds Available for Distribution are
helpful to investors as measures of the performance of the Company because,
along with cash flows from operating activities, financing activities and
investing activities, they provide investors with an understanding of the
ability of the Company to incur and service debt and make capital expenditures.
22
<PAGE> 23
Funds from Operations and Funds Available for Distribution for the three and six
months ended June 30, 1998 and 1997 are calculated as follows (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income before extraordinary items..... $ 13,553 $ 9,493 $ 19,450 $ 15,369
Gain on sale of real estate assets.... (8,731) (4,366) (8,731) (4,366)
Minority interest of Unitholders in
Operating Partnership............... 2,315 1,729 3,310 2,781
Depreciation from real estate
assets.............................. 6,842 5,421 13,363 10,593
---------- ---------- ---------- ----------
Funds from Operations................. 13,979 12,277 27,392 24,377
Recurring capital expenditures(1)..... (1,918) (1,016) (2,761) (1,471)
---------- ---------- ---------- ----------
Funds Available for Distribution...... $ 12,061 $ 11,261 $ 24,631 $ 22,906
========== ========== ========== ==========
Non-recurring Capital
Expenditures(2)..................... $ 724 $ 1,225 $ 1,487 $ 2,147
========== ========== ========== ==========
Cash Flow Provided By (Used In):
Operating Activities................ $ 15,924 $ 13,093 $ 30,084 $ 27,161
Investing Activities................ (40,797) (30,643) (95,108) (86,536)
Financing Activities................ 22,927 19,518 63,848 61,056
Weighted average shares and units
outstanding -- basic................ 28,785,746 27,302,798 28,449,861 27,161,146
========== ========== ========== ==========
Weighted average shares and units
outstanding -- diluted.............. 28,810,928 27,333,968 28,478,149 27,192,559
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Recurring capital expenditures are expected to be funded from operations and
consist primarily of exterior painting, new appliances, vinyl, blinds, tile,
and wallpaper. In contrast, non-recurring capital expenditures, such as
major improvements, new garages and access gates, are expected to be funded
by financing activities and are therefore not included in the calculation of
Funds Available for Distribution. The increase in recurring capital
expenditures for the six months ended June 30, 1998 compared to 1997 was
primarily due to the timing of capital improvement projects. The Company
expects capital expenditures for the year 1998 on a per unit basis to be
equal to or less than 1997.
(2) Non-recurring capital expenditures include major renovations in the amount
of $364,000 in 1998 and $1.9 million in 1997; $484,000 and $19,000 in water
meters in 1998 and 1997, respectively; $239,000 and $76,000 in new signage
in 1998 and 1997, respectively; $207,000 of fitness center and key controls
in 1998; and $191,000 of improvements at Summit Norcroft I done in
conjunction with development of Summit Norcroft II in 1998.
23
<PAGE> 24
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On each of April 27, 1998 and June 22, 1998 the Company issued to a limited
partner of the Operating Partnership 8,005 and 13,375 shares of Common Stock,
respectively. Such shares of the Company's Common Stock were issued in reliance
on an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder. In light
of information obtained by the Company in connection with each such transaction,
management of the Company believes that the Company may rely on such exemption.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On May 12, 1998, the Company held its 1998 Annual Meeting of Stockholders (the
"Annual Meeting"). At the Annual Meeting, Stockholders of the Company were asked
to consider a proposal (the "Proposal") to elect two Class I Directors of the
Company to serve until the 2001 annual meeting to the stockholders or until
their successors are duly elected and qualified.
With respect to the election of Directors, James H. Hance, Jr. and Henry H.
Fishkind were nominated to serve as Class I Directors of the Company until the
2001 annual meeting; the other Directors of the Company whose terms of office as
directors continued after the Annual Meeting are as follows: Nelson Schwab III
(Class II Director), John Crosland, Jr. (Class II Director), William B. McGuire,
Jr. (Class III Director) and Henry H. Fishkind (Class III Director).
With respect to the Proposal, the stockholders of the Company voted at the
Annual Meeting as hereinafter described. By a vote of 16.5 million votes of
Common Stock in favor of James H. Hance, Jr. and Henry H. Fishkind, in excess of
a majority of the eligible votes, with no votes against each of Messrs. Hance
and Fishkind, respectively, each of James H. Hance, Jr. and Henry H. Fishkind
was elected as a Class I Director of the Company. In addition, 74,433 and 20,638
votes abstained with respect to Messrs. Hance and Fishkind, respectively.
24
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <C> <S>
10.1 -- Amendment No. 12 to the Limited Partnership Agreement of
Summit Properties Partnership, L.P. (Incorporated by
reference to Exhibit 3.1 of Summit Properties Partnership,
L.P.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, File No. 000-22411).
10.2 -- $8,730,000 Promissory Note, dated August 30, 1995, issued by
Summit Properties Partnership, L.P. to the Public Employee's
Retirement Association of Colorado (Incorporated by
reference to Exhibit 10.1 of Summit Properties Partnership,
L.P.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, File No. 000-22411).
10.3 -- 6.75% Medium-Term Note due 2001 in principal amount of
$30,000,000 issued by Summit Properties Partnership, L.P. on
July 28, 1998 (Incorporated by reference to Exhibit 10.2 of
Summit Properties Partnership, L.P.'s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1998, File
No. 000-22411).
12.1 -- Statement Regarding Calculation of Ratio of Earnings to
Fixed Charges for the Three and Six Months ended June 30,
1998 (filed herewith).
27.1 -- Financial Data Schedule -- Six Months ended June 30, 1998
(for SEC use only) (filed herewith).
27.2 -- Revised Financial Data Schedule - Six Months ended June 30,
1997 (for SEC use only) (filed herewith).
</TABLE>
(b) Reports on Form 8-K
A Form 8-K was filed with the Securities and Exchange Commission on June 2, 1998
in connection with the commencement of Summit Properties Partnership, L.P.'s
Medium-Term Note Program.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
SUMMIT PROPERTIES INC.
August 13, 1998 /s/ WILLIAM F. PAULSEN
- ----------------------------------------------------- -----------------------------------------------------
(Date) William F. Paulsen,
President and Chief Executive Officer
August 13, 1998 /s/ MICHAEL L. SCHWARZ
- ----------------------------------------------------- -----------------------------------------------------
(Date) Michael L. Schwarz,
Executive Vice President and
Chief Financial Officer
</TABLE>
26
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
10.1 -- Amendment No. 12 to the Limited Partnership Agreement of
Summit Properties Partnership, L.P. (Incorporated by
reference to Exhibit 3.1 of Summit Properties Partnership,
L.P.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, File No. 000-22411).
10.2 -- $8,730,000 Promissory Note, dated August 30, 1995, issued by
Summit Properties Partnership, L.P. to the Public Employee's
Retirement Association of Colorado (Incorporated by
reference to Exhibit 10.1 of Summit Properties Partnership,
L.P.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, File No. 000-22411).
10.3 -- 6.75% Medium-Term Note due 2001 in principal amount of
$30,000,000 issued by Summit Properties Partnership, L.P. on
July 28, 1998 (Incorporated by reference to Exhibit 10.2 of
Summit Properties Partnership, L.P.'s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1998, File
No. 000-22411).
12.1 -- Statement Regarding Calculation of Ratio of Earnings to
Fixed Charges for the Three and Six Months ended June 30,
1998 (filed herewith).
27.1 -- Financial Data Schedule -- Six Months ended June 30, 1998
(for SEC use only) (filed herewith).
27.2 -- Revised Financial Data Schedule -- Six Months ended June 30,
1997 (for SEC use only) (filed herewith).
</TABLE>
<PAGE> 1
EXHIBIT 12.1
SUMMIT PROPERTIES INC.
CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES
THREE AND SIX MONTHS ENDED JUNE 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30 June 30
------------ ----------
<S> <C> <C>
Fund from operations before fixed charges:
Income (loss) before minority interest of
unitholders in Operating Partnership and
extraordinary items $ 15,868 $ 22,760
Interest:
Expense incurred 7,458 14,446
Amortization of deferred financing costs 203 513
------------ ----------
Total $ 23,529 $ 37,719
============ ==========
Fixed charges:
Interest expense $ 7,458 $ 14,446
Interest capitalized 1,495 2,629
Rental fixed charges 34 73
Amortization of deferred financing costs 203 513
------------ ----------
Total $ 9,190 $ 17,661
============ ==========
Ratio of earnings to fixed charges 2.56 2.14
============ ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,387
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,011,751
<DEPRECIATION> 114,258
<TOTAL-ASSETS> 922,790
<CURRENT-LIABILITIES> 0
<BONDS> 539,201
0
0
<COMMON> 247
<OTHER-SE> 338,856
<TOTAL-LIABILITY-AND-EQUITY> 922,790
<SALES> 67,385
<TOTAL-REVENUES> 67,810
<CGS> 0
<TOTAL-COSTS> 23,885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,959
<INCOME-PRETAX> 22,760
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,450
<DISCONTINUED> 158
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,292
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,346
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 814,941
<DEPRECIATION> 93,936
<TOTAL-ASSETS> 748,922
<CURRENT-LIABILITIES> 0
<BONDS> 398,890
0
0
<COMMON> 231
<OTHER-SE> 316,762
<TOTAL-LIABILITY-AND-EQUITY> 748,922
<SALES> 55,006
<TOTAL-REVENUES> 55,352
<CGS> 0
<TOTAL-COSTS> 20,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,592
<INCOME-PRETAX> 18,150
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,369
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
