<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended March 31, 1998
--------------
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
Commission file number 33-85492
------------
CP LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
MARYLAND 38-3140664
(State or other jurisdiction (IRS Employer
of incorporation or organization) (Identification No.)
6430 SOUTH QUEBEC STREET, ENGLEWOOD, CO 80111
(Address of principal executive offices, including zip code)
(303) 741-3707
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
CP LIMITED PARTNERSHIP
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 1998 and 1997 1
Condensed Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997 2
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION 13
SIGNATURES 14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997.
(IN THOUSANDS, EXCEPT PER OP UNIT DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
Revenues:
Rental income $39,093 $28,908
Management fee, interest and other income 1,112 468
------- -------
40,205 29,376
Expenses:
Property operating and maintenance 11,076 8,008
Real estate taxes 2,955 2,129
Depreciation and amortization 9,109 6,677
Administrative 2,150 1,546
Interest and related amortization 7,546 5,428
------- -------
32,836 23,788
------- -------
Net income $ 7,369 $ 5,588
======= =======
Net income attributed to:
General partners $ 6,590 $ 4,455
Limited partners 779 1,133
------- -------
$ 7,369 $ 5,588
======= =======
Basic earnings per OP unit outstanding $ .25 $ .24
======= =======
Diluted earnings per OP unit outstanding $ .25 $ .24
======= =======
Distribution declared per OP unit outstanding $ .455 $ .43
======= =======
Weighted average OP units outstanding 29,486 23,480
======= =======
</TABLE>
The accompanying notes are an integral
part of the financial statements.
1
<PAGE> 4
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
-------- -----------
<S> <C> <C>
Rental property:
Land $124,657 $111,832
Land and improvements for expansion sites 16,999 14,437
Depreciable property 790,106 709,906
-------- --------
931,762 836,175
Less accumulated depreciation 121,302 112,314
-------- --------
Net rental property 810,460 723,861
Cash and cash equivalents 441 14,910
Receivables 2,857 2,936
Notes receivable 8,124 8,143
Investment in and advances to affiliates 33,575 21,646
Prepaid expenses and other assets 10,799 11,242
-------- --------
Total assets $866,256 $782,738
======== ========
LIABILITIES
Debt $409,552 $387,015
Accounts payable and accrued expenses 19,896 19,757
Tenants, security deposits and rents received in advance 7,554 5,580
Accrued distributions 13,858 12,148
-------- --------
Total liabilities 450,860 424,500
PARTNERS' CAPITAL, Unlimited Authorized units; 30,473,857 and
28,250,803 OP units outstanding at March 31, 1998 and
December 31, 1997, respectively
General partners 372,576 322,966
Limited partners 42,820 35,272
-------- --------
Total partners' capital 415,396 358,238
-------- --------
Total liabilities and partners' capital $866,256 $782,738
======== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
2
<PAGE> 5
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 7,369 $ 5,588
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,109 6,677
Amortization of deferred financing costs 186 108
Decrease (increase) in operating assets 244 (6,555)
Increase in operating liabilities 2,113 3,663
-------- --------
Net cash provided by operating activities 19,021 9,481
Cash flows from financing activities:
Borrowings on the line of credit (23,145) (4,485)
Payments on the line credit 23,145
Mortgage principal payments (572) (267)
Distributions to OP Unitholders (12,144) (5,871)
OP Units reacquired and retired -- (19,851)
Proceeds from the issuance of OP Units 53,924 25,477
Other financing activities 99 669
-------- --------
Net cash provided by (used in) financing activities 41,307 (4,328)
Cash flows from investing activities:
Acquisition of rental properties (61,168) --
Additions to rental property (1,700) (3,303)
Investment in and advances to joint ventures/affiliates (11,929) --
Payment of merger costs -- (2,316)
-------- --------
Net cash used in investing activities (74,797) (5,619)
-------- --------
Decrease in cash and cash equivalents (14,469) (466)
Cash and cash equivalents, beginning of period 14,910 586
-------- --------
Cash and cash equivalents, end of period $ 441 $ 120
======== ========
Supplemental cash flow information:
Fair Market Value of OP Units issued in connection with acquisitions $ 9,620 $ 98
======== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 6
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY:
The accompanying unaudited condensed consolidated financial statements of
CP Limited Partnership (the "Company"), have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. 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
considered necessary for a fair presentation have been included, and such
adjustments are of a normal recurring nature. The year-end condensed
consolidated balance sheet was derived from audited consolidated financial
statements, but does not include all disclosures required by generally
accepted accounting principles. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
Chateau Communities, Inc. ("Chateau"), a Real Estate Investment Trust
("REIT"), is the sole general partner of the Company.
On February 11, 1997, Chateau completed a strategic merger of equals (the
"Merger") with ROC Communities, Inc. ("ROC"). The Merger and related
transactions were accounted for using the purchase method of accounting in
accordance with generally accepted accounting principles. Accordingly, the
assets and liabilities of ROC were adjusted to fair value for financial
accounting purposes and the results of operations of ROC were included in
the results of operations of the Company beginning in February 1997.
2. ACQUISITION OF RENTAL PROPERTIES
During the first quarter of 1998, the Company completed the following
acquisitions:
<TABLE>
<CAPTION>
Acquisition Acquisition Purchase
Date and Location Price
---- ------------ -----
(in thousands)
<S> <C> <C>
January 1998 Purchase of 2 communities in South Carolina $15,806
(961 homesites)
January 1998 Purchase of 11 manufactured home communities and
3 park model/RV communities in Connecticut (4) and
Florida (10) (1,372 homesites and 1,359 park
model/RV sites) $41,130
March 1998 Purchase of 6 communities in Indiana (5) and
Michigan (1,521 homesites) $36,960
-------
$93,896
=======
</TABLE>
4
<PAGE> 7
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
3. ACQUISITION OF RENTAL PROPERTIES CONTINUED:
The purchase price of the acquired communities was paid (in thousands) as
follows:
<TABLE>
<S> <C>
Borrowings(1) $ 25,000
Mortgages and other notes 23,108
Available cash, net of cash borrowed(2) 36,168
Issuance of OP units (370,000)(3) 9,620
--------
Total purchase price $ 93,896
========
</TABLE>
(1) Borrowings were made on the Company's line of credit, which were
subsequently repaid with the proceeds received from the capital
contribution made by Chateau from its issuance of common stock in
February 1998.
(2) Includes cash remaining from the December 1997 MOPPRS and February
1998 capital contribution.
(3) Does not include 26,000 units to be issued following closing. The OP
Units were issued in private transactions exempt from the registration
requirements of the Securities Act of 1933, pursuant to section 4(2)
and or Regulation D thereunder.
As of March 31, 1998, the Company owned 153 communities with an aggregate
of 47,654 residential homesites and 1,359 park model/RV sites. In addition,
it fee managed 7,200 residential homesites in 33 communities.
4. EQUITY TRANSACTIONS:
In February 1998, Chateau received net proceeds of approximately $53.9
million from the issuance of 1,850,000 shares of its common stock. Chateau
contributed the proceeds to the Company in exchange for the issuance of the
same number of OP Units to Chateau. The contribution was used to reduce
outstanding balances under the Company's line of credit from the January
1998 acquisitions and for the March 1998 acquisitions.
On February 25, 1998, the Company declared a cash distribution of $.455 per
OP Unit to OP Unitholders of record as of March 31, 1998. The distribution
was paid on April 14, 1998 and is included in accrued distributions in the
accompanying condensed consolidated balance sheet as of March 31, 1998.
On November 20, 1997, the Company declared a cash distribution of $.43 per
OP Unit to OP Unitholders of record as of December 29, 1997. The
distribution was paid on January 15, 1998 and is included in accrued
distributions in the accompanying condensed balance sheet as of December
31, 1997.
5
<PAGE> 8
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
4. EQUITY TRANSACTIONS CONTINUED:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
SFAS No. 128 establishes standards for computing and presenting earnings
per share ("EPS") and replaces the presentation of primary EPS with a
presentation of basic EPS and diluted EPS, as summarized in the table
below:
<TABLE>
<CAPTION>
(In thousands, except per OP Unit data) FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Basic EPS:
Income................................. $ 7,369 $ 5,588
OP Units .............................. 29,486 23,480
Per OP Unit ........................... $ .25 $ .24
Diluted EPS:
Income .................................. $ 7,369 $ 5,588
OP Units (1) ............................ 29,822 23,702
Per OP Units ............................ $ .25 $ .24
</TABLE>
(1) Represents the weighted average OP Units outstanding, as well as
dilutive Chateau stock options
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income.
SFAS 130 is designed to report a measure of all changes in equity of an
enterprise that result from recognized transactions and other economic
events of the period other than transactions with owners in their capacity
as owners. Besides net income, other comprehensive income includes foreign
currency items, minimum pension liability adjustments, and unrealized gains
and losses on certain investments in debt and equity securities. The
Company has no items of other comprehensive income in any period presented
in the accompanying interim financial statements.
5. DEBT:
The following table sets forth certain information regarding debt at March
31, 1998.
<TABLE>
<CAPTION>
Weighted
Interest Rate Maturity Date Principal Balance
------------- ------------- -----------------
<S> <C> <C> <C>
Fixed Rate Mortgage Debt 7.86 % 1998-2011 $ 120,414
Unsecured Senior Notes 7.46 % 2000-2004 245,000
Unsecured Lines of Credit 6.75 % -- 25,000
Other notes payable various various 19,138
---------
$ 409,552
</TABLE> =========
6
<PAGE> 9
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
6. SUBSEQUENT EVENTS:
In April 1998, the Company completed the acquisition of 11 manufactured
home communities, in Michigan (9) and North Carolina (2), containing
approximately 3,000 homesites, for an aggregate purchase price of
approximately $76 million. These acquisitions were financed by $45 million
in borrowings under the Company's line of credit, the issuance of 551,251
OP Units and the assumption of mortgage debt of $12.5 million with an
average interest rate of 7.9 percent. The OP Units were issued in private
transactions exempt from the registration requirements of the Securities
Act of 1933, pursuant to section 4(2) and or Regulation D thereunder.
On April 20, 1998, the Company completed the issuance of $75 million of
8.125% Series A Cumulative Redeemable Preferred Units (the "Series A
Preferred Units"). The proceeds of which were used to pay off the
outstanding balances on the Company's line of credit, which were used to
finance the acquisition of the properties in April and to pay off the $25
million term loan. The Series A Preferred Units were issued in a private
transaction exempt from the registration requirements of the Securities Act
of 1933 by virtue of Section 4(2) thereunder.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
report. Certain statements in this discussion constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company or industry to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
On February 11, 1997, Chateau completed a strategic merger of equals (the
"Merger") with ROC Communities, Inc. ("ROC"). The Merger and related
transactions were accounted for using the purchase method of accounting in
accordance with generally accepted accounting principles. Accordingly, the
assets and liabilities of ROC were adjusted to fair value for financial
accounting purposes and the results of operations of ROC were included in the
results of operations of the Company beginning in February 1997.
RESULTS OF OPERATIONS
Comparison of three months ended March 31, 1998 to three months ended March 31,
1997
For the three months ended March 31, 1998, net income was $7,369,000, an
increase of $1,781,000 from the three months ended March 31, 1997. The increase
was due primarily to the Merger and increased net operating income from
communities owned by the Company or ROC at the beginning of the 1997 period
(Core 1997 Portfolio).
Rental revenue for the three months ended March 31, 1998 was $39,093,000; an
increase of $10,185,000 from the three months ended March 31, 1997. The majority
of the increase was due to the Merger and to the acquisitions in 1997 and the
first quarter of 1998. The remaining increase was due to rent increases and
occupancy gains in the Company's Core 1997 Portfolio.
Weighted average occupancy for the three months ended March 31, 1998 was 42,684
sites compared with 32,809 sites for the same period in 1997. The occupancy rate
was 92 percent on approximately 47,700 sites as of March 31, 1998, compared to
92.3 percent on approximately 43,000 sites as of March 31, 1997. The decrease in
the occupancy rate is primarily due to the increase in available sites added
through expansions of existing communities and acquisitions of properties with
lower occupancy rates that are in some phase of development. The occupancy rate
on the stabilized portfolio was 93.5 percent as of March 31, 1998. On a per site
basis, weighted average monthly rental revenue for the three months ended March
31, 1998 was $293 compared with $285 in the same period of 1997. For the
Company's Core 1997 Portfolio, on a per site basis, weighted average monthly
rental revenue for the three months ended March 31, 1998 was $296 compared with
$281 for the same period in 1997, an increase of 5.3 percent.
Management fee, interest and other income primarily includes management fee
income for the management of 33 manufactured home communities, equity earnings
from the Company's sales subsidiary and interest income on notes receivable and
advances to joint ventures/affiliates.
Property operating and maintenance expense for the three months ended March 31,
1998 increased by $3,068,000 or 38.4 percent from the same period a year ago.
The majority of the increase was due to the Merger and the 1997 and 1998
acquisitions. The remaining increase is due to increases in the Company's Core
1997 Portfolio. On a per site basis, monthly weighted average property operating
and maintenance expense increased 6.3 percent from $81 for the three months
ended March 31, 1997 to $87 for the same period in 1998. A portion of this
increase is due to the operating expenses related to the properties managed by
the Company for a management fee beginning in February 1997.
8
<PAGE> 11
Real estate taxes for the three months ended March 31, 1998, increased by
$826,000 or 38.8 percent from the three months ended March 31, 1997. The
increase is due primarily to the Merger and acquisitions and expansions of
communities and general increases. On a per site basis, monthly weighted real
estate taxes were $23.08 for the three months ended 1998 compared to $21.63 for
the same period in 1997. Real estate taxes may increase or decrease due to
inflation, expansions and improvements of communities, as well as changes in
taxation in the tax jurisdictions in which the Company operates.
Administrative expense for the three months ended March 31, 1998 increased due
to the Merger and the Company's increased size. Administrative expense in 1998
was 5.35 percent of revenues as compared to 5.26 percent in 1997.
Interest and related amortization costs increased for the three months ended
March 31, 1998 by $2,118,000, as compared with the three months ended March 31,
1997. The increase is attributable to the indebtedness incurred to finance the
1997 and 1998 acquisitions. Interest expense as a percentage of average debt
outstanding decreased to approximately 7.48 percent in 1998 from approximately
7.57 percent in 1997. The decrease is due primarily to the issuance of $100
million of the Mandatory Par Put Remarketing Securities in December 1997 at an
effective rate of 6.44 percent and a lower borrowing rate of 110 basis points
over LIBOR on the Company's line of credit.
Depreciation expense for the three months ended March 31, 1998 increased $2.4
million from the same period a year ago. The increase is directly attributable
to the Merger and acquisitions. Depreciation expense as a percentage of average
depreciable rental property in 1998 remained relatively unchanged from 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $19,021,000 for the three months
ended March 31, 1998, compared to $9,481,000 for the three months ended March
31, 1997. The increase in cash provided by operating activities was due
primarily to the increase in net operating income.
Net cash provided by financing activities for the three months ended March 31,
1998 was $41,307,000. This was due primarily to the cash contribution from
Chateau from proceeds received by Chateau from the issuance of common stock of
approximately $53.9 million, offset partially by $12.1 million in distributions
paid to OP Unitholders in the first quarter of 1998.
Net cash used in investing activities for the three months ended March 31, 1998
was $74,797,000. This amount represented acquisitions, joint venture
investments, capital expenditures and construction and development costs. In the
first quarter of 1998, the Company acquired, through three separate portfolio
acquisitions, 19 manufactured home communities and three park model/RV
communities with a total of 3,854 homesites and 1,359 park model/RV sites. Nine
of the properties acquired, containing approximately 900 homesites and 1,100
park model/RV sites, are subject to long term ground leases. The Company's total
investment of $93.9 million was financed primarily by the assumption of $23.1
million of mortgage and other notes, the issuance of 370,000 OP Units, borrowing
under the Company's line of credit and cash contributions from Chateau from
proceeds received by Chateau from the issuance of 1.85 million common shares by
Chateau in February 1998. The proceeds of $53.9 million were used for the above
transactions and to repay the Company's line of credit. For the three months
ended March 31, 1998, construction and development costs, including joint
venture investments were approximately $12.5 million, while recurring property
capital expenditures, other than construction and development costs, were
approximately $800,000. Capital expenditures have historically been financed
with funds from operations and it is the Company's intention that such future
expenditures will be financed with funds from operations.
9
<PAGE> 12
The Company has available two credit facilities with the First National Bank of
Chicago and other lenders, consisting of a $25 million term loan and a $75
million revolving line of credit (the "First Chicago Credit Facilities"). The
interest rate on the revolving credit facility was reduced to LIBOR plus 110
basis points (from LIBOR plus 150 basis points). In addition, the Company
secured a $7.5 million revolving line of credit from Colorado National Bank
which bears interest at a rate of LIBOR plus 125 basis points (the "CNB
Facility" and , together with the First Chicago Credit Facilities, the "Credit
Facilities"). As of March 31, 1998, approximately $25 million was outstanding
under the Credit Facilities and the Company had available $82.5 million in
additional borrowing capacity.
In December 1997, the Company issued 6.92% Mandatory Par Put Remarketed
Securities(SM) ("MOPPRS(SM)") due December 10, 2014. The net proceeds to the
Company from the issuance before deducting offering expenses, were approximately
$102.0 million. The net proceeds from the MOPPRS(SM) were utilized primarily to
reduce outstanding balances under the Credit Facilities and to finance
acquisitions. The MOPPRS(SM) are rated as "BBB" by Standard & Poor's Rating
Service and "Baa3" by Moody's Investors Service.
In connection with the issuance of the MOPPRS(SM), the Company and Chateau
entered into a Remarketing Agreement, dated as of December 23, 1997 (the
"Remarketing Agreement"), with the remarketing dealer named therein (the
"Remarketing Dealer"), pursuant to which the MOPPRS(SM) are subject to
mandatory tender in favor of the Remarketing Dealer on December 10, 2004 (the
"Remarketing Date"), for a purchase price equal to 100% of the principal amount
of the outstanding MOPPRS(SM). Upon the Remarketing Dealer's election to
remarket the MOPPRS(SM), the interest rate to the December 10, 2014 maturity
date of the MOPPRS(SM) will be adjusted to equal the sum of 5.75% plus the
Applicable Spread (as defined in the Remarketing Agreement). In the event the
Remarketing Dealer does not elect to remarket the MOPPRS(SM), the MOPPRS(SM)
will mature on the Remarketing Date.
As of March 31, 1998, the Company had outstanding, in addition to the Credit
Facilities and the MOPPRS(SM), $145 million of other unsecured senior debt with
a weighted average interest rate and maturity of 8.2 percent and 3.75 years,
respectively, and $120 million of secured mortgage debt with a weighted average
interest rate and maturity of 7.86 percent and 2.5 years, respectively.
Repayment of long-term borrowings and amounts outstanding under the Credit
Facilities, future acquisitions of communities and land for development and new
community development activities represent the principal long-term liquidity
needs of the Company. The Company does not expect to generate sufficient funds
from operations to finance these long-term liquidity needs and instead intends
to meet its long-term liquidity requirements through additional borrowing under
the Credit Facilities or other lines of credit, the issuance of additional
equity or debt securities and the assumption of existing secured or unsecured
indebtedness.
The Company expects to meet its short-term liquidity requirements, including
expansion activities and capital expenditure requirements, through cash flow
from operations and, if necessary, borrowings under the Credit Facilities and
other lines of credit.
In April 1998, the Company completed the acquisition of 11 manufactured home
communities, in Michigan and North Carolina, containing approximately 3,000
homesites, for an aggregate purchase price of approximately $76 million. These
acquisitions were financed by $45 million in borrowings under the Company's
Credit Facilities, the issuance of 551,251 OP Units and the assumption of
mortgage debt of $12.5 million with an average interest rate of 7.9 percent.
On April 20, 1998, the Company completed the issuance of $75 million of 8.125%
Series A Cumulative Redeemable Preferred Units (the "Series A Preferred Units").
The proceeds of this issuance were used to pay off the outstanding balances on
the Company's Credit Facilities, which were used to finance the acquisition of
the properties in April and to pay off the $25 million term loan portion of the
Credit Facilities.
10
<PAGE> 13
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS 130 is
designed to report a measure of all changes in equity of an enterprise that
result from recognized transactions and other economic events of the period
other than transactions with owners in their capacity as owners. Besides net
income, other comprehensive income includes foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities. The Company has no items of other
comprehensive income in any period presented in the accompanying interim
financial statements.
OTHER
Funds from operations (FFO) is defined by the National Association of Real
Estate Investment Trusts (NAREIT) as net income excluding gains (or losses) from
debt restructuring and sales of property plus rental property depreciation and
amortization. Management believes that FFO is an important and widely used
measure of the operating performance of REITs which provides a relevant basis
for comparison among REITs. FFO (i) does not represent cash flow from operations
as defined by generally accepted accounting principles; (ii) should not be
considered as an alternative to net income as a measure of operating performance
or to cash flows from operating, investing and financing activities; and (iii)
is not an alternative to cash flows as a measure of liquidity. FFO is calculated
as follows:
<TABLE>
<CAPTION>
For the Quarter
ended March 31
-------------------
1998 1997
------- -------
<S> <C> <C>
Income before minority interest $ 7,369 $ 5,588
Depreciation of rental property 8,936 6,544
Amortization of other intangibles 111 77
------- -------
Funds from operations $16,416 $12,209
======= =======
</TABLE>
11
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Three separate purported class actions have been filed against the Company and
its directors in the Circuit Court of Montgomery County, Maryland alleging
breaches of fiduciary duty for agreeing to the Merger with ROC and refusing to
endorse alternative transactions proposed by Manufactured Home Communities, Inc.
or Sun Communities, Inc. The three class actions are entitled Harbor Finance
Partners v. Chateau Properties, et al. (Case No. 157467), Niles v. Chateau
Properties, et al. (Case No. 158284), and ZSA Asset Allocation Fund v. Boll, et
al. (Case No. 158652) and were filed on or about September 12, 1996, September
27, 1996 and October 4, 1996, respectively.
Chateau agreed to settle the Harbor, Niles, and ZSA actions brought in 1996 for
$287,000 plus expenses not to exceed $25,000, subject to court approval.
Reimbursement from Chateau's directors' and officers' liability insurer, Genesis
Insurance, Co., is being pursued in the amount of approximately $1.1 million,
which includes the amount of the settlement plus expenses incurred in the course
of the defense and settlement of these actions.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters for a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
The Company's Form 8-K filed with the Commission on January 21, 1998.
13
<PAGE> 16
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, and in the capacities indicated, on the
13th day of May, 1998.
CP LIMITED PARTNERSHIP
By: CHATEAU COMMUNITIES, INC.
By: /s/ Tamara D. Fischer
----------------------------
Tamara D. Fischer
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
14
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 441
<SECURITIES> 0
<RECEIVABLES> 10,981
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 931,762
<DEPRECIATION> 121,302
<TOTAL-ASSETS> 866,256
<CURRENT-LIABILITIES> 0
<BONDS> 409,552
0
0
<COMMON> 0
<OTHER-SE> 415,396
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 40,205
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,546
<INCOME-PRETAX> 7,369
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,369
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 586
<SECURITIES> 0
<RECEIVABLES> 3,157
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 300,631
<DEPRECIATION> 81,293
<TOTAL-ASSETS> 232,066
<CURRENT-LIABILITIES> 0
<BONDS> 168,315
0
0
<COMMON> 0
<OTHER-SE> 42,743
<TOTAL-LIABILITY-AND-EQUITY> 232,066
<SALES> 0
<TOTAL-REVENUES> 67,384
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,962
<INCOME-PRETAX> 16,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,100
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.08
</TABLE>
