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UNITED STATES
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
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
CHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 1996
Commission file number: 000-26572
NHP INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1445137
- -------- ----------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
8065 LEESBURG PIKE, SUITE 400, VIENNA, VIRGINIA 22182-2738
- ----------------------------------------------- ----------
Address of principal executive offices Zip Code
Registrant's telephone number including area code (703) 394-2400
--------------
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At October 31, 1996, there were 12,566,629 shares of common stock outstanding.
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NHP INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations
- Three Months Ended September 30, 1996 and 1995 1
Consolidated Statements of Operations
- Nine Months Ended September 30, 1996 and 1995 2
Consolidated Balance Sheets
- September 30, 1996 and December 31, 1995 3
Consolidated Statements of Cash Flows
- Nine Months ended September 30, 1996 and 1995 4
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 23
SIGNATURES 24
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NHP INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
<S> <C> <C>
Revenue:
Property management services $14,001 $12,068
On-Site personnel, general and administrative cost
reimbursement 30,448 29,899
Financial services 6,316 -
Financial services interest income 1,133 -
Administrative and reporting fees 1,029 924
Other 2,455 986
------- -------
Total revenue 55,382 43,877
Expenses:
Salaries and benefits:
On-Site employees 28,838 28,805
Off-Site employees 10,199 5,385
Other general and administrative 6,077 2,584
Costs charged to the Real Estate Companies 1,610 1,094
Financial services operating interest 175 -
Provision for loan servicing losses 247 -
Amortization of purchased management contracts 1,114 781
Amortization of mortgage servicing rights 1,024 -
Other depreciation and amortization 834 172
------- -------
Total expenses 50,118 38,821
------- -------
Operating income 5,264 5,056
Interest income 47 68
Interest expense (1,312) (1,385)
------- -------
Income from continuing operations before income
taxes and extraordinary item 3,999 3,739
(Provision) benefit for income taxes (1,676) 19,981
------- -------
Income from continuing operations before
extraordinary item 2,323 23,720
Income from discontinued real estate operations, net
of income taxes - 90
------- -------
Income before extraordinary item 2,323 23,810
Extraordinary item - write-off of deferred costs
associated with terminated credit agreement, net of
income tax benefit - (400)
------- -------
Net income $ 2,323 $23,410
======= =======
Net income (loss) per common share:
Continuing operations before extraordinary item $ 0.18 $ 2.35
Discontinued operations - 0.01
Extraordinary item - (0.04)
------- -------
Net income $ 0.18 $ 2.32
======= =======
Weighted average common and equivalent shares
outstanding (in thousands) 12,797 10,074
======= =======
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements
are an integral part of these statements.
1
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NHP INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
<S> <C> <C>
Revenue:
Property management services $ 40,566 $ 35,231
On-Site personnel, general and administrative
cost reimbursement 92,194 87,756
Financial services 12,911 -
Financial services interest income 2,247 -
Administrative and reporting fees 2,913 2,772
Other 4,812 3,037
-------- --------
Total revenue 155,643 128,796
Expenses:
Salaries and benefits:
On-Site employees 89,245 84,336
Off-Site employees 25,103 16,264
Other general and administrative 14,460 8,568
Costs charged to the Real Estate Companies 2,949 3,420
Financial services operating interest 595 -
Provision for loan servicing losses 503 -
Amortization of purchased management contracts 3,007 2,256
Amortization of mortgage servicing rights 1,975 -
Other depreciation and amortization 1,598 473
Other non-recurring expenses - 45
-------- --------
Total expenses 139,435 115,362
-------- --------
Operating income 16,208 13,434
Interest income 331 220
Interest expense (2,868) (5,292)
-------- --------
Income from continuing operations before income
taxes and extraordinary item 13,671 8,362
(Provision) benefit for income taxes (5,620) 19,981
-------- --------
Income from continuing operations before
extraordinary item 8,051 28,343
Loss from discontinued real estate operations, net of
income taxes - (1,963)
-------- --------
Income before extraordinary item 8,051 26,380
Extraordinary item - write-off of deferred costs
associated with terminated credit agreement, net
of income tax benefit - (400)
-------- --------
Net income $ 8,051 $ 25,980
======== ========
Net income (loss) per common share:
Continuing operations before extraordinary item $ 0.63 $ 3.25
Discontinued operations - (0.22)
Extraordinary item - (0.05)
-------- --------
Net income $ 0.63 $ 2.98
======== ========
Weighted average common and equivalent shares
outstanding (in thousands) 12,717 8,717
======== ========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements
are an integral part of these statements.
2
<PAGE> 5
NHP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,237 $ 5,996
Receivables, substantially all from related
parties, net of allowance for doubtful
accounts of $2,411 and $1,613 in 1996 and
1995, respectively 9,082 12,809
Mortgage loans held for sale, pledged 55,496 -
On-Site cost reimbursement receivable,
substantially all from related parties 5,697 2,747
Principal, interest and other servicing
advances 3,433 -
Current portion of net deferred tax asset 7,162 5,916
Investment in Real Estate held for sale 13,608 -
Other current assets 1,346 277
-------- --------
Total current assets 101,061 27,745
Purchased management contracts, net of
accumulated amortization of $10,822 and
$8,409 in 1996 and 1995, respectively 45,183 34,568
Mortgage servicing rights, net of accumulated
amortization of $1,975 21,931 -
Goodwill, net of accumulated amortization
of $500 9,795 -
Property, equipment and capitalized software,
net of accumulated depreciation and
amortization of $2,837 and $1,780 in 1996
and 1995, respectively 11,015 3,523
Other 18,135 4,483
Net deferred tax asset 5,878 14,451
-------- --------
$212,998 $ 84,770
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt, including
amounts payable to related parties of $356
in 1996 and 1995 $ 1,919 $ 412
Warehouse lines of credit - financial
services 52,885 -
Accounts payable 4,451 4,063
Accrued expenses, including amounts
associated with related parties of
$2,513 and $4,365 in 1996 and 1995,
respectively 14,878 10,001
Accrued on-site salaries and benefits 5,697 2,747
Deferred revenues and other 5,246 2,232
-------- --------
Total current liabilities 85,076 19,455
Long-term debt, including amounts payable
to related parties of $139 in 1996 and 1995 66,438 23,278
Other long-term liabilities 9,288 2,883
-------- --------
Total liabilities 160,802 45,616
Commitments and contingencies (Note 5)
Shareholders' equity (deficit)
Common stock, $0.01 par value,
25,000,000 shares authorized;
12,568,675 and 12,264,675 shares issued
in 1996 and 1995, respectively 126 123
Additional paid-in capital 131,320 126,293
Treasury stock (shares held in 1996, 2,046) (39) -
Accumulated deficit (79,211) (87,262)
-------- --------
Total shareholders' equity 52,196 39,154
-------- --------
$212,998 $ 84,770
======== ========
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements
are an integral part of these statements.
3
<PAGE> 6
NHP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 8,051 $ 25,980
Extraordinary item - 400
Loss from discontinued operations, net of
income taxes - 1,963
--------- ---------
Income from continuing operations 8,051 28,343
Depreciation and amortization 6,580 2,729
Income on originated mortgage servicing rights (1,813) -
Income taxes 3,580 (19,981)
Decrease (increase) in receivables, substantially
all from related parties 993 (2,657)
Decrease in Financial Services principal, interest
and servicing advances 287 -
Increase in deferred costs and other (1,751) (926)
Increase (decrease) in accounts payable and
accrued expenses 1,725 (555)
Increase (decrease) in deferred revenues and
other liabilities 3,636 (203)
Increase in warehouse line of credit, net 38,904 -
Mortgage loans originated (438,472) -
Mortgage loans sold 397,412 -
Other 144 583
--------- ---------
Net cash provided by continuing operations 19,276 7,333
Net cash used in discontinued operations - (8,554)
--------- ---------
Net cash provided by (used in) operating activities 19,276 (1,221)
--------- ---------
Cash Flows From Investing Activities:
Purchases of businesses, net of cash acquired (12,253) -
Investment in real estate held for sale (13,608) -
Purchase of management contracts (8,708) (11,767)
Purchases of long-term notes receivable (9,516) -
Purchase of mortgage servicing rights (2,957) -
Purchase of fixed assets (5,492) (1,733)
--------- ---------
Net cash used in investing activities (52,534) (13,500)
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements
are an integral part of these statements.
4
<PAGE> 7
NHP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
<S> <C> <C>
Cash Flows From Financing Activities:
Additional borrowings 52,016 27,207
Repayments of debt (20,065) (58,466)
Repurchase of common stock from related parties - (375)
Borrowings from related parties - 1,119
Repayments of notes payable to related parties - (10,369)
Proceeds from issuance of common stock, net - 51,987
Proceeds from stock option exercises 1,000 -
Payment of financing, offering and disposition costs (452) (3,751)
--------- ---------
Net cash provided by financing activities 32,499 7,352
--------- ---------
Decrease in cash and cash equivalents (759) (7,369)
Cash and Cash Equivalents, beginning of period 5,996 12,090
--------- ---------
Cash and Cash Equivalents, end of period $ 5,237 $ 4,721
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash interest payments $ 2,211 $ 6,232
Cash income tax payments $ 2,040 $ 303
Non-cash items:
Notes payable given as consideration for
acquisitions $ 6,293 $ -
Stock issued for acquisition of NHP Financial
Services, Ltd. $ 3,780 $ -
Reduction in notes payable to related parties
in consideration for the sale of the Real
Estate Companies $ - $ 9,129
</TABLE>
The accompanying Notes to Unaudited Consolidated Financial Statements
are an integral part of these statements.
5
<PAGE> 8
NHP INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and include the accounts of NHP Incorporated (the "Company") and its
wholly-owned subsidiaries. Although certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating results
for the three and nine month periods ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. These unaudited consolidated financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1995
and in conjunction with the financial statements and notes thereto for WMF
Holdings, Ltd., filed as Exhibit 99.1 of the Company's 8-K/A filed with the
Securities and Exchange Commission on May 29, 1996, for the years ended December
31, 1995 and 1994. In the opinion of the Company, the unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results for the
three and nine month periods ended September 30, 1996 and 1995. Certain prior
year amounts have been reclassified to conform to current year presentation.
On August 18, 1995, the Company sold those of its subsidiaries which held
all of the Company's direct and indirect interests in property-owning
partnerships, along with its captive insurance subsidiary and certain other
related assets (collectively referred to as the "Real Estate Companies") to the
two controlling shareholders of the Company, Demeter Holdings Corporation
("Demeter") and Capricorn Investors, L.P. ("Capricorn"), and J. Roderick Heller,
III, the Chairman, President and CEO of the Company ("Mr. Heller"). The
financial statements include the accounts of the Real Estate Companies through
August 18, 1995, presented as discontinued operations. The Company continues to
provide services to the Real Estate Companies and, therefore, revenues and
expenses between the Company and the Real Estate Companies have not been
eliminated from the Company's revenues and expenses in the accompanying
unaudited consolidated financial statements. All other material intercompany
accounts and transactions have been eliminated in consolidation.
(2) ACQUISITIONS
NHP FINANCIAL SERVICES
As of April 1, 1996, NHP Incorporated closed the acquisition of all of the
outstanding capital stock of WMF Holdings, Ltd., which was subsequently renamed
NHP Financial Services, Ltd., for consideration of approximately $21 million in
the form of $16.8 million in cash and 210,000 shares of the Company's common
stock. NHP Financial Services, Ltd., is the owner of Washington Mortgage
Financial Group, Ltd. ("Washington Mortgage Financial") of Fairfax County,
Virginia, one of the nation's leading multifamily mortgage originators and
servicers (collectively, "NHP Financial Services"). Included in Washington
Mortgage Financial is WMF/Huntoon, Paige Associates Limited ("WMF/Huntoon,
Paige"), a leading FHA mortgage originator and servicer located in Edison, New
Jersey. The transaction has been accounted for under the purchase method of
accounting. All assets acquired were recorded at their estimated fair value
which resulted in recording an identifiable intangible asset of approximately
$19.1 million related to acquired servicing rights. In addition, the Company
also recorded approximately $5.2 million of goodwill related to the transaction.
The goodwill is being amortized over seven years. The acquired servicing rights
are being amortized over periods up to seven years. Operating results of NHP
Financial Services are included with those of the Company from the closing date.
6
<PAGE> 9
NHP INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma combined financial information presents the
historical results of operations for the Company and NHP Financial Services for
the three and nine month periods ended September 30, 1996 and 1995, with pro
forma adjustments as if NHP Financial Services had been acquired as of the
beginning of the periods presented. The pro forma information is based upon
certain estimates and assumptions that the Company believes are reasonable in
the circumstances. The pro forma information is not necessarily indicative of
what the results of operations actually would have been if the transaction had
occurred on the dates indicated, or of future operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Total revenues $55,382 $49,548 $162,859 $144,496
======= ======= ======== ========
Operating income $ 5,264 $ 5,208 $ 17,233 $ 14,250
======= ======= ======== ========
Net income $ 2,323 $23,199 $ 8,226 $ 25,565
======= ======= ======== ========
Net income per share $ 0.18 $ 2.26 $ 0.64 $ 2.88
======= ======= ======== ========
</TABLE>
AMERICAN CAPITAL RESOURCE, INC.
On May 13, 1996, WMF/Huntoon, Paige, a subsidiary of Washington Mortgage
Financial, purchased the loan production system and pipeline, as well as certain
other assets, of American Capital Resource, Inc. for approximately $2.2 million,
plus potential future payments based on realization of the pipeline through
August 1997. The purchase has been accounted for under the purchase method of
accounting and results in WMF/Huntoon, Paige becoming the nation's largest FHA-
insured multifamily loan originator.
GOLDBERG ACQUISITION
As of July 12, 1996, the Company, directly and through subsidiaries,
acquired the long-term management rights and certain notes receivable from two
Florida rental retirement communities as well as all of the outstanding stock of
Preferred Home Health, Inc. (the "Goldberg Acquisition"). In addition, a
subsidiary of NHP Partners, Inc. ("Partners"), an affiliate of the Company,
acquired certain other notes receivable from the two properties and subsequently
acquired all of the issued and outstanding stock of the corporate general
partners of the limited partnership owners of the two properties. The Company
and Partners acquired these assets from affiliates of the Stephen A. Goldberg
Company of Washington, D.C. and certain other individuals. Total consideration
in the transaction was approximately $16.3 million in cash and $4.0 million in
long-term notes. The purchase price was funded through additional borrowings
under the Company's revolving credit facility and a cash payment by Partners.
The transaction was accounted for under the purchase method of accounting.
Preferred Home Health, Inc. is a provider of home health care services to
residents of multifamily rental retirement communities.
(3) INVESTMENT IN REAL ESTATE HELD FOR SALE
On May 16, 1996, the Company acquired 12 multifamily properties containing
2,905 apartment units, including the right to manage the units on a long-term
basis, from affiliates of Great Atlantic Management, Inc. for a purchase price
(including transaction costs) of approximately $86.8 million (the "Great
Atlantic Acquisition"), in the form of approximately $71.2 million in debt and
$15.6 million in cash. The Company intends to hold this investment in real
estate only until such time as a third-party investor acquires the ownership
interests in the properties and,
7
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NHP INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
accordingly, the net investment, less amounts allocated to purchased management
contracts, is recorded on the Consolidated Balance Sheet at the lower of
carrying value or fair value less estimated cost to sell. In addition, no
earnings were recognized in the period from the properties. Any earnings will be
considered an adjustment to the Company's basis in the properties. Upon
disposition of its ownership interests, the Company intends to retain the long-
term rights to manage the properties. The Company is currently in negotiations
with a potential third-party investor but there can be no assurance that these
continued negotiations will result in the sale of the Company's investment.
(4) LONG-TERM DEBT AND LINES OF CREDIT
As a result of the acquisition of NHP Financial Services, the Goldberg
Acquisition, and the Great Atlantic Acquisition, described in Notes 2 and 3
above, the Company had additional borrowings under its $75 million credit
facility as of September 30, 1996, net of repayments during the period, of
approximately $29.0 million. The balance due on the Company's credit facility as
of September 30, 1996 was $52.0 million.
In conjunction with the Real Estate Companies purchase from Southport
Financial Corporation of the general partner interests in partnerships that own
14 properties containing 2,140 units, the Company completed its acquisition of
the management rights for these properties. As consideration for the acquisition
of the management rights, the Company issued non-interest bearing notes in 1996
and 1995 in the amount of $2.5 million which are due in various quarterly
installments through the year 2000. These notes were recorded net of an
unamortized discount of $0.5 million based on an imputed interest rate of 9.5%.
During the third quarter of 1996, Washington Mortgage Financial
renegotiated the terms of its existing warehouse line of credit (the "Warehouse
Line"), which is used for the purpose of originating loans. The Warehouse Line
was increased from $80 million to $150 million. The interest rate on the
Warehouse Line is now the London Interbank Offered Rate ("LIBOR") plus one
percent. The interest rate is reduced based on the level of compensating
balances maintained. The Warehouse Line expires in August 1997, at which time
the Company expects to extend it or replace it with a similar line of credit. As
of September 30, 1996, Washington Mortgage Financial had drawn $52.9 million on
the Warehouse Line.
During the third quarter of 1996, Washington Mortgage Financial replaced
its existing separate line of credit which was used exclusively for acquisition
of mortgage servicing rights. The amount of the new servicing acquisition line
of credit (the "Servicing Acquisition Line") remained at $10 million. The
interest rate on the Servicing Acquisition Line is LIBOR plus three percent. The
interest rate is reduced based on the level of compensating balances maintained.
The debt is to be repaid in quarterly installments based on a 10 year
amortization schedule with the remaining balance due in June 2000. As of
September 30, 1996, Washington Mortgage Financial had drawn $9.2 million on the
servicing Acquisition Line.
During the third quarter of 1996, Washington Mortgage Financial also
established a new line of credit which can be utilized for servicing
acquisitions or working capital advances (the "Working Capital Line") in the
amount of $10 million. Interest on the Working Capital Line is LIBOR plus 3 1/2
percent. The interest rate is reduced based on the level of compensating
balances maintained. The Working Capital Line is convertible at the end of five
years to a five year term note with equal quarterly installments. As of
September 30, 1996, Washington Mortgage Financial had drawn $0.2 million on the
Working Capital Line.
8
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NHP INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(5) COMMITMENTS AND CONTINGENCIES
As of September 30, 1996, the Company was committed to performance
guarantees, loan guarantees and other guarantees totaling $8.7 million, which
largely relate to transactions consummated by the Real Estate Companies prior to
their sale in August 1995. The Real Estate Companies have indemnified the
Company for any costs which might be incurred by the Company related to these
guarantees. In the opinion of management, future calls, if any, on these
guarantees are not expected to have a material adverse effect on the Company's
financial position or results of operations.
NHP Financial Services bears the Level I risk of loss associated with the
loans it services under the FNMA DUS program. The Level I risk of loss imposes a
lender deductible of 5 percent of the unpaid principal balance and limits the
maximum loss to 20 percent of the original mortgage. The unpaid principal
balance of the FNMA DUS loan servicing portfolio was approximately $698.4
million at September 30, 1996. The DUS loans are secured by first liens on the
underlying multifamily properties and are concentrated primarily in Texas,
Nevada, Arizona, Ohio and New York. The Company has provided a reserve for
losses of $3.9 million as of September 30, 1996. This reserve represents
management's estimate of losses which may be incurred on loans underwritten to
date that are currently being serviced. Under the DUS program, NHP Financial
Services has also established at September 30, 1996, a $4.0 million irrevocable
letter of credit on FNMA's behalf to fund any loan losses.
(6) NET INCOME PER SHARE
On August 18, 1995, the Company completed an initial public offering
("IPO") of 4.3 million shares of its common stock for net proceeds of
approximately $52.0 million. Although application of the proceeds of the
offering reduced interest expense, net income per share subsequent to the IPO
decreased due to the increase in shares outstanding.
(7) NEW ACCOUNTING STANDARD
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS 122"), which is an amendment
to SFAS No. 65, "Accounting for Certain Mortgage Banking Activities" ("SFAS
65"). NHP Financial Services elected to adopt this statement as of January 1,
1996.
The primary difference between SFAS No. 122 and SFAS No. 65, as they relate
to NHP Financial Services, is the accounting treatment for originated mortgage
servicing rights ("OMSRs"). Substantially all of NHP Financial Services'
originations are in-house, whereby the underlying loans are funded and closed by
NHP Financial Services. SFAS No. 122, among other provisions, requires the
recognition of OMSRs, as well as purchased mortgage servicing rights ("PMSRs"),
as assets by allocating the total cost incurred between the loan and the
servicing rights based on their relative fair values if determinable based upon
a liquid market value. Under SFAS No. 65, the cost of OMSRs was included with
the cost of the related loans and was included in determining the gain or loss
on sale of the loans when the loans were sold. PMSRs were previously recorded as
assets under SFAS No. 65.
Also under SFAS 122, all capitalized mortgage servicing rights are
evaluated for impairment based on the excess of the carrying amount of the
mortgage servicing rights over their fair value. In measuring impairment, the
carrying amount must be stratified based on one or more predominant risk
characteristics of the underlying loans. Impairment is recognized through a
valuation allowance for each individual stratum. Under SFAS No. 65, the
impairment valuation could be made using either discounted or undiscounted cash
flows with no required level of disaggregation specified. Any impairment was
recorded directly against the asset.
9
<PAGE> 12
NHP INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of capitalized mortgage servicing rights, net of
accumulated amortization, included in the Consolidated Balance Sheet of
September 30, 1996:
<TABLE>
<CAPTION>
CAPITALIZED MORTGAGE
(DOLLARS IN THOUSANDS) SERVICING RIGHTS
---------------------- ---------------------
<S> <C>
Balance as of April 1, 1996 (date of acquisition) $19,135
Amortization expense (1,975)
Originations 1,964
Acquisitions 2,807
-------
Balance as of September 30, 1996 $21,931
=======
</TABLE>
NHP Financial Services has determined that only its FHA loan originations
meet the criteria for market determination. To determine the fair value of the
servicing rights created, NHP Financial Services uses a valuation model that
calculates the present value of future cash flows. Purchased and originated
mortgage servicing rights are being amortized using a straight line method over
periods up to seven years. A quarterly value impairment analysis is performed
using a discounted methodology that groups the servicing rights by predominant
risk characteristics. NHP Financial Services has determined those risk
characteristics to include interest rate and loan type. The book value of
capitalized PMSRs and OMSRs at September 30, 1996 approximated market value. No
reserve was required for the PMSRs or OMSRs.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements in certain circumstances. Certain
information included in this Report and other Company filings (collectively "SEC
Filings") under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (as well as information communicated orally or
in writing between the dates of such SEC Filings) contains or may contain
information that is forward looking, including statements regarding the effect
of government regulations and regarding the effect of acquisitions. Actual
results may differ materially from those described in the forward looking
statements and will be affected by a variety of factors including national and
local economic conditions, terms of governmental regulations that affect the
Company and interpretations of those regulations, the competitive environment in
which the Company operates, the availability of working capital, dispositions of
properties managed by the Company, and the availability of acquisition
opportunities. Additional factors that could affect results are set forth in the
Company's registrations statement on Form S-1, filed June 5, 1995, as amended.
On August 18, 1995, NHP Incorporated (the "Company") completed an initial
public offering (the "IPO") of 4.3 million shares of its common stock for net
proceeds of approximately $52.0 million. Prior to that date the Company had been
owned by various private investors. Concurrently with the closing of the IPO,
the Company sold those of its subsidiaries which held all of the Company's
direct and indirect interest in property-owning partnerships, along with its
captive insurance subsidiary and certain other related assets (collectively
referred to as the "Real Estate Companies") to the two controlling shareholders
of the Company, Demeter Holdings Corporation ("Demeter") and Capricorn
Investors, L.P. ("Capricorn"), and J. Roderick Heller, III, the Chairman,
President and Chief Executive Officer of the Company ("Mr. Heller").
Accordingly, operating results and cash flows attributable to the Real Estate
Companies through August 18, 1995, have been presented as discontinued
operations in the accompanying financial statements in conformity with generally
accepted accounting principles. The following discussion, except where
specifically stated otherwise, relates only to the Company's continuing
operations.
ACQUISITIONS AND NEW BUSINESSES
As of April 1, 1996, the Company closed the acquisition of all of the
outstanding capital stock of WMF Holdings, Ltd., which was subsequently renamed
NHP Financial Services, Ltd., for consideration of approximately $21 million, in
the form of $16.8 million in cash and 210,000 shares of the Company's common
stock. NHP Financial Services, Ltd., is the owner of Washington Mortgage
Financial Group, Ltd. ("Washington Mortgage Financial"), located in Fairfax
County, Virginia, one of the nation's leading multifamily mortgage originators
and servicers (collectively, "NHP Financial Services"). Washington Mortgage
Financial originated approximately $805 million in multifamily and other
commercial mortgages in 1995. Included in Washington Mortgage Financial is
WMF/Huntoon, Paige Associates Limited ("WMF/Huntoon, Paige"), a leading FHA
mortgage originator and servicer located in Edison, New Jersey.
As a result of the acquisition of NHP Financial Services, the Company is
now reporting on two business segments, Property Services and Financial
Services. Property Services includes the Company's property management and
related services. Financial Services includes mortgage financing and servicing
through NHP Financial Services.
On May 13, 1996, WMF/Huntoon, Paige, a subsidiary of Washington Mortgage
Financial, completed the purchase of the loan production system and pipeline, as
well as certain other assets, of American Capital Resource, Inc. for
approximately $2.2 million plus potential future payments based on realization
of the pipeline through August 1997. The purchase has been accounted for under
the purchase method of accounting and results in WMF/Huntoon, Paige becoming the
nation's largest FHA-insured multifamily loan originator.
11
<PAGE> 14
On May 16, 1996, the Company acquired 12 multifamily properties containing
2,905 apartment units, including the right to manage the units on a long-term
basis, from affiliates of Great Atlantic Management, Inc. for a purchase price
(including transaction costs) of approximately $86.8 million (the "Great
Atlantic Acquisition"), in the form of approximately $71.2 million in debt and
$15.6 million in cash. The Company intends to hold this investment in real
estate only until such time as a third-party investor acquires the ownership
interests in the properties and, accordingly, the net investment, less amounts
allocated to purchased management contracts, is recorded on the Consolidated
Balance Sheet at the lower of carrying value or fair value less estimated cost
to sell. In addition, no earnings were recognized in the period from the
properties. Any earnings will be considered an adjustment to the Company's basis
in the properties. Upon disposition of its ownership interests, the Company
intends to retain the long-term rights to manage the properties. The Company
currently is in negotiations with a potential third-party investor but there can
be no assurance that these continued discussions will result in the sale of the
Company's investment.
On February 29, 1996, the Company entered into a three-year contract with
CRI, Inc., a Rockville, Maryland-based real estate investment firm, to provide
asset management, refinancing and disposition services for 286 affordable
multifamily communities containing over 35,000 apartment units, which are owned
by 129 of CRI's public and private real estate partnerships. Revenues associated
with this contract are included in property management services fees.
As of July 12, 1996, the Company, directly and through subsidiaries,
acquired the long-term management rights and certain notes receivable from two
Florida rental retirement communities as well as all of the outstanding stock of
Preferred Home Health, Inc. ("Preferred Home Health"). In addition, a subsidiary
of NHP Partners, Inc. ("Partners"), an affiliate of the Company, acquired
certain other notes receivable from the two properties and subsequently acquired
all of the issued and outstanding stock of the corporate general partners of the
limited partnership owners of the two properties (the "Goldberg Acquisition").
The Company and Partners acquired these assets from affiliates of the Stephen A.
Goldberg Company of Washington, D.C. and certain other individuals. Total
consideration in the transaction was approximately $16.3 million in cash and
$4.0 million in long-term notes. The purchase price was funded through
additional borrowings under the Company's revolving credit facility and a cash
payment by Partners. The transaction was accounted for under the purchase method
of accounting. Preferred Home Health is a provider of home health care services
to residents of multifamily rental retirement communities. Preferred Home
Health, which the Company now operates as a separate company, represents an
expansion of the Company's Customer Services division through which services are
provided to the residents and owners of approximately 500,000 units, including
the Company's management portfolio of 701 properties containing 130,990 units.
On a going-forward basis, to the extent that the Company is successful in
acquiring new management contract rights or completing other acquisitions (such
as the acquisition of NHP Financial Services described above), the Company will
experience increased expenses associated with the amortization of the cost of
the acquired rights and, if the acquisitions are financed by additional
indebtedness, an increase in interest expense. Accordingly, acquisitions may
result in a decrease in income from continuing operations. However, the Company
intends to pursue acquisitions of property management rights and other
acquisitions that result in an increase in income from continuing operations
before interest expense, income taxes, depreciation and amortization ("EBITDA")
after all transition costs relating to the acquisition are absorbed. EBITDA is
widely used in the industry as a measure of a company's operating performance,
but should not be considered as an alternative either (i) to income from
continuing operations (determined in accordance with generally accepted
accounting principles) as a measure of profitability or (ii) to cash flows from
operating activities (determined in accordance with generally accepted
accounting principles). EBITDA does not take into account the Company's debt
service requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available for discretionary uses.
LEGISLATIVE ACTION REGARDING PROPOSED HUD REORGANIZATION AND RESTRUCTURING OF
HUD PROGRAMS
On September 26, 1996, the President signed into law H.R. 3666, providing
funding for programs administered by the U.S. Department of Housing and Urban
Development ("HUD") during the federal fiscal year
12
<PAGE> 15
ending September 30, 1997. H.R. 3666 includes provisions relating to Housing
Assistance Payments contracts ("HAP Contracts") under Section 8 of the National
housing Act of 1937. HAP Contracts provide long-term rental assistance payments
to owners of qualifying projects, including a significant number of projects
managed by the Company. H.R. 3666 provides, in part, that HAP Contracts expiring
during Fiscal Year 1997 will be renewed for one year, generally without reducing
the property rents. However, for certain expiring HAP Contracts allowing
particularly high rents, H.R. 3666 provides for contract renewal at reduced
rents and, where requested by the owner, restructuring of the government-issued
mortgage on the related property to allow the property to operate successfully
at the reduced rent levels. No legislative action has been taken with respect to
HAP Contracts expiring after September 30, 1997. While the Company does not
believe that H.R. 3666 will have a materially adverse effect on the Company's
property management revenues, there can be no assurance that future legislative
action will not have such an effect.
RESULTS OF OPERATIONS
SUMMARY
For the third quarter of 1996, the Company recorded pre-tax income of $4.0
million compared with $3.7 million for the third quarter of 1995, an improvement
of $0.3 million, or 7.0%. For the nine months ended September 30, 1996, the
Company recorded pre-tax income of $13.7 million compared with $8.4 million for
the same period of 1995, an improvement of $5.3 million, or 63.5%. Both revenues
and expenses of the Company show increases in the three and nine month periods
of 1996 over 1995, primarily as a result of the acquisition of NHP Financial
Services as of April 1, 1996, and the acquisition of additional property
management contracts and Preferred Home Health. The $0.3 million increase in
pre-tax income for the quarter was the result of an increase of approximately
$0.4 million attributable to NHP Financial Services offset by a decrease of
approximately $0.1 million attributable to other operations. Approximately $1.3
million of the year-to-date increases in pre-tax income is attributable to NHP
Financial Services. The Company's EBITDA for the third quarter of 1996 was $8.3
million compared with $6.1 million for the third quarter of 1995, an improvement
of $2.2 million, or 36.3%. EBITDA for the nine months ended September 30, 1996,
was $23.1 million compared with $16.4 million for the same period of 1995, an
improvement of $6.7 million, or 41.1%. Approximately $1.8 and $4.0 million of
the quarter and year-to-date increases in EBITDA, respectively, are attributable
to NHP Financial Services
Net income for the third quarter of 1996 was $2.3 million, including a $1.7
million provision for income taxes, compared with $23.4 million in the third
quarter of 1995. Net income for the third quarter of 1995 includes a $20.0
million income tax benefit. The income tax benefit resulted from the recognition
of a $23.3 million net asset primarily consisting of net operating loss
carryforwards ("NOLs") following the sale of the Real Estate Companies on August
18, 1995, net of the year-to-date tax provision of $3.3 million. Net income for
the first nine months of 1996 was $8.1 million, including a $5.6 million
provision for income taxes, compared with $26.0 million, including the
aforementioned tax benefit and year-to-date tax provision, for the same period
of 1995. Net income for the three and nine month periods of 1995 included $0.1
million in income and $2.0 million in losses from discontinued operations,
respectively. In addition, the Company recorded an extraordinary after-tax
charge of $0.4 million in the third quarter of 1995 related to the early
termination of a credit facility.
13
<PAGE> 16
The following table sets forth the revenues and expenses by business
segment for the three and nine month periods ending September 30, 1996. Property
Services includes the Company's property management and related services.
Financial Services includes mortgage financing and servicing since the date of
acquisition. As NHP Financial Services was acquired as of April 1, 1996, the
Company's 1995 results for the three and nine month periods ended September 30,
1995, as presented in the Consolidated Statements of Operations, represent
Property Services only and a separate table for 1995 is not presented below.
SUMMARY SEGMENT INFORMATION - 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------------- -------------------------
PROPERTY FINANCIAL PROPERTY FINANCIAL
SERVICES SERVICES TOTAL SERVICES SERVICES TOTAL
-------- --------- ----- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Property management
services $14,001 $ - $14,001 $ 40,566 $ - $ 40,566
On-site personnel,
general and
administrative cost
reimbursement 30,448 - 30,448 92,194 - 92,194
Financial services - 6,316 6,316 - 12,911 12,911
Financial services
interest income - 1,133 1,133 - 2,247 2,247
Administrative and
reporting fees 1,029 - 1,029 2,913 - 2,913
Other 2,455 - 2,455 4,812 - 4,812
------- ------ ------- -------- -------- --------
Total revenue 47,933 7,449 55,382 140,485 15,158 155,643
------- ------ ------- -------- -------- --------
EXPENSES
Salaries and benefits
On-site employees 28,838 - 28,838 89,245 - 89,245
Off-site employees 7,095 3,104 10,199 19,183 5,920 25,103
Other general and
administrative 3,987 2,090 6,077 10,288 4,172 14,460
Costs charged to the
Real Estate Companies 1,610 - 1,610 2,949 - 2,949
Financial services
operating interest - 175 175 - 595 595
Provision for loan
losses - 247 247 - 503 503
Amortization of purchased
management contracts 1,114 - 1,114 3,007 - 3,007
Amortization of acquired
servicing rights - 1,024 1,024 - 1,975 1,975
Depreciation and
amortization 529 305 834 1,010 588 1,598
------- ------ ------- -------- -------- --------
Total expenses 43,173 6,945 50,118 125,682 13,753 139,435
------- ------ ------- -------- -------- --------
Operating income $ 4,760 $ 504 $ 5,264 $ 14,803 $ 1,405 $ 16,208
======= ====== ======= ======== ======== ========
EBITDA $ 6,450 $1,833 $ 8,283 $ 19,151 $ 3,968 $ 23,119
======= ====== ======= ======== ======== ========
</TABLE>
14
<PAGE> 17
PROPERTY SERVICES
Table 1 below sets forth the percentage of Property Services' total revenue
represented by each revenue and expense line presented. This table is presented
as supplemental information to enable the reader to better analyze the change in
revenues and expenses during the three and nine months ended September 30, 1996
versus the same period of 1995. The percent of revenue comparison is intended to
make the periods more comparable by removing the absolute effect of growth in
revenues and expenses which results from expansion of the Company's business.
TABLE 1 - PROPERTY SERVICES
SUMMARY FINANCIAL OPERATIONAL DATA - REVENUE AND EXPENSES
AS A PERCENTAGE OF TOTAL REVENUE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- --------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Property management services 29.2% 27.5% 28.9% 27.4%
On-site personnel, general and
administrative cost reimbursement 63.6% 68.2% 65.6% 68.0%
Administrative and reporting fees 2.1% 2.1% 2.1% 2.2%
Other 5.1% 2.2% 3.4% 2.4%
----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
EXPENSES
Salaries and benefits
On-site employees 60.2% 65.6% 63.5% 65.5%
Off-site employees 14.8% 12.3% 13.7% 12.6%
Other general and administrative 8.3% 5.9% 7.3% 6.7%
Costs charged to the Real Estate
Segment 3.4% 2.5% 2.1% 2.7%
Amortization of purchased management
contracts 2.3% 1.8% 2.1% 1.8%
Depreciation and amortization 1.1% 0.4% 0.7% 0.4%
Non-recurring expense - - - -
----- ----- ----- -----
Total expenses 90.1% 88.5% 89.4% 89.7%
----- ----- ----- -----
Operating Income 9.9% 11.5% 10.6% 10.3%
===== ===== ===== =====
EBITDA 13.5% 13.9% 13.6% 12.7%
===== ===== ===== =====
</TABLE>
Property Services' expenses include salaries and benefits with respect to
employees working at managed properties, that are fully reimbursed by the
property-owning partnerships, and certain general and administrative costs that
are fully reimbursed by the Real Estate Companies. The reimbursements, recorded
as revenue under "On-site personnel, general and administrative cost
reimbursement," fully offset the corresponding expenses, with no impact on the
segment's net income. Therefore, reimbursed expenses and related revenue are not
analyzed in any detail below. Table 2 below shows Property Services' adjusted
revenue and expenses, which excludes on-site personnel, general and
administrative cost reimbursements, and related expenses.
Table 3 below sets forth the percentage of Property Services' total revenue
excluding on-site personnel, general and administrative cost reimbursement
("adjusted revenue") represented by each revenue and expense line presented.
This table is presented as supplemental information to enable the reader to
better analyze the change in revenues and expenses during the three and nine
months ended September 30, 1996 versus the same period of 1995. The percent of
revenue comparison is intended to make the periods more comparable by removing
the absolute effect of growth in revenues and expenses which results from
expansion of the Company's business. Such a presentation would also reflect
economies in operating expenses, to the extent they exist.
15
<PAGE> 18
TABLE 2 - PROPERTY SERVICES
SUMMARY FINANCIAL AND OPERATIONAL DATA - ADJUSTED REVENUE AND
ADJUSTED OPERATING EXPENSES (IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Property management services $14,001 $12,068 $40,566 $35,231
Administrative and reporting fees 1,029 924 2,913 2,772
Other 2,455 986 4,812 3,037
------- ------- ------- -------
Adjusted revenue (1) 17,485 13,978 48,291 41,040
------- ------- ------- -------
EXPENSES
Salaries and benefits, off-site
employees 7,095 5,385 19,183 16,264
Other general and administrative 3,987 2,584 10,288 8,568
Amortization of purchased management
contracts 1,114 781 3,007 2,256
Depreciation and amortization 529 172 1,010 473
Non-recurring expense - - - 45
------- ------- ------- -------
Adjusted operating expenses (2) 12,725 8,922 33,488 27,606
------- ------- ------- -------
Operating Income $ 4,760 $ 5,056 $14,803 $13,434
======= ======= ======= =======
</TABLE>
TABLE 3 - PROPERTY SERVICES
SUMMARY FINANCIAL AND OPERATIONAL DATA - ADJUSTED REVENUE AND
ADJUSTED OPERATING EXPENSES AS A PERCENTAGE OF ADJUSTED REVENUE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Property management services 80.1% 86.3% 84.0% 85.8%
Administrative and reporting fees 5.9% 6.6% 6.0% 6.8%
Other 14.0% 7.1% 10.0% 7.4%
------- ------- ------- ------
Adjusted revenue (1) 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------
EXPENSES
Salaries and benefits, off-site
employees 40.6% 38.5% 39.7% 39.6%
Other general and administrative 22.8% 18.5% 21.3% 20.9%
Amortization of purchased management
contracts 6.4% 5.6% 6.2% 5.5%
Depreciation and amortization 3.0% 1.2% 2.1% 1.2%
Non-recurring expense - - - 0.1%
------- ------- ------- ------
Adjusted operating expenses (2) 72.8% 63.8% 69.3% 67.3%
------- ------- ------- ------
Operating Income 27.2% 36.2% 30.7% 32.7%
======= ======= ======= ======
EBITDA 36.9% 43.5% 39.7% 39.9%
======= ======= ======= ======
</TABLE>
- -------------------
(1) Adjusted revenue excludes On-site personnel, general and administrative
cost reimbursement.
(2) Adjusted operating expenses exclude salaries and benefits for On-site
employees and costs charged to the Real Estate Companies.
16
<PAGE> 19
RESULTS OF OPERATIONS - PROPERTY SERVICES - THIRD QUARTER 1996 COMPARED WITH
THIRD QUARTER 1995
REVENUE
Total revenue of Property Services consists of property management services
fees, on-site personnel, general and administrative cost reimbursement,
administrative and reporting fees, and other revenue. Adjusted revenue equals
total revenue less on-site personnel, general and administrative cost
reimbursement. Property Services' total revenue increased $4.0 million, or 9.2%,
to $47.9 million in the third quarter of 1996 from $43.9 million in the third
quarter of 1995. Adjusted revenue increased $3.5 million, or 25.1%, to $17.5
million in the third quarter of 1996 from $14.0 million in third quarter of
1995. The reasons for these changes are set forth below.
PROPERTY MANAGEMENT SERVICES revenue increased $1.9 million, or 16.0%,
during the third quarter of 1996 versus 1995. As a percentage of total revenue,
property management revenue increased to 29.2% from 27.5%. As a percentage of
adjusted revenue, property management revenue decreased to 80.1% from 86.3%. The
increase in absolute terms and as a percentage of total revenue resulted
primarily from an increase in the average number of units managed, due primarily
to the acquisition of additional property management rights. The decrease as a
percentage of adjusted revenue reflects the more than proportional increase in
other revenue discussed below.
ADMINISTRATIVE AND REPORTING FEES increased $0.1 million, or 11.4%, during
the third quarter of 1996 versus 1995. As a percentage of total revenue,
administrative and reporting fees revenue remained the same at 2.1%. As a
percentage of adjusted revenue, administrative and reporting fees revenue
decreased to 5.9% from 6.6%. This revenue is subject to fluctuations from year
to year and is recorded on an estimated basis throughout the year, subject to
adjustment depending on actual fees received during the year. The Company
expects administrative and reporting fees to continue to decline as a percentage
of adjusted revenue because these fees are not received with respect to
newly-acquired management contracts and as the properties which have
administrative and reporting fees are lost due to sale or other reasons. The
decrease as percentage of adjusted revenue reflects the more than proportional
increase in other revenue discussed below.
OTHER REVENUE, which includes Buyers Access (Registered Trademark) fees,
revenues from Preferred Home Health, tax credit investment fees, insurance
advisory fees and other revenue, increased $1.5 million, or 149.0%, during the
third quarter of 1996 versus 1995. As a percentage of total revenue, other
revenue increased to 5.1% from 2.2%. As a percentage of adjusted revenue, other
revenue increased to 14.0% from 7.1%. The increase in absolute terms and as a
percentage of total and adjusted revenue resulted primarily from an increase in
the average number of units enrolled in the Buyers Access (Registered Trademark)
program, the acquisition of Preferred Home Health early in the third quarter of
1996, which contributed approximately $0.8 million in revenue, and an increase
in the level of tax credit related fees during the third quarter of 1996 versus
1995.
EXPENSES
Total expenses of Property Services consist of salaries and benefits for
on-site and off-site employees, other general and administrative expenses, costs
charged to the Real Estate Companies, depreciation and amortization,
amortization of purchased management contracts and other non-recurring expenses.
Adjusted operating expenses equal total expenses less salaries and benefits for
on-site employees and costs charged to the Real Estate Companies. Total expenses
increased $4.4 million, or 11.2%, to $43.2 million in the third quarter of 1996
from $38.8 million in the third quarter of 1995. Total expenses as a percentage
of total revenue increased to 90.1% in the third quarter of 1996 from 88.5% in
the third quarter of 1995. Adjusted operating expenses increased $3.8 million,
or 42.6%, to $12.7 million in the third quarter of 1996 from $8.9 million in the
third quarter of 1995. Adjusted operating expenses as a percentage of adjusted
revenue increased to 72.8% from 63.8%. The reasons for these changes are set
forth below.
SALARIES AND BENEFITS - OFF-SITE EMPLOYEES expenses increased $1.7 million,
or 31.8%, in the third quarter of 1996 versus 1995. As a percentage of total
revenue, salary and benefits - off-site employees increased to 14.8% from 12.3%.
As a percentage of adjusted revenue, salary and benefits - off-site employees
expenses increased to 40.6% from
17
<PAGE> 20
38.5%. The increase in absolute terms and as a percentage of total and adjusted
revenue resulted primarily from additional personnel costs associated with
Preferred Home Health ($0.6 million) and additional personnel costs incurred
related to management of additional properties and addition of personnel to
expand the Company's customer and equity services.
OTHER GENERAL AND ADMINISTRATIVE expenses increased $1.4 million, or 54.3%,
in the third quarter of 1996 versus 1995. As a percentage of total revenue,
other general and administrative expenses increased to 8.3% from 5.9%. As a
percentage of adjusted revenue, other general and administrative expenses
increased to 22.8% from 18.5%. The increase in absolute terms and as a
percentage of total and adjusted revenues resulted primarily from higher
professional fees resulting from the growth in the Company's business, increased
costs associated with the Company's new facilities in Vienna, Virginia and
Indianapolis, Indiana, and certain liability adjustments recorded in the third
quarter of 1996.
AMORTIZATION OF PURCHASED MANAGEMENT CONTRACTS increased $0.3 million, or
42.6%, in the third quarter of 1996 versus 1995. As a percentage of total
revenue, amortization of purchased management contracts increased to 2.3% from
1.8%. As a percentage of adjusted revenue, amortization of purchased management
contracts increased to 6.4% from 5.6%. The increase in absolute terms and as a
percentage of total and adjusted revenues resulted primarily from acquisitions
of additional management contracts.
DEPRECIATION AND AMORTIZATION expense increased $0.4 million, or 207.6%, in
the third quarter of 1996 versus 1995. As a percentage of total revenue,
depreciation and amortization expense increased to 1.1% from 0.4%. As a
percentage of adjusted revenue, depreciation and amortization expense increased
to 3.0% from 1.2%. The increase in absolute terms and as a percentage of total
and adjusted revenue resulted primarily from increased depreciation on computer
hardware and software purchased in connection with the Company's move from
mainframe to client-server based technology, leasehold improvements, furniture
and equipment purchased in connection with the movement of the Company's
headquarters to Vienna, Virginia and the movement of the Company's Indianapolis,
Indiana facilities to a new location in Indianapolis, and amortization of
goodwill associated with the acquisition of Preferred Home Health.
RESULTS OF OPERATIONS - PROPERTY SERVICES - NINE MONTHS OF 1996 COMPARED WITH
NINE MONTHS OF 1995
REVENUE
Property Services' total revenue increased $11.7 million, or 9.0%, to
$140.5 million for the first nine months of 1996 from $128.8 million for the
first nine months of 1995. Adjusted revenue increased $7.3 million, or 17.7%, to
$48.3 million in the nine months of 1996 from $41.0 million for the nine months
of 1995. The reasons for these changes are set forth below.
PROPERTY MANAGEMENT SERVICES revenue increased $5.3 million, or 15.1%,
during the first nine months of 1996 versus 1995. As a percentage of total
revenue, property management revenue increased to 28.9% from 27.4%. As a
percentage of adjusted revenue, property management revenue decreased to 84.0%
from 85.8%. The increase in absolute terms and as a percentage of total revenue
resulted primarily from an increase in the average number of units managed, due
primarily to the acquisition of additional property management rights. The
decrease as a percentage of adjusted revenue reflects the more than proportional
increase in other revenue discussed below.
ADMINISTRATIVE AND REPORTING FEES increased $0.1 million, or 5.1%, during
the first nine months of 1996 versus 1995. As a percentage of total revenue,
administrative and reporting fees revenue decreased to 2.1% from 2.2%. As a
percentage of adjusted revenue, administrative and reporting fees revenue
decreased to 6.0% from 6.8%. This revenue is subject to fluctuations from year
to year and is recorded on an estimated basis throughout the year, subject to
adjustment depending on actual fees received during the year. The Company
expects administrative and reporting fees to continue to decline as a percentage
of adjusted revenue because these fees are not received with respect to
newly-acquired management contracts and as the properties which have
administrative and reporting fees are lost due to sale or other reasons.
18
<PAGE> 21
OTHER REVENUE increased $1.8 million, or 58.4%, during the first nine
months of 1996 versus 1995. As a percentage of total revenue, other revenue
increased to 3.4% from 2.4%. As a percentage of adjusted revenue, other revenue
increased to 10.0% from 7.4%. The increase in absolute terms and as a percentage
of total and adjusted revenue resulted primarily from an increase in the average
number of units enrolled in the Buyers Access (Registered Trademark) program,
the acquisition of Preferred Home Health (which contributed $0.8 million) early
in the third quarter of 1996, and an increase in the level of tax credit related
fees during the first nine months of 1996 versus 1995.
EXPENSES
Total expenses increased $10.3 million, or 8.9%, to $125.7 million for the
first nine months of 1996 from $115.4 million for the first nine months of 1995.
Total expenses as a percentage of total revenue decreased to 89.4% for the first
nine months of 1996 from 89.7% for the first nine months of 1995. Adjusted
operating expenses increased $4.9 million, or 17.7%, to $32.5 million for the
first nine months of 1996 from $27.6 million for the first nine months of 1995.
Adjusted operating expenses as a percentage of adjusted revenue increased to
69.3% from 67.3%. The reasons for these changes are set forth below.
SALARIES AND BENEFITS - OFF-SITE EMPLOYEES expenses increased $2.9 million,
or 17.9%, for the first nine months of 1996 versus 1995. As a percentage of
total revenue, salary and benefits - off-site employees increased to 13.7% from
12.6%. As a percentage of adjusted revenue, salary and benefits - off-site
employees expenses increased to 39.7% from 39.6%. The increase in absolute terms
and as a percentage of total and adjusted revenue resulted primarily from
additional personnel cost related to management of additional properties,
addition of personnel to expand the Company's customer and equity services, and
personnel costs associated with Preferred Home Health.
OTHER GENERAL AND ADMINISTRATIVE expenses increased $1.7 million, or 20.1%,
for the first nine months of 1996 versus 1995. As a percentage of total revenue,
other general and administrative expenses increased to 7.3% from 6.7%. As a
percentage of adjusted revenue, other general and administrative expenses
increased to 21.3% from 20.9%. The increase in absolute terms and as a
percentage of total and adjusted revenue resulted primarily from a $0.8 million
increase in allowance for doubtful accounts for the first nine months of 1996,
increased costs associated with the Company's new facilities in Vienna, Virginia
and Indianapolis, Indiana, and certain liability adjustments recorded in the
third quarter of 1996.
AMORTIZATION OF PURCHASED MANAGEMENT CONTRACTS increased $0.8 million, or
33.3%, for the first nine months of 1996 versus 1995. As a percentage of total
revenue, amortization of purchased management contracts increased to 2.1% from
1.8%. As a percentage of adjusted revenue, amortization of purchased management
contracts increased to 6.2% from 5.5%. The increase in absolute terms and as a
percentage of total and adjusted revenues resulted primarily from acquisitions
of additional management contracts.
DEPRECIATION AND AMORTIZATION expense increased $0.5 million, or 113.5%,
for the first nine months of 1996 versus 1995. As a percentage of total revenue,
depreciation and amortization expense increased to 0.7% from 0.4%. As a
percentage of adjusted revenue, depreciation and amortization expense increased
to 2.1% from 1.2%. The increase in absolute terms and as a percentage of total
and adjusted revenue resulted primarily from increased depreciation on computer
hardware and software purchased in connection with the Company's move from
mainframe to client-server based technology, leasehold improvements, furniture
and equipment purchased in connection with the movement of the Company's
headquarters to Vienna, Virginia and the movement of the Company's Indianapolis,
Indiana facilities to a new location in Indianapolis, and amortization of
goodwill associated with the acquisition of Preferred Home Health.
RESULTS OF OPERATIONS - FINANCIAL SERVICES
As previously discussed, the Financial Services business segment represents
the results of operations of NHP Financial Services which includes Washington
Mortgage Financial. NHP Financial Services' primary business activities are
multifamily loan servicing, multifamily loan origination and secondary
marketing. NHP Financial Services does not hold the mortgages it originates or
purchases
long-term but resells them through various programs.
19
<PAGE> 22
NHP Financial Services' revenue includes loan servicing fees, net gain on sale
of mortgage loans, interest income, placement fee income, origination fee income
and other income. The results of NHP Financial Services are included in the
Company's results of operations from the date of acquisition, April 1, 1996.
NHP Financial Services revenue is to a large degree activity driven and is
somewhat sensitive to economic factors such as the general level of interest
rates. Future revenues may fluctuate as a result of changes in these factors.
Therefore, Financial Services' third quarter results may not be indicative of
future period results. NHP Financial Services results also reflect the impact of
certain purchase accounting adjustments. The purchase accounting adjustments
relate primarily to the write-up of acquired servicing rights to market value as
of the date of acquisition and the recording of the excess of purchase price
over net assets acquired ("goodwill"). These adjustments resulted in
significantly increased amortization expense related to acquired servicing
rights and goodwill.
INTEREST INCOME AND INTEREST EXPENSE
Interest income decreased $0.02 million, or 30.9% for the third quarter of
1996 verses 1995. This decrease is due primarily to a lower average cash balance
in the third quarter of 1996 verses 1995. Interest income increased $0.1
million, or 50.5% for the first nine months of 1996 verses 1995. The increase is
due primarily to interest earned on amounts due from the Real Estate Companies
in 1996. Prior to the sale of the Real Estate Companies in August of 1995, no
interest was charged on amounts due from the Real Estate Companies since they
were part of NHP Incorporated.
Interest expense decreased $0.07 million, or 5.3%, and $2.4 million, or
45.8%, for the third quarter and first nine months of 1996, respectively,
compared with the same periods of 1995. The decreases are due primarily to a
lower level of debt during 1996 following the application of the proceeds from
the Company's IPO to repay debt in August of 1995. Going forward, interest
expense is expected to increase as a result of additional borrowings related to
the previously discussed acquisitions.
PROVISION FOR INCOME TAXES
The Company recorded a $1.7 million and $5.6 million provision for income
taxes in the third quarter and first nine months of 1996, respectively, versus a
$20.0 million tax benefit recorded in the third quarter of 1995. The income tax
benefit in 1995 resulted from the recognition of a $23.3 million net asset
primarily consisting of NOLs following the sale of the Real Estate Companies on
August 18, 1995, net of the year-to-date tax provision of $3.3 million. The
Company files a consolidated Federal income tax return and prior to the third
quarter of 1995 had recognized no provision or benefit for income taxes
primarily because of net operating losses generated in prior years by the
discontinued real estate operations. Prior to the sale of the Real Estate
Companies, losses from discontinued operations typically caused the Company to
report no taxable income, making realization of NOLs uncertain. As a result,
historically, the Company had established a valuation allowance for the full
amount of the NOLs. Subsequent to the sale of the Real Estate Companies, the
Company reduced its valuation allowance in the third quarter of 1995, resulting
in the recognition of a net deferred tax asset and a corresponding tax benefit.
Since that time, the Company has recorded a tax provision.
LIQUIDITY AND CAPITAL RESOURCES
Continuing operations, particularly property management operations, have
historically provided a steady, noncyclical source of cash flow to the Company.
The reported cash flows include six months of activity related to NHP Financial
Services. Cash flow related to NHP Financial Services tends to be less
predictable and depends largely on the level of loan origination activity. Net
cash provided by continuing operations for the first nine months of 1996 was
$19.3 million compared with $7.3 million for the first nine months of 1995. On
September 30, 1996, cash and cash equivalents totaled $5.2 million. The Company
and its subsidiaries have various credit arrangements. On September 30, 1996,
NHP Property Services had $23 million of available borrowings under its
revolving $75 million credit facility with a group of banks
20
<PAGE> 23
(the "Credit Facility"). During the third quarter of 1996, Washington Mortgage
Financial renegotiated the terms of its existing warehouse line of credit (the
"Warehouse Line"), which is used for the purpose of originating loans. The
Warehouse Line was increased from $80 million to $150 million. As of September
30, 1996, Washington Mortgage Financial had drawn $52.9 million on the Warehouse
Line. See Note 4 to the Unaudited Consolidated Financial Statements for further
discussion of Washington Mortgage Financial's lines of credit.
During the third quarter of 1996, Washington Mortgage Financial replaced
its existing separate line of credit which was used exclusively for acquisition
of mortgage servicing rights. The amount of the new servicing acquisition line
of credit (the "Servicing Acquisition Line") remained at $10 million. As of
September 30, 1996, Washington Mortgage Financial had drawn $9.2 million on the
servicing Acquisition Line.
During the third quarter of 1996, Washington Mortgage Financial also
established a new line of credit which can be utilized for servicing
acquisitions or working capital advances (the "Working Capital Line") in the
amount of $10 million. As of September 30, 1996, Washington Mortgage Financial
had drawn $0.2 million on the Working Capital Line.
For the first nine months of 1996, net cash used in investing activities
was $52.5 million, primarily reflecting the purchase of NHP Financial Services,
an investment in real estate held for sale, the purchase of long-term notes
receivable related to the Goldberg Acquisition, the acquisition of property
management rights, cash used to purchase and develop software related to the
Company's move from mainframe technology to client-server based technology and
costs of furniture and equipment for the Company's new office space in both
Vienna, Virginia and Indianapolis, Indiana. Net cash used in investing
activities in the first nine months of 1995 of $13.5 million primarily reflects
payments for acquisition of property management rights.
For the first nine months of 1996, net cash provided by financing
activities was $32.5 million, primarily reflecting borrowings on the Credit
Facility related to the acquisition of NHP Financial Services, the Goldberg
Acquisition, and the investment in real estate held for sale, net of repayments
on the Credit Facility. In the first nine months of 1995, net cash provided by
financing activities was $7.4 million, primarily reflecting the net proceeds
from the issuance of common stock, and borrowings in connection with the
acquisition of additional property management rights, net of repayments of notes
payable and other debt.
The Company's future capital expenditures are expected to consist largely
of funds required in connection with the expansion of the Company's business.
The Company intends to finance such acquisitions primarily out of operating cash
flow and bank or other borrowings, including borrowings under its various credit
facilities. The Company may also issue additional common stock, either for cash
to be used in connection with, or as consideration for, acquisitions. The
Company believes that it can repay its current indebtedness out of operating
cash flow, alternative debt arrangements or additional equity offerings. The
Company currently has no material commitments for capital expenditures.
The Company has substantial unused NOLs for Federal tax purposes. In
addition, the Company estimates that, based on current projections, it has
sufficient Federal alternative minimum tax NOLs to offset the allowable limit of
Federal alternative minimum taxable income at least through 1996. Therefore, the
Company expects its combined Federal and state cash income tax rate to be
approximately 7% for 1996.
The Company has provided, and expects to continue to provide, working
capital advances to the Real Estate Companies. These advances, which are
included in receivables and totaled $0.07 million as of September 30, 1996, are
payable on demand and incur interest at the rate equal to prime plus 1%.
21
<PAGE> 24
NET INCOME PER SHARE
As previously discussed, on August 18, 1995, the Company completed an IPO
of 4.3 million shares of its common stock for net proceeds of approximately
$52.0 million. Although application of the proceeds of the offering reduced
interest expense, net income per share subsequent to the IPO decreased due to
the increase in shares outstanding. In addition, as of April 1, 1996, the
Company issued 210,000 shares of common stock in connection with the purchase of
WMF Holdings. This transaction impacted both earnings and net income per share
beginning with the second quarter of 1996.
22
<PAGE> 25
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of NHP Incorporated was held on July 24,
1996, at the Company's corporate offices in Vienna, Virginia. At the meeting,
three items, as set forth in the Company's proxy statement dated June 24, 1996,
were submitted to the stockholders for a vote: (1) the stockholders elected,
for one-year terms, all persons nominated for directors as set forth in the
Company's proxy statement dated June 24, 1996; (2) the stockholders voted to
increase by 400,000 the number of shares of the Company's common stock, $.01 par
value per share, available for issuance under the Company's 1995 incentive Stock
Option Plan for a total of 1,200,000 shares available under such plan, and; (3)
the stockholders ratified the selection of Arthur Andersen as the Company's
independent public accountants for the fiscal year 1996 audit. Approximately 89%
of the eligible proxies were returned for voting. The table below sets forth the
results of the voting at the Annual Meeting:
<TABLE>
<CAPTION>
AGAINST OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
(1) Election of Directors
J. Roderick Heller III 11,099,223 100 0 0
John W. Creighton, Jr. 11,099,223 100 0 0
Michael R. Eisenson 11,099,223 100 0 0
Herbert S. Winokur, Jr. 11,099,223 100 0 0
Richard S. Bodman 11,099,223 100 0 0
Lloyd N. Cutler 11,099,023 300 0 0
Tim R. Palmer 11,099,223 100 0 0
(2) Amendment to the NHP Incorporated 1995
Incentive Stock Plan 11,099,023 300 0 0
(3) Appointment of
Independent Accountants 11,099,323 0 0 0
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
11.0 Statement regarding computation of per share earnings.
27.0 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
On July 26, 1996, the Company filed a report on Form 8-K reporting, under
Item 2, Acquisition or Disposition of Assets, the acquisition of management
rights, notes receivable and the stock of Preferred Home Health, Inc. in the
Goldberg Acquisition.
23
<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.
NHP INCORPORATED
(Registrant)
<TABLE>
<CAPTION>
November 12, 1996 By: /S/ ANN TORRE GRANT
----------------------
<S> <C>
Ann Torre Grant
Executive Vice President,
Chief Financial Officer,
and Treasurer (Authorized Officer
and Principal Financial Officer)
</TABLE>
24
<PAGE> 1
EXHIBIT 11, FORM 10-Q
COMMISSION FILE NUMBER 000-26572
NHP INCORPORATED
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- ------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS):
Income from continuing
operations before
extraordinary item $ 2,323 $ 23,720 $ 8,051 $ 28,343
Income (loss) from
discontinued operations - 90 - (1,963)
Extraordinary item - (400) - (400)
----------- ------------ ----------- -----------
Net income (loss) $ 2,323 $ 23,410 $ 8,051 $ 25,980
=========== ============ =========== ===========
ADJUSTMENTS TO COMMON SHARES OUTSTANDING:
Average number of shares
of common stock 12,494,620 10,012,196 12,411,627 8,662,452
Primary adjustment:
Assume exercise of
options (treasury
stock method) 302,398 61,758 305,318 54,120
----------- ------------ ----------- -----------
Total average number
of common shares and
equivalents used for
primary computation 12,797,018 10,073,954 12,716,945 8,716,572
=========== ============ =========== ===========
Average number of
shares of common
stock 12,494,620 10,012,196 12,411,627 8,662,452
Fully diluted adjustment:
Assume exercise of
options (treasury
stock method) 305,737 114,194 318,224 104,220
----------- ------------ ----------- -----------
Total average number
of common shares
and equivalents used
for fully diluted
computation 12,800,357 10,126,390 12,729,851 8,766,672
----------- ------------ ----------- -----------
INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common
share before extraordinary
item - Primary:
Income from continuing
operations before
extraordinary item $ .18 $ 2.35 $ .63 $ 3.25
Income (loss) from
discontinued operations - .01 - (.22)
Extraordinary item - (.04) - (.05)
----------- ------------ ----------- -----------
Net income per
common share -
Primary $ .18 $ 2.32 $ .63 $ 2.98
=========== ============ =========== ===========
Net income (loss) per
common share - Fully
Diluted:
Income from
continuing operations
before extraordinary
item $ .18 $ 2.34 $ .63 $ 3.23
Income (loss) from
discontinued
operations - .01 - (.22)
Extraordinary item - (.04) - (.05)
----------- ----------- ----------- -----------
Net income per
common share -
Fully Diluted $ .18 $ 2.31 $ .63 $ 2.96
=========== ============ =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND THE RELATED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS THEN ENDED, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,237
<SECURITIES> 0
<RECEIVABLES> 20,623
<ALLOWANCES> 2,411
<INVENTORY> 0
<CURRENT-ASSETS> 101,061
<PP&E> 13,852
<DEPRECIATION> 2,837
<TOTAL-ASSETS> 212,998
<CURRENT-LIABILITIES> 85,076
<BONDS> 66,438
0
0
<COMMON> 126
<OTHER-SE> 52,070
<TOTAL-LIABILITY-AND-EQUITY> 212,998
<SALES> 0
<TOTAL-REVENUES> 155,643
<CGS> 0
<TOTAL-COSTS> 139,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,868
<INCOME-PRETAX> 13,671
<INCOME-TAX> 5,620
<INCOME-CONTINUING> 8,051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,051
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
