10-Q/A 1 d10qa.txt 10-Q/A DATED 6/30/2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________ FORM 10-Q/A [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2001 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 of incorporation) (I.R.S. Employer Identification No.) 6160 South Syracuse Way, Greenwood Village, Colorado 80111 (Address of principal executive offices) (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 [_] CP LIMITED PARTNERSHIP FORM 10-Q/A INDEX

PART I. FINANCIAL INFORMATION Item 1. Financial Statements CP LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)

The accompanying notes are an integral part of the financial statements. 1 CP LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)

The accompanying notes are an integral part of the financial statements. 2 CP LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)

The accompanying notes are an integral part of the financial statements. 3 CP LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ----------- 1. Background and Basis of Presentation: ------------------------------------- Background - CP Limited Partnership is a limited partnership and was formed by Chateau Communities, Inc., a real estate investment trust, as general partner and Chateau Estates, as the initial limited partner, on September 16, 1993. We are engaged in owning and operating manufactured housing community properties. As of June 30, 2001, our portfolio consisted of 174 properties, containing an aggregate of 54,690 homesites and 1,359 park model/RV sites, located in 28 states. We also fee manage 39 properties, containing an aggregate of 8,591 homesites. We have prepared the accompanying interim financial statements in accordance with generally accepted accounting principles and in conformity with the rules and regulations of the Securities and Exchange Commission. In our opinion, the interim financial statements presented herein reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. These financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2000. Basis of Presentation - The accompanying condensed consolidated financial statements of the company include all accounts of CP Limited and our subsidiaries. Chateau and ROC Communities, Inc, are general partners. As of June 30, 2001, Chateau owned on a combined basis, an 88 percent general partner interest. Pursuant to the terms of the operating partnership agreement, we are required to reimburse Chateau for the net expenses incurred by Chateau. Amounts paid on behalf of Chateau by us are reflected in the statement of income as general and administrative expenses. The balance sheet of Chateau as of June 30, 2001 is identical to our accompanying balance sheet, except as follows:

All significant inter-entity balances and transactions have been eliminated. As of January 1, 2001, we began consolidating all our joint ventures, which we control. Reclassifications - Certain prior year amounts have been reclassified to conform to current period presentation. 4 CP LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ----------- 2. New Accounting Standards: ------------------------- In June 2000, the FASB issued SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This statement amends certain requirements of SFAS No. 133. We adopted SFAS No. 138 on January 1, 2001, the required date of adoption. Upon adoption, changes in the fair value of derivatives will be recorded each period in earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedged transaction. Upon adoption of SFAS No. 138, we recorded a transition adjustment of $658,000 as a cumulative effect in accumulated other comprehensive income in the stockholders' equity section of the Condensed Consolidated Balance Sheet. The cumulative effect adjustment relates to net deferred gains on prior hedges of anticipated refinancings of debt which have been completed. The amount in the accumulated other comprehensive income account will be amortized over the remaining life of the related debt instruments. In June 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all business combinations to be accounted for by the purchase method and defines criteria under which intangible assets acquired in connection with a business combination be recognized as assets apart from goodwill. SFAS No. 141 is effective for all fiscal business combinations initiated after June 30, 2001. SFAS No. 142 changes the useful life of goodwill recorded on a company's books from 40 years to indefinite and requires goodwill to be reviewed annually for impairment. SFAS No. 142 is effective for all fiscal years beginning after December 15, 2001. Adoption of SFAS No. 141 and No. 142 is not expected to have a significant impact on our financial position or results of operations. 3. Comprehensive Income: ----------------------- Other comprehensive income includes a cumulative effect of derivative securities from the adoption of FAS 138. Total comprehensive income for the six months ended June 30, 2001 is summarized as follows (in thousands): Net income $ 18,132 Plus: amortization of deferred hedge gains 76 Less: reclassification of amounts already included in net income (76) ------------------- Total comprehensive income $ 18,132 ===================

4. Rental Property: ---------------- We purchased two communities in April and May of 2001. One community was purchased for $5.4 million, is located in Indiana, and has 288 sites. The other community was purchased for $23.9 million, is located in Georgia, and has 911 sites. 5. Equity Transactions: -------------------- On May 17, 2001, we declared a cash distribution of $.545 per OP Unit to OP Unitholders of record as of June 29, 2001. The distribution was paid July 16, 2001 and is included in distributions payable in the accompanying condensed consolidated balance sheet as of June 30, 2001. On February 22, 2001, we declared a cash distribution of $.545 per OP Unit to OP Unitholders of record as of March 30, 2001. 5 CP LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -----------

6. Financing: ---------- The following table sets forth certain information regarding our debt at June 30, 2001.

7. Related Party Transactions: -------------------------- Included in management and other income is $2,300,000 and $2,039,000 of management and transaction fee income received from N'Tandem Trust for the six months ended June 30, 2001 and 2000, respectively. 8. Subsequent Event: ---------------- On July 31, 2001 we purchased CWS Communities Trust, a private real estate investment trust for $557 million, consisting of approximately $335 million in cash, $63 million in a private placement of Operating Partnership Units (which were issued at $30.935 per OP Unit), the issuance of approximately $10 million in 7.5% Senior Unsecured Notes due August 2012 (the "August 2012 Notes") and the assumption of $149 million in debt. The portfolio consists of 46 properties with 16,600 homesites in 12 states. We financed the cash portion of this transaction primarily through borrowings of a $323 million bridge facility (the "Acquisition Facility"), which carries an interest rate of LIBOR plus 120 basis points and matures August 2, 2002. We expect to replace this facility, depending on market conditions, with longer term debt and/or a combination of asset dispositions and the issuance of equity. In connection with this transaction, we agreed to issue in a private placement to the holders of the August 2012 Notes, an aggregate of 321,399 OP Units at $30.935 per OP Unit, in exchange for the issuance by such holders of 7.5% notes, due August 2012, subject to extension in certain events. These notes are substantially collateralized by the related OP Units. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements and notes appearing elsewhere in this report. Certain information and 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 may involve our plans, objectives and expectations, which are dependent upon a number of factors, including site expansions, acquisitions, development and other new business initiatives which are all subject to a number of contingency factors such as the effects of national and local economic conditions, changes in interest rates, supply and demand for affordable housing and the condition of the capital markets that may prevent us from achieving our objectives. As used in this Form 10-Q/A, "we", "our", "ours" and "us" refer to CP Limited Partnership and our subsidiaries. Overview We are one of the largest owner/managers of manufactured home communities in the United States. As of June 30, 2001, our portfolio comprised 174 manufactured home communities containing 54,690 manufactured homesites and 1,359 park model/RV sites, located in 28 states. As of January 1, 2001, we began consolidating all our joint ventures, which we control. Results of Operations The following table summarizes certain information relative to our properties as of and for the three and six months ended June 30, 2001 and 2000. We consider all communities owned by us at the beginning of the period as our "Core Portfolio."

Comparison of three months ended June 30, 2001 to three months ended June 30, 2000 For the three months ended June 30, 2001, net income was $12,162,000, a decrease of $445,000 from the three months ended June 30, 2000. The decrease was due to increased depreciation and property based operating expenses and lower profit from CSI, offset by increased net operating income from our Core Portfolio. Rental revenue for the three months ended June 30, 2001 was $49,355,000 an increase of $3,165,000 from the three months ended June 30, 2000. The increase is primarily due to rental increases in our Core Portfolio. 7 Weighted average occupancy for the three months ended June 30, 2001 was 48,507 sites compared with 47,385 for the same period in 2000. The occupancy rate was 89.1 percent on 54,690 sites as of June 30, 2001, compared to 91.3 percent on 51,913 sites as of June 30, 2000. The occupancy rate on our stabilized portfolio was 91.8 percent as of June 30, 2001 compared to 92.9% as of June 30, 2000. Our stabilized portfolio includes communities where we do not have, or have not recently had, an expansion of the community. On a per site basis, weighted average monthly rental revenue for the three months ended June 30, 2001 was $327 compared with $313 in the same period of 2000. For our Core Portfolio, on a per site basis, weighted average monthly rental revenue for the three months ended June 30, 2001 was $329 compared with $313 for the same period in 2000 an increase of 4.9 percent. Interest income primarily includes interest on notes receivable and advances to affiliates. The decrease of $2,000 for the three months ended June 30, 2001 from the same period in 2000 is due primarily to eliminating $764,000 of interest income from consolidating the joint ventures, offset by increased lending activities. Management fee and other income primarily include management and transaction fee income for the management of 39 manufactured home communities and equity earnings from CSI. Included in this amount is approximately $1,200,000 and $1,400,000 of fees from N'Tandem for the three months ended June 30, 2001 and 2000, respectively. The decrease of $495,000 in the three months ended June 30, 2001 from the same period in 2000 is due primarily to slower home sales, a difficult financing environment and fewer resale commissions from CSI, as well as lower fees from N'Tandem. The general decline in demand and economic activity, while not directly related to us, has had an impact on revenue growth. Property operating and maintenance expense for the three months ended June 30, 2001 increased by $1,255,000 or 9.6 percent from the same period a year ago. The majority of the increase was due to increases in our Core Portfolio, including increased property insurance, healthcare and administrative costs. Administrative expense for the three months ended June 30, 2001 increased by $410,000 from the same period a year ago. Administrative expense in the second quarter of 2001 was 5.2 percent of total revenues as compared to 4.6 percent in 2000. Depreciation and amortization expense for the month ended June 30, 2001, increased $925,000 from the same period a year ago. Depreciation expense as a percentage of average depreciable rental property in the second quarter of 2001 remained relatively unchanged from 2000. Comparison of six months ended June 30, 2001 to six months ended June 30, 2000 For the six months ended June 30, 2001, net income was $23,497,000, a decrease $417,000 from the six months ended June 30, 2000. The decrease was due primarily to increased depreciation and property based operating expenses and lower profit from CSI, offset by increased net operating income from our Core Portfolio. Rental revenue for the six months ended June 30, 2001, was $97,967,000, an increase of $5,572,000 from the six months ended June 30, 2000. The increase is primarily due to rental increases in our Core Portfolio. Revenues did not increase as expected due to slowing economic conditions. We do not anticipate the rate of revenue growth for the remainder of this year to increase over the growth rate from the first half of this year. Weighted average occupancy for the six months ended June 30, 2001, was 48,199 sites compared with 47,388 for the same period in 2000. On a per site basis, weighted average monthly rental revenue for the six months ended June 30, 2001 was $325 compared with $312 in the same period of 2000. For our Core Portfolio, on a per site basis, weighted average monthly rental revenue for the six months ended June 30, 2001 was $327, compared with $312 for the same period in 2000, an increase of 4.5 percent. Interest income primarily includes interest on notes receivable and advances to affiliates. The increase of $212,000 for the six months ended June 30, 2001 from the same period in 2000 is due primarily to increased lending activities, offset by $1,636,000 of eliminating interest income from consolidating the joint ventures. Management fee and other income primarily include management and transaction fee income for the management of 39 manufactured home communities and equity earnings from CSI. Included in this amount is approximately $2,300,000 and $2,000,000 of fees from N'Tandem for the six months ended June 30, 2001 and 2000, respectively. The decrease of $222,000 in the six months ended June 30, 2001 from the same period in 2000 is due primarily to fewer home sales and re- sales at CSI. 8 Property operating and maintenance expense for the six months ended June 30, 2001 increased by $2,657,000 or 10.3% percent from the same period a year ago. The majority of the increase was due to increases in our Core Portfolio, due to unusually high weather-related repair and maintenance, increasing utility costs in several parts of the country and increased property insurance costs. We recently completed the implementation of an enterprise-wide software system. In connection with the implementation, we performed a detailed review and analysis of each resident account. These reviews led us to recognize write-offs of accounts receivable of approximately $650,000 in the first quarter of 2001. Upon completion of these reviews, management bonuses for the year 2000 were recalculated and reduced by approximately $400,000. Administrative expense for the six months ended June 30, 2001 increased by $122,000 from the same period a year ago. Administrative expense in the first half of 2001 was 4.6 percent of total revenues as compared to 4.7 percent in 2000. Depreciation and amortization expense for the month ended June 30, 2001, increased $1,993,000 from the same period a year ago. Depreciation expense as a percentage of average depreciable rental property in the first half of 2001 remained relatively unchanged from 2000. Liquidity and Capital Resources Net cash provided by operating activities was $47,927,000 for the six months ended June 30, 2001, compared with $36,630,000 for the six months ended June 30, 2000. The increase in cash provided by operating activities was due primarily to the increase in net operating income. Net cash used in investing activities for the six months ended June 30, 2001 was $51,153,000. This amount represented investments and advances to affiliates, lending activity, capital expenditures and development costs. Development and acquisition costs were $20,766,000, capital expenditures were approximately $15,000,000, (which includes recurring cap-ex of $3,093,000), investments in and advances to affiliates were $6,686,000 and advances on notes receivable were approximately $9,000,000. Capital expenditures have historically been financed with cash from operations and it is our intention that such future expenditures will be financed with cash from operations. On July 31, 2001 we purchased CWS Communities Trust, a private real estate investment trust for $557 million, consisting of approximately $335 million in cash, $63 million in a private placement of Operating Partnership Units (which were issued at $30.935 per OP Unit), the issuance of approximately $10 million in 7.5% Senior Unsecured Notes due August 2012 (the "August 2012 Notes") and the assumption of $149 million in debt. The portfolio consists of 46 properties with 16,600 homesites in 12 states. We financed the cash portion of this transaction primarily through borrowings of a $323 million bridge facility (the "Acquisition Facility"), which carries an interest rate of LIBOR plus 120 basis points and matures August 2, 2002. We expect to replace this facility, depending on market conditions, with longer term debt and/or a combination of asset dispositions and the issuance of equity. In connection with this transaction, we agreed to issue in a private placement to the holders of the August 2012 Notes, an aggregate of 321,399 OP Units at $30.935 per OP Unit, in exchange for the issuance by such holders of 7.5% notes, due August 2012, subject to extension in certain events. These notes are substantially collateralized by the related OP Units. Net cash provided by financing activities for the six months ended June 30, 2001 was $6,005,000. This was due primarily to net borrowings of $21,619,000 on the Company's lines of credit, offset by payment of distributions to OP Unitholders. We have a line of credit available with BankOne, N.A., acting as lead agent, for $125 million. In February 2001, we renegotiated our BankOne credit facility and increased it from $100 million to $125 million. The term of the new facility is three years and bears interest at LIBOR plus 90 basis points. In addition we have a $7.5 million revolving line of credit from US Bank, which bears interest at a rate of LIBOR plus 125 basis points, (together with our BankOne credit facility, "Credit Facilities"). As of June 30, 2001 we had approximately $96 million outstanding under our Credit Facilities and had available $36 million in additional borrowing capacity. In addition to repayment of long-term borrowings and amounts outstanding under the Acquisition and Credit Facilities, our principal long-term liquidity needs will be derived from future acquisitions of communities, acquisition of land for development, and new community development activities. We do not expect to generate sufficient funds from operations to finance these long-term liquidity needs and instead intend to meet our long-term liquidity requirements through additional borrowings under our Credit Facilities or other lines of credit, the assumption of existing secured or unsecured indebtness and, depending on market conditions and capital availability factors, the issuance of additional equity or debt securities. 9 We expect to meet our short-term liquidity requirements, including dividends, expansion activities and capital expenditure requirements, through cash flow from operations and, if necessary, borrowings under our Credit Facilities and other lines of credit. New Accounting Standards In June 2000, the FASB issued SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This statement amends certain requirements of SFAS 133. We adopted SFAS No. 138 on January 1, 2001, the required date of adoption. Upon adoption, changes in the fair value of derivatives will be recorded each period in earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedged transaction. Upon adoption of SFAS No. 138, we recorded a transition adjustment of $658,000 as a cumulative effect in accumulated other comprehensive income in the stockholders' equity section of the Condensed Consolidated Balance Sheet. The cumulative effect adjustment relates to net deferred gains on prior hedges of anticipated refinancing of debt which have been completed. The amount in the accumulated other comprehensive income account will be amortized over the remaining life of the related debt instruments. In June 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS no. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all business combinations to be accounted for by the purchase method and defines criteria under which intangible assets acquired in connection with a business combination be recognized as assets apart from goodwill. SFAS No. 141 is effective for all fiscal business combinations initiated after June 30, 2001. SFAS No. 142 changes the useful life of goodwill recorded on a company's books from 40 years to indefinite and requires goodwill to be reviewed annually for impairment. SFAS No. 142 is effective for all fiscal years beginning after December 15, 2001. Adoption of SFAS No. 141 and No. 142 is not expected to have a significant impact on our financial position or results of operations. Other Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as consolidated net income without giving effect to gain (or losses) from debt restructuring and sales of property and rental property depreciation and amortization. We believe 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 (1) does not represent cash flow from operations as defined by generally accepted accounting principles; (2) 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 (3) is not an alternative to cash flow as a measure of liquidity. Our FFO is calculated as follows:

10 Item 3. Quantitative and Qualitative Disclosures about Market Risks The following table sets forth certain information relating to our secured and unsecured indebtness outstanding as of June 30, 2001.

Based on the amount outstanding under our Credit Facilities as of June 30, 2001 of $96,349,000 if the LIBOR rate under our Credit Facilities was 100 basis points higher or lower during the six months ended June 30, 2001, then our interest expense (net of adjustments for capitalized items), for the period would have increased or decreased by approximately $482,000. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information Property Information We classify all of our properties in either a Stable Portfolio or an Active Expansion Portfolio. Our Stable Portfolio includes the communities where we do not have, or have not recently had, expansions of the community. These communities generally have stable occupancy rates. Our Active Expansion Portfolio are those properties where we are currently, or have recently, expanded the community by adding homesites to the available homesites for rental. Generally, these communities will have a lower occupancy rate than our Stable Portfolio as they are in the lease-up phase. In addition, we own three park model/RV communities. The following table sets forth certain information, as of June 30, 2001, regarding our Properties, excluding the three park model/RV communities. . These properties are included in our Active Expansion Portfolio.

Item 6 Exhibits and Reports on Form 8-K (a) Exhibits and Index of Exhibits None. (b) Reports on Form 8-K Chateau Communities, Inc., filed a form 8-K on June 12, 2001. 16 SIGNATURE 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 14/th/ day of March, 2002. CP LIMITED PARTNERSHIP By: /s/ Tamara D. Fischer --------------------- Tamara D. Fischer Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) 17

CP LTD PARTNERSHIP 10-Q/A