10-Q 1 cp2q02q.txt 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 For the quarterly period ended June 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 333-42441 MID-AMERICA CAPITAL PARTNERS, L.P. (Exact Name of Registrant as Specified in Charter) TENNESSEE 62-1717980 (State of Incorporation) (I.R.S. Employer Identification Number) 6584 POPLAR AVENUE, SUITE 300 MEMPHIS, TENNESSEE 38138 (Address of principal executive offices) (901) 682-6600 Registrant's telephone number, including area code N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of Shares Outstanding Class August 14, 2002 none TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets of Mid-America Capital Partners, L.P. (the "Partnership") as of June 30, 2002 (Unaudited) and December 31, 2001 Statements of Operations of the Partnership for the three and six months ended June 30, 2002 and 2001 (Unaudited) Statements of Cash Flows of the Partnership for the six months ended June 30, 2002 and 2001 (Unaudited) Notes to Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures PART I. Financial Information ITEM 1. Mid-America Capital Partners, L.P. (a limited partnership) Balance Sheets June 30, 2002 (Unaudited) and December 31, 2001 (Dollars in thousands)

Mid-America Capital Partners, L.P. (a limited partnership) Statements of Operations Three and six months ended June 30, 2002 and 2001 (Dollars in thousands) (Unaudited)

Mid-America Capital Partners, L.P. (a limited partnership) Statements of Cash Flows Six months ended June 30, 2002 and 2001 (Dollars in thousands) (Unaudited)

MID-AMERICA CAPITAL PARTNERS, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2002 and 2001 (Unaudited) 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the accounting policies in effect as of December 31, 2001, as set forth in the annual financial statements of Mid-America Capital Partners, L.P. (the "Partnership"), as of such date. In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included and all such adjustments were of a normal recurring nature. The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year. The Partnership is a special purpose Delaware limited partnership. The Partnership was formed on November 24, 1997 for the sole purpose to own 26 apartment communities (the Mortgaged Properties) and manage, renovate, improve, lease, sell, transfer, exchange, mortgage and otherwise deal with the Mortgaged Properties. The sole limited partner of the Partnership is Mid-America Apartments, L.P., a Tennessee limited partnership (MAALP), which is a majority-owned subsidiary of Mid-America Apartment Communities, Inc. (MAAC). MAAC owns, directly or through its subsidiaries, all of the outstanding units of partnership interest. MAAC is a self-administered and self-managed umbrella partnership real estate investment trust (REIT). MAAC conducts a substantial portion of its operations through MAALP and subsidiaries of MAALP. The sole general partner of the Partnership is MAACP, Inc., a Tennessee corporation (MAACP), a wholly-owned subsidiary of MAAC. The term of the Partnership shall be to December 31, 2020, unless terminated earlier as provided in the Partnership Agreement or as otherwise provided by law. 2. Recent Accounting Pronouncements In July 2001, the FASB issued Statement No. 141, Business Combinations (Statement 141), and Statement No. 142, Goodwill and Other Intangible Assets (Statement 142). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144). The Partnership adopted the provisions of Statement 141 as of July 1, 2001, except with regard to business combinations initiated prior to July 1, 2001. The Partnership adopted the provisions of Statement 142 effective January 1, 2002. Furthermore, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001, but before Statement 142 is adopted in full will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Statement 141 will require upon adoption of Statement 142, that the Partnership evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Partnership will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Partnership will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. As of the Partnership's adoption on January 1, 2002, the Partnership had no unamortized goodwill which is subject to the transition provisions of Statements 141 and 142. In August 2001, FASB issued Statement No. 144 which supersedes both FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30), for the disposal of a segment of a business (as previously defined in that Opinion). Statement 144 retains the fundamental provisions in Statement 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with Statement 121. For example, Statement 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. Statement 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike Statement 121, an impairment assessment under Statement 144 will not result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under Statement 142. The Partnership adopted Statement 144 effective January 1, 2002. The adoption of Statement 144 for long-lived assets held for use did not have a material impact on the Partnership's financial statements because the impairment assessment under Statement 144 is largely unchanged from Statement 121. In April 2002, the FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No.13, and Technical Corrections (Statement 145). The rescission of Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt and Statement No. 64, Extinguishments of Debt made to Satisfy Sinking-Fund Requirements eliminates an exception to general practice relating to the determination of whether certain items should be classified as extraordinary and is effective in fiscal years beginning after May 15, 2002, with earlier implementation encouraged. The amendment of Statement No. 13, Accounting for Leases affects the accounting by the lessee for certain lease modifications that have economic effects similar to sale-leaseback transactions and Intangible Assets for Motor Carriers removes a no longer relevant standard from the authoritative literature. The rescission of Statement No. 44 and all other provisions of Statement 145 are effective for financial statements issued on or after May 15, 2002. The impact of adopting Statement 145 is not expected to be material. In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (Statement 146). Statement 146 requires all companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Statement 146 is to be applied prospectively to exit or disposal activities after December 31, 2002. The impact of adopting Statement 146 is not expected to be material. 3. Segment Information At June 30, 2002, the Partnership owned and operated 26 apartment communities from which it derives all significant sources of earnings and operating cash flows. The Partnership's operational structure is organized on a decentralized basis, with individual property managers having overall responsibility and authority regarding the operations of their respective properties. Each property manager individually monitors local and area trends in rental rates, occupancy percentages, and operating costs. Property managers are given the on-site responsibility and discretion to react to such trends in the best interest of the Partnership. Management evaluates the performance of each individual property based on its contribution of revenues and net operating income ("NOI"), which is composed of property revenues less all operating costs including insurance and real estate taxes. The Partnership's reportable segments are its individual properties because each is managed separately and requires different operating strategy and expertise based on the geographic location, community structure and quality, population mix, and numerous other factors unique to each community. The revenues and profits for the aggregated communities are summarized as follows (Dollars in thousands):

There have been no material changes in segment assets during the period. PART I. Financial Information ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following is a discussion of the financial condition and results of operations of the Partnership for the three and six months ended June 30, 2002 and 2001. This discussion should be read in conjunction with the financial statements included in this report. These financial statements include all adjustments, which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. The total number of apartment units owned at June 30, 2002 and 2001 was 5,948 in 26 apartment communities. Average monthly rental per apartment unit increased to $618 at June 30, 2002 from $613 at June 30, 2001. Overall occupancy was 95.1% and 95.6% at June 30, 2002 and 2001, respectively. RESULTS OF OPERATIONS (Dollars in 000's) COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED JUNE 30, 2002 TO THE THREE MONTHS ENDED JUNE 30, 2001 Total revenues for the three months ended June 30, 2002 decreased 2.7% from the three months ended June 30, 2001. This decrease is due to the decline in occupancy from the first quarter of 2001. Property operating expenses for the three months ended June 30, 2002 increased by 1.5% as compared to the same period a year ago. Increases in personnel, and real estate taxes and insurance were partially offset by decreases in utilities, building repairs and maintenance and other operating expenses. COMPARISON OF THE PARTNERSHIP'S SIX MONTHS ENDED JUNE 30, 2002 TO THE SIX MONTHS ENDED JUNE 30, 2001 Total revenues for the six months ended June 30, 2002 decreased 3.9% from the six months ended June 30, 2001. This decrease was due to the decline in occupancy from the first six months of 2001. Property operating expenses for the six months ended June 30, 2002 increased by 1.1% as compared to the same period a year ago. Increases in personnel, and real estate taxes and insurance were partially offset by decreases in utilities, building repairs and maintenance and other operating expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities decreased to $8,061 for the six months ended June 30, 2002 from $8,508 for the six months ended June 30, 2001 mainly related to lower net income, and changes in operating assets and liabilities. Net cash flow used in investing activities decreased by $524 for the six months ended June 30, 2002 as compared to the same period a year earlier due to decreased capital improvements to the properties. Net cash used in financing activities increased during the period due to intercompany cash payments to the limited partner. The Partnership believes that cash provided by operations is adequate and anticipates that it will continue to be adequate in both the short and long-term to meet operating requirements (including recurring capital expenditures at the communities). INSURANCE In the opinion of management, property and casualty insurance is in place which provides adequate coverage to provide financial protection against normal insurable risks such that it believes that any loss experienced would not have a significant impact on the Partnership's liquidity, financial position, or results of operations. INFLATION Substantially all of the resident leases at the communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable the Partnership to seek rent increases. The substantial majority of these leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to the Partnership of the adverse effects of inflation. RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS The Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to capital expenditures and rehabilitation costs on the apartment communities. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Although the Partnership believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Partnership or any other person that the objectives and plans of the Partnership will be achieved. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This information has been omitted as there have been no material changes in the Partnership's market risk as disclosed in the 2001 Annual Report on Form 10-K. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits or Reports on Form 8-K (a) The following exhibits are filed as part of this report. None (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. MID-AMERICA CAPITAL PARTNERS, L.P. Date: August 14, 2002 /s/Simon R.C. Wadsworth Simon R.C. Wadsworth President and Director (Principal Financial and Accounting Officer)

MID AMERICA CAPITAL PARTNERS L P 10-Q