10-Q 1 cp3q02q.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 September 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 November 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 September 30, 2002 (Unaudited) and December 31, 2001 Statements of Operations of the Partnership for the three and nine months ended September 30, 2002 and 2001 (Unaudited) Statements of Cash Flows of the Partnership for the nine months ended September 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 Item 4. Controls and Procedures 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 September 30, 2002 (Unaudited) and December 31, 2001 (Dollars in thousands)

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

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

MID-AMERICA CAPITAL PARTNERS, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS September 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 nine months ended September 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. Segment Information At September 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 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The following discussion and analysis of financial condition and results of operations are based upon the Partnership's financial statements, and the notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Partnership to make a number of estimates and assumptions that affect the reported amounts and disclosures in the financial statements. On an ongoing basis, the Partnership evaluates its estimates and assumptions based upon historical experience and various other factors and circumstances. The Partnership believes that its estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates and assumptions under different future conditions. The Partnership believes that the estimates and assumptions that are most important to the portrayal of its financial condition and results of operations, in that they require the most subjective judgments, form the basis of accounting policies deemed to be most critical. These critical accounting policies include capitalization of expenditures and depreciation of assets, and impairment of long-lived assets. Capitalization of Expenditures and Depreciation of Assets The Partnership carries its real estate assets at their depreciated cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from 8 to 40 years for land improvements and buildings, to 5 years for furniture, fixtures, and equipment, all of which are judgmental determinations. Repairs and maintenance costs are expensed as incurred while significant improvements, renovations, and replacements are capitalized. Impairment of Long-Lived Assets The Partnership accounts for long-lived assets in accordance with the provisions of Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Partnership periodically evaluates its long-lived assets, for indicators that would suggest that the carrying amount of the assets may not be recoverable. The judgments regarding the existence of such indicators are based on factors such as operating performance, market conditions, costs to complete development projects, and legal factors. Future events could occur which would cause the Partnership to conclude that impairment indicators exist and that the Partnership should record an impairment loss. OVERVIEW The following is a discussion of the financial condition and results of operations of the Partnership for the three and nine months ended September 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 September 30, 2002 and 2001 was 5,948 in 26 apartment communities. Average monthly rental per apartment unit was $617 at September 30, 2002 and 2001. Overall occupancy was 94.4% and 95.2% at September 30, 2002 and 2001, respectively. RESULTS OF OPERATIONS (Dollars in 000's) COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED SEPTEMBER 30, 2002 TO THE THREE MONTHS ENDED SEPTEMBER 30, 2001 Total revenues for the three months ended September 30, 2002 decreased .6% from the three months ended September 30, 2001. This decrease is due to the decline in occupancy from the third quarter of 2001. Property operating expenses for the three months ended September 30, 2002 increased by 5.0% as compared to the same period a year ago. Increases in personnel, real estate taxes and insurance, and utilities were partially offset by decreases in building repairs and maintenance and other operating expenses. COMPARISON OF THE PARTNERSHIP'S NINE MONTHS ENDED SEPTEMBER 30, 2002 TO THE NINE MONTHS ENDED SEPTEMBER 30, 2001 Total revenues for the nine months ended September 30, 2002 decreased 2.8% from the nine months ended September 30, 2001. This decrease was due to the decline in occupancy from the first nine months of 2001. Property operating expenses for the nine months ended September 30, 2002 increased by 2.4% 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, landscaping and other operating expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities decreased to $10,908 for the nine months ended September 30, 2002 from $11,877 for the nine months ended September 30, 2001 mainly related to lower net income. Net cash flow used in investing activities decreased by $790 for the nine months ended September 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 decreased 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). The Partnership's $142 million of debt matures in March 2003. Mid-America Apartment Communities, Inc. ("MAAC") expects to fund the refinancing of this debt by debt issued under MAAC's secured credit facility with Prudential Mortgage Capital, credit enhanced by Fannie Mae. 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. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS 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. 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. ITEM 4. Controls and Procedures EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES The Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Partnership's management, including its general partner's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management's control objectives. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Partnership's management, including its general partner's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures are effective in timely alerting them to material information relating to the Partnership that is required to be included in the Partnership's Exchange Act filings. CHANGES IN INTERNAL CONTROLS There have been no significant changes in the Partnership's internal controls or in other factors which could significantly affect internal controls subsequent to the date the evaluation was completed. 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. Exhibit No 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (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: November 14, 2002 /s/Simon R.C. Wadsworth Simon R.C. Wadsworth President and Director (Principal Financial and Accounting Officer) Chief Executive Officer Certification I, H. Eric Bolton, Jr., certify that: (1) I have reviewed this quarterly report on Form 10-Q of Mid-America Capital Partners, L.P.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/H. Eric Bolton, Jr. H. Eric Bolton, Jr. Chief Executive Officer Chief Financial Officer Certification I, Simon R.C. Wadsworth, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Mid-America Capital Partners, L.P.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/Simon R.C. Wadsworth Simon R.C. Wadsworth Chief Financial Officer

MID AMERICA CAPITAL PARTNERS L P 10-Q