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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
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MIC-Info: RSA-MD5,RSA,
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CZnZbruRBV8uxBx0MKkF5g==
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Post Office Box 1988 12 South Main Suite 100 Minot, ND (Address of principal executive offices) |
(Zip 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 (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.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Applicant is a North Dakota Real Estate Investment Trust. As of August 31, 2002, it had 31,786,071 shares of beneficial interest outstanding.
Part I | Financial | Page |
Item 1. | Financial Statements - First Quarter - Fiscal 2003 (unaudited) | |
Consolidated Balance Sheet July 31, 2002 (unaudited) and April 30, 2002 |
3 | |
Consolidated Statements of Operations
(unaudited) For the Three Months ended July 31, 2002, and 2001 |
4 | |
Consolidated Statements of Cash
Flows (unaudited) For the Three Months ended July 31, 2002, and 2001 |
5 | |
Consolidated Statements of Shareholders
Equity (unaudited) For the Three Months ended July 31, 2002, and 2001 |
7 | |
Notes to Consolidated Financial Statements (unaudited) | 8 | |
Item 2. |
Managements Discussion and
Analysis of Financial Condition and Results of Operations |
16 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
Part II | Other Information | |
Item 1. | Legal Proceedings | 27 |
Item 2. | Changes in Securities and Use of Proceeds - None | 27 |
Item 3. | Defaults Upon Senior Securities - None | 27 |
Item 4. | Submission of Matters to a Vote of Security Holders - None | 27 |
Item 5. | Other Information - None | 27 |
Item 6. | Exhibits and Reports on Form 8-K filed - None | 27 |
Signatures and Certifications | 28 -30 |
ASSETS |
(unaudited) 07/31/02 |
04/30/02 |
Real Estate Investments | ||
Property Owned | $ 766,339,144 | $ 740,319,436 |
Less Accumulated Depreciation | -63,029,682 | -58,925,517 |
$ 703,309,462 | $ 681,393,919 | |
Mortgage Loans Receivable | 3,636,662 | 3,952,762 |
Total Real Estate Investments | $ 706,946,124 | $ 685,346,681 |
OTHER ASSETS | ||
Cash | $ 13,659,352 | $ 12,333,426 |
Marketable Securities Available for Sale | 19,088,266 | 10,500,000 |
Rent Receivable | 3,638,144 | 3,233,765 |
Real Estate Deposits | 469,000 | 422,045 |
Notes Receivable | 3,500,000 | 3,500,000 |
Prepaid and Other Assets | 2,869,317 | 3,513,791 |
Tax, Insurance and Other Escrow | 5,452,942 | 6,210,450 |
Deferred Charges and Leasing Costs | 3,867,201 | 3,498,922 |
Furniture & Fixtures, Net | 579,101 | 209,121 |
Goodwill | 1,440,817 | 1,440,817 |
TOTAL ASSETS | $ 761,510,264 | $ 730,209,018 |
LIABILITIES | ||
Accounts Payable and Accrued Expenses | $ 10,628,533 | $ 10,596,277 |
Mortgages Payable | 462,620,396 | 459,568,905 |
Investment Certificates Issued | 17,972,369 | 25,186,582 |
TOTAL LIABILITIES | $ 491,221,298 | $ 495,351,764 |
Commitments and Contingencies (Note 10) | ||
Minority Interest in Partnerships | 12,759,454 | 12,819,077 |
Minority Interest of Unit Holders
in Operating Partnership 9,882,883 on 07/31/02 9,636,247 on 04/30/02 |
$ 78,771,521 | $ 76,460,046 |
SHAREHOLDERS' EQUITY Shares of Beneficial Interest 31,785,979 on 07/31/02 27,847,079 on 04/30/02 |
$ 198,451,609 | $ 163,376,549 |
Accumulated Distributions in Excess of Net Income | -19,693,618 | -17,798,418 |
Total Shareholders Equity | $ 178,757,991 | $ 145,578,131 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 761,510,264 | $ 730,209,018 |
3 Months Ended 07/31/02 |
3 Months Ended 07/31/01 |
|
REVENUE | ||
Real Estate Rentals * | $ 27,176,943 | $ 21,568,381 |
Interest, Discounts and Fees | 362,698 | 211,713 |
Total Revenue | $ 27,539,641 | $ 21,780,094 |
OPERATING EXPENSE | ||
Interest | $ 8,796,063 | $ 7,198,378 |
Depreciation | 4,417,768 | 3,656,762 |
Utilities and Maintenance | 4,053,543 | 2,971,809 |
Taxes | 2,949,623 | 2,115,630 |
Insurance | 484,052 | 314,685 |
Property Management Expenses | 2,025,960 | 1,630,079 |
Administrative Expense & Trustee Services | 474,732 | 386,307 |
Operating Expenses | 244,581 | 126,622 |
Amortization | 128,269 | 128,956 |
Total Expenses | $ 23,574,591 | $ 18,529,228 |
INCOME BEFORE GAIN/LOSS ON PROPERTIES
AND MINORITY INTEREST |
$ 3,965,050 | $ 3,250,866 |
GAIN ON SALE OF PROPERTIES | 262,568 | 307,934 |
MINORITY INTEREST PORTION OTHER |
-282,486 | -56,755 |
MINORITY INTEREST PORTION OPERATING PARTNERSHIP | -999,681 | -726,318 |
NET INCOME | $ 2,945,451 | $ 2,775,727 |
PER SHARE | ||
Net Income Per Share | $ .10 | $ 0.11 |
Dividends Paid Per Share | $ .1540 | $ 0.1450 |
Average Number of Shares Outstanding | 30,070,096 | 23,873,777 |
* Includes $404,379 and $333,295 for 3 months ended July 31, 2002, and July 31, 2001, of straight-line rents. Straight-line rents are the amounts to be collected in future years from tenants occupying commercial properties under leases which provide for periodic increases in rents. It is determined by dividing the total rent payable for the lease term by the total rental periods and allocating the resulting average rent to the period covered by the report.
4
07/31/02 | 07/31/01 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME | $ 2,945,451 | $ 2,775,727 |
Adjustments to reconcile net income
to net cash provided by operating activities |
||
Depreciation and amortization | 4,546,037 | 3,785,718 |
Minority interest portion of operating partnership income | 1,282,167 | 783,073 |
Gain on sale of properties | -262,568 | -307,934 |
Interest reinvested in investment certificates | 112,607 | 110,495 |
Changes in other assets and liabilities: | ||
(Increase) decrease in real estate deposits | -46,955 | -1,046,777 |
(Increase) decrease in other assets | 644,473 | -1,010,776 |
(Increase) decrease in rent receivable | -404,379 | -16,244 |
(Increase) decrease in tax, insurance and other escrow | 757,507 | 146,747 |
(Increase) decrease in deferred charges | -496,548 | -186,712 |
Increase
(decrease) in accounts payable & accrued expenses |
40,923 | -386,189 |
Net cash provided from operating activities | $ 9,118,715 | $ 4,647,128 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sale of marketable
securities - available-for-sale |
$ 8,000,000 | $ 2,351,248 |
Proceeds from sale of property | 979,982 | 0 |
Principal payments on mortgage loans receivable | 316,101 | 164,924 |
Payments for acquisition and improvements of properties | -23,538,972 | -4,462,109 |
Purchase of Marketable Securities | -16,588,266 | 0 |
Investment in mortgage loan receivable | 0 | -3,200,000 |
Net cash used for investing activities | $ -30,831,155 | $ -5,145,937 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from sale of shares, net of issue costs | $ 31,653,946 | $ 0 |
Proceeds from investment certificates issued | 0 | 6,688,447 |
Proceeds from mortgages payable | 5,700,000 | 9,734,544 |
Repurchase of shares and minority interest units | -5,658 | -17,821 |
Distributions paid to shareholders | -2,646,779 | -1,844,275 |
Distributions paid to unitholders of operating partnership | -1,345,706 | -1,091,042 |
Distributions paid to other minority partners | -342,110 | 0 |
Redemption of investment certificates | -7,326,819 | -170,085 |
Principal payments on mortgage loans | -2,648,508 | -5,847,446 |
Net cash provided from financing activities | $ 23,038,366 | $ 7,452,322 |
NET INCREASE IN CASH | $ 1,325,926 | $ 6,953,513 |
CASH AT BEGINNING OF YEAR | $ 12,333,426 | $ 6,356,063 |
CASH AT END OF 1st PERIOD | $ 13,659,352 | $ 13,309,576 |
Consolidated Statements of Cash Flows continued
07/31/02 | 07/31/01 | |
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES 2002 and 2001 | ||
Distribution reinvestment plan | $ 2,352,587 | $ 1,744,586 |
Proceeds from
sale of properties deposited directly with escrow agent |
258,941 | 712,477 |
Properties acquired
through the issuance of minority interest units in the operating partnership |
3,890,401 | 1,100,000 |
Interest reinvested directly in investment certificates | 112,607 | 110,495 |
UPREIT units converted to shares | 1,074,185 | 0 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid during the year for: | ||
Interest paid on mortgages | $ 8,370,684 | $ 6,557,770 |
Interest paid on investment certificates | 289,223 | 79,519 |
Interest paid on margin account and other | 0 | 1,438 |
$ 8,659,907 | $ 6,638,727 |
NUMBER OF SHARES |
SHARES OF BENEFICIAL INTEREST |
DISTRIBUTIONS IN EXCESS OF NET INCOME |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
TOTAL SHARE- HOLDERS EQUITY |
|
Balance May 1, 2001 | 24,068,346 | $ 132,148,768 | $ -13,073,157 | $ -130,451 | $ 118,945,160 |
Comprehensive Income | |||||
Net income | 10,600,129 | 10,600,129 | |||
Unrealized
gain on securities available-for-sale |
130,451 | 130,451 | |||
Total comprehensive income | $ 10,730,580 | ||||
Distributions | -15,325,390 | -15,325,390 | |||
Distribution reinvestment plan | 832,708 | 7,297,694 | 7,297,694 | ||
Sale of shares | 2,947,986 | 23,949,523 | 23,949,523 | ||
Fractional shares repurchased | -1,961 | -19,436 | -19,436 | ||
Balance April 30, 2002 | 27,847,079 | $ 163,376,549 | $ -17,798,418 | $ 0 | $ 145,578,131 |
Comprehensive Income | |||||
Net income | 2,945,451 | 2,945,451 | |||
Unrealized gain on securities available-for-sale | 0 | 0 | |||
Total comprehensive income | $ 2,945,451 | ||||
Distributions | -4,840,651 | -4,840,651 | |||
Distribution reinvestment plan | 229,520 | 2,193,872 | 2,193,872 | ||
Sale of shares | 3,709,948 | 32,886,846 | 32,886,846 | ||
Fractional shares repurchased | -568 | -5,658 | _____________ | -5,658 | |
Balance July 31, 2002 | 31,785,979 | $ 198,451,609 | $ -19,693,618 | $ 0 | $ 178,757,991 |
Note 1 - Organization
Investors Real Estate
Trust ("IRET") elected to be taxed as a Real Estate
Investment Trust ("REIT") under Sections 856-860 of
the Internal Revenue Code of 1986, as amended, commencing with
its taxable year ended April 30, 1971. REITs are subject
to a number of organization and operational requirements, including
a requirement to distribute 90% of ordinary taxable income to
its shareholders and, generally, are not subject to Federal income
tax on net income. IRET is engaged in the acquisition and
ownership of residential apartment communities and commercial
properties located mainly in the states of North Dakota and Minnesota
but also in the states of Colorado, Idaho, Iowa, Georgia, Kansas,
Montana, Nebraska, South Dakota, Texas, Michigan and Washington.
As of July 31, 2002, IRET owned 65 apartment communities with
8,347 apartments and 69 commercial buildings totaling 4,225,055
square feet. IRET conducts a majority of its business activities
through its operating partnership, IRET Properties, a North Dakota
Limited Partnership, as well as through a number of other subsidiary
entities.
Note 2 Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The consolidated financial
statements include the accounts of IRET and all its subsidiaries
in which it maintains a controlling interest. The financial
statements have been prepared on the basis of accounting principles
that are in effect as of the financial statement date. IRET
operates on a fiscal year commencing May 1 and ending April 30.
The accompanying consolidated financial statements include the accounts of IRET and its 76.3% (74.3% at April 30, 2002) partnership interest in the operating partnership. Such interest has been calculated as the percentage of outstanding common shares divided by the total outstanding common shares and operating partnership units ("UPREIT Units") outstanding. The remaining 23.7% (25.7% at April 30, 2002) is reflected as Minority Interest of Unit Holders in Operating Partnership in these consolidated financial statements.
The consolidated financial statements also include the ownership by IRET Properties of a 60.31% in Minnesota Medical Investors LLC, SMB Operating Company LLC, and SMB MM LLC, collectively known as Southdale Medical Center and a 51% ownership interest in Mendota Properties, LLC, a Minnesota limited liability company. Mendota Properties, LLC, is the holder of all of the issued and outstanding membership interests in Mendota Office Holding LLC, a Minnesota limited liability company and Mendota Office Three and Four, LLC, a Minnesota limited liability company. The three Mendota LLCs are the owner of five multi-tenant commercial real estate properties in Dakota County, Minnesota. These companies are consolidated into the IRET's other operations with minority interests reflecting the minority partners share of ownership and income and expenses.
All material inter-company transactions and balances have been eliminated in the consolidated financial statements.
Note 2 continued
Unaudited Interim Financial
Statements
The interim consolidated financial statements of IRET have been
prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information
and the applicable rules and regulations of the Securities and
Exchange Commission. Accordingly, certain disclosures accompanying
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
are omitted. The year-end balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United
States of America. In the opinion of management, all adjustments,
consisting solely of normal recurring adjustments, necessary for
the fair presentation of the consolidated financial statements
for the interim periods have been included.
The current period's results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the company's form 10-K405 for the year ended April 30, 2002.
Significant Accounting Policies
IRET has not made any
significant changes in accounting policy and practices since the
most recent audited financial statements.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities, established
accounting and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset
or liability measured at its fair value. The statement requires
that changes in the derivatives fair value be recognized
currently in earnings unless specific hedge accounting criteria
are met. Certain provisions of SFAS 133 were amended by
SFAS 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities an amendment of Statement
133. The impact of SFAS 133 is not significant.
In 2001 the FASB issued SFAS No. 141 Business Combinations (SFAS 141) which requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method, SFAS No. 142 Goodwill and Other Intangible Assets (SFAS 142) which provides new guidance in accounting for goodwill and intangible assets and SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144) which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS 141 had no effect of IRETs financial position or results of operations. SFAS 142 and SFAS 144 were adopted May 1, 2002 with no significant impact.
Note 3 Goodwill
There was no change in the carrying amount of goodwill for the
three months ended July 31, 2002. Goodwill is tested on
an annual basis and any impairment adjustments are reflected at
that time. The impact of the adoption of SFAS No. 142 has
no significant impact on net income or earnings per share when
comparing the three months ended July 31, 2002, to July 31, 2001.
Note 4 - Earnings Per Share
Earnings per share ("EPS") is computed as net
income available to common shareholders divided by the weighted
average number of common shares outstanding for the period.
The company has no outstanding warrants, convertible stock, or
other contractual obligations requiring issuance of additional
common shares that would result in a dilution of earnings.
The exchange of outstanding operating partnership units for common shares will have no effect on EPS as unitholders and shareholders presently share equally in the net income of the operating partnership.
The following table reconciles amounts reported in the consolidated financial statements for the three months ended July 31, 2002, and 2001.
|
07/31/02 | 07/31/01 | ||||
NUMERATOR Net income applicable to shares |
$ 2,945,451 | $ 2,775,727 | |||
Minority interest portion of operating partnership income | 999,681 | 726,318 | |||
Numerator for diluted earnings per share | 3,945,132 | 3,502,045 | |||
DENOMINATOR Weighted average shares |
30,070,096 | 23,873,777 | |||
Effect
of dilutive securities Weighted Average Convertible operating partnership units |
9,764,271 | 7,592,484 | |||
Denominator for diluted earnings per share | 39,834,367 | 31,466,261 | |||
Earnings per share | $ .10 | $ .11 | |||
Diluted earnings per share | $ .10 | $ .11 |
Note
5 Investment Certificates Issued
IRET has sold investment certificates to the public. The
interest rates vary from 5% to 9% per annum, depending on the
term of the security. Interest is paid annually, semiannually,
or quarterly on the anniversary date of issuance. In April
of 2002, IRET discontinued the sale of investment certificates
and outstanding certificates will be redeemed at maturity as follows:
Ending April 30, | |
Nine Months remaining 2003 | $ 9,246,920 |
2004 | 1,986,692 |
2005 | 2,235,926 |
2006 | 2,179,467 |
2007 | 2,323,364 |
$ 17,972,369 |
Note 6
UPREIT Loan Program Loan to Trustee
On January 16, 2002, IRETs
Board authorized an UPREIT unit loan program available to holders
of $1,000,000 or more of limited partnership units in IRETs
operating partnership. IRET will lend up to 50% of the value
of the units based on the closing price of IRET shares on the
NASDAQ market for a term of two years or less, secured by the
borrower's limited partnership units in IRET Properties, at a
variable interest rate 1.5% over the interest rate charged IRET
by its participating lender. The interest rate adjusts on
the first of each month. IRET charges a .5% loan fee.
On January 30, 2002, a $3,500,000.00 loan, pursuant to the UPREIT Loan Program, was made to Steven B. Hoyt, a member of IRETs Board of Trustees. The IRET Board of Trustees approved the loan; Mr. Hoyt abstaining.
The terms of the loan require Mr. Hoyt to make quarterly interest payments, beginning April 1, 2002, with the full balance of the principle sum due on or before January 31, 2004. The interest rate is equal to the Wall Street Journal Prime Rate plus one and one-half percent (1.5%), as of July 31, 2002 for an interest rate of 6.25%. The agreement also required the borrower to pay an origination fee of one-half percent (.5%), of the principle balance. The borrower paid a fee of $17,500.00 on the date of the loan.
Note 7 - Segment Reporting
The following information
summarizes IRET's segment reporting for residential and commercial
properties along with reconciliations to the consolidated financial
statements:
Three Months Ended July 31, 2002
Commercial | Residential | Total | |
Segment Revenue | |||
Rental Revenue | $ 12,182,678 | $ 14,994,265 | $ 27,176,943 |
Segment Expenses | |||
Mortgage Interest | $ 4,082,717 | $ 4,384,787 | $ 8,467,504 |
Utilities and Maintenance | 1,267,646 | 2,785,897 | 4,053,543 |
Real Estate Taxes | 1,259,217 | 1,690,406 | 2,949,623 |
Insurance | 99,779 | 384,273 | 484,052 |
Property Management | 567,255 | 1,458,705 | 2,025,960 |
Total Segment Expense | $ 7,276,614 | $ 10,704,068 | $ 17,980,682 |
Segment Gross Profit | $ 4,906,064 | $ 4,290,197 | $ 9,196,261 |
Reconciliation to consolidated operations: | |
Interest Discounts and Fee Revenue | $ 362,698 |
Other Interest Expense | -328,559 |
Depreciation | -4,417,768 |
Administrative Expense and Trustee Fees | -474,732 |
Operating Expenses | -244,581 |
Amortization | -128,269 |
Income Before Gain/Loss on Properties and Minority Interest | $ 3,965,050 |
Three Months Ended July 31, 2001
Commercial | Residential | Total | |
Segment Revenue | |||
Rental Revenue | $ 7,439,531 | $ 14,128,850 | $ 21,568,381 |
Segment Expenses | |||
Mortgage Interest | $ 2,649,704 | $ 4,371,013 | $ 7,020,717 |
Utilities and Maintenance | 411,066 | 2,560,743 | 2,971,809 |
Taxes | 533,699 | 1,581,931 | 2,115,630 |
Insurance | 46,253 | 268,432 | 314,685 |
Property Management | 185,825 | 1,444,254 | 1,630,079 |
Total Segment Expense | $ 3,826,547 | $ 10,226,373 | $ 14,052,920 |
Segment Gross Profit | $ 3,612,984 | $ 3,902,477 | $ 7,515,461 |
Reconciliation to consolidated operations: | |
Interest Discounts and Fee Revenue | $ 211,713 |
Other Interest Expense | -177,661 |
Depreciation | -3,656,762 |
Advisory and Trust Fees | -386,307 |
Operating Expenses | -126,622 |
Amortization | -128,956 |
Income Before Gain/Loss on Properties and Minority Interest | $ 3,250,866 |
Segment Assets and Accumulated Depreciation
July 31, 2002
Commercial | Residential | Total | |
Segment Assets | |||
Property Owned | $ 370,820,359 | $ 395,518,785 | $ 766,339,144 |
Less Accumulated Depreciation | - 19,233,013 | - 43,796,669 | - 63,029,682 |
Total Property Owned | $ 351,587,346 | $ 351,722,116 | $ 703,309,462 |
April 30, 2002
Commercial | Residential | Total | |
Segment Assets | |||
Property Owned | $ 350,388,982 | $ 389,930,454 | $ 740,319,436 |
Less Accumulated Depreciation | - 17,296,055 | - 41,629,462 | - 58,925,517 |
Total Property Owned | $ 333,092,927 | $ 348,300,992 | $ 681,393,919 |
Note 8 Pro Forma Condensed Financial Information Newly Acquired Properties (unaudited)
IRET acquired the following real estate during the three months ended July 31, 2002:
Property Description |
Date of Acquisition |
Total Purchase Price (Including all closing costs) |
Three Paramont Plaza 75,526 sq. ft. | ||
Multi-tenant Office Building Bloomington, MN | 05/20/02 | $ 7,367,227 |
Wilsons Leather 353,049 sq. ft. | ||
Office/Industrial Building, Brooklyn Park, MN | 06/12/02 | 13,010,645 |
East Park Apartments 59,520 sq. ft. | ||
84-unit Apartment Community, Sioux Falls, SD | 07/15/02 | 2,520,354 |
Sycamore Village Apartments 34,950 sq. ft. | ||
48-unit Apartment Community, Sioux Falls, SD | 07/15/02 | 1,417,699 |
Total | $ 24,315,925 |
The following unaudited pro forma information was prepared as if the above transactions had occurred on May 1, 2002, the beginning of IRETs current fiscal year. The pro forma financial information is based upon the rent rolls and expected expenses for each property on the date of its actual acquisition. This pro forma information is not necessarily indicative of the consolidated results which would have occurred if all of the transactions had been consummated on May 1, 2002, nor do they purport to represent the results of operations for future periods.
The pro forma consolidated statement of operations (unaudited) for the three months ended July 31, 2002, is presented as if the real estate acquisition had been completed at the beginning of the period May 1, 2002, rather than on the actual acquisition or closing date.
Three Months Ended 07/31/02 |
Three Months Ended Acquisitions Pro Forma Adjustments |
Total Consolidated Pro Forma |
|
REVENUE | |||
Real Estate Rentals | $ 27,176,943 | $ 464,221 | $ 27,641,164 |
Interest, Discounts and Fees | 362,698 | 0 | 362,698 |
Total Revenue | $ 27,539,641 | $ 464,221 | $ 28,003,862 |
EXPENSES | |||
Interest | $ 8,796,063 | $ 149,148 | $ 8,945,211 |
Depreciation | 4,417,768 | 69,799 | 4,487,567 |
Utilities and Maintenance | 4,053,543 | 65,705 | 4,119,248 |
Taxes | 2,949,623 | 40,033 | 2,989,656 |
Insurance | 484,052 | 6,035 | 490,087 |
Property Management Expenses | 2,025,960 | 21,311 | 2,047,271 |
Administrative Expenses and Trustee Services | 474,732 | 0 | 474,732 |
Operating Expenses | 244,581 | 0 | 244,581 |
Amortization | 128,269 | 0 | 128,269 |
Total Expenses | $ 23,574,591 | $ 352,030 | $ 23,926,621 |
INCOME BEFORE GAIN/LOSS ON PROPERTIES AND MINORITY INTEREST | $ 3,965,050 | $ 112,191 | $ 4,077,241 |
GAIN ON SALE OF PROPERTIES | 262,568 | 0 | 262,568 |
MINORITY INTEREST PORTION OTHER PARTNERSHIP |
-282,486 | 0 | -282,486 |
MINORITY INTEREST PORTION - OPERATING PARTNERSHIP | $ -999,681 | $ -26,589 | $ -1,026,270 |
NET INCOME | $ 2,945,451 | $ 85,602 | $ 3,031,053 |
Net income per share | $ .10 | $ .00 | $ .10 |
AVERAGE WEIGHTED SHARES | 30,070,096 | 30,070,096 | 30,070,096 |
Note 9 Market Price Range of Shares
IRET Shares of Beneficial Interest trade on the NASDAQ National Market under the symbol IRETS. For the three months ended July 31, 2002, a total of 3,127,513 shares were traded in 6,387 separate trades. The high trade price during the period was $11.900, the low was $8.550, and the closing price on July 31, 2002, was $9.240. For the three months ended July 31, 2001, a total of 2,516,122 shares were traded in 4,434 separate trades on the NASDAQ small-cap market. The high trade price during the period was $10.490, the low was $8.250, and the closing price on July 1, 2001, was $8.950. On April 9, 2002, IRET moved its listing from the Nasdaq small-cap to the Nasdaq National Market.
Note 10 - Commitments and Contingencies
Insurance IRETs portfolio-wide general liability and property insurance policies expired on April 30, 2002. IRET renewed its policies at similar coverage levels for the first quarter ending July 31, 2002, but at a price of $169,367 or 53.8% higher than the prior fiscal year's cost due to the addition of more property to IRET's portfolio as well as the general price increases for insurance coverage implemented by the insurance industry. A portion of IRETs insurance costs are passed through to certain commercial tenants pursuant to the terms of the applicable lease agreement. Of IRETs total insurance costs of $1,613,552, $281,737 or 17.46% will be billed back to IRETs commercial tenants. For Fiscal 2002, all of IRET's real estate properties are insured against the customary casualty and liability claims except for acts of terrorism, which are excluded under IRETs new insurance policy. Management believes that IRET is in compliance with all insurance provisions of its debt agreements with the exception of one loan pertaining to an apartment complex in Rochester, Minnesota, held by Jefferson Pilot Financial in the amount of $3,772,688 as of July 31, 2002. IRET has requested a waiver from the terror insurance requirement. This waiver request is pending with the lender. If the waiver is not granted, the increased cost to IRET for terrorism coverage on the apartment complex as of July 31, 2002, is expected to be at a minimum of $25,000.
Environmental Matters Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around or under property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate any property containing such substances, may adversely affect the owners or operators ability to sell or rent the affected property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal of, or remediation of, such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials, as well as other hazardous or toxic substances. The operation and subsequent removal of certain underground storage tanks are also regulated by federal and state laws. In connection with the current or former ownership (direct or indirect), operation, management, development and/or control of real properties, IRET may be considered to be an owner or operator of such properties, or to have arranged for the disposal or treatment of hazardous or toxic substances. As such, IRET may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines and claims for injuries to persons and property.
It is currently IRET's policy to obtain a Phase I environmental study on each property that IRET seeks to acquire. If the Phase I indicated any possible environmental problems, IRET's policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances. No assurance can be given that the Phase I or Phase II environmental studies, or any other environmental studies undertaken with respect to any of IRET's current or future properties, will reveal the full extent of potential environmental liabilities, that any prior owner or operator of a property did not create any material environmental condition unknown to IRET, that a material environmental condition does not otherwise exist as to any one or more of such properties or that environmental matters will not have a material adverse effect on IRET, IRET's ability to make distributions to shareholders and IRET's ability to pay amounts due on debt. IRET currently does not carry insurance for environmental liabilities.
Certain environmental laws impose liability on a previous owner of property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not relieve an owner of such liability. As a result, in addition to any liability that IRET may have with respect to current properties, IRET may also have liability with respect to properties previously sold by IRET's predecessors or by IRET. To management's knowledge, as of April 30, 2002, IRET does not own and has not sold any properties that contain known material environmental liabilities.
Note 11 Subsequent Events
Dividend Declaration On August 21, 2002, the Board of Trustees of IRET declared a dividend of $0.156 per share, payable October 1, 2002, to shareholders of record at the close of business on September 13, 2002.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the consolidated financial statements included in this report as well as the financial statements audited by Brady Martz & Associates, P.C. of Minot, North Dakota, certified public accountants for the period ended April 30, 2002, which financial statements were attached to the Form 10-K405 on file for Investors Real Estate Trust.
Certain matters included in this discussion are forward looking statements within the meaning of federal securities laws. Although the Company believes that the expectations reflected in such forward looking statements are based on reasonable assumptions, it can give no assurance that the expectations expressed will actually be achieved. Many factors may cause actual results to differ materially from the Companys current expectations, including general economic conditions, local real estate conditions, the general level of interest rates, and the availability of financing, timely completion and lease-up of properties under construction and various other economic risks inherent in the business of owning and operating investment real estate.
Revenues
Total IRET revenues for the
first quarter of Fiscal 2003 ended July 31, 2002, were $27,539,641
compared to $21,780,094 received in the first quarter of the prior
fiscal year ended July 31, 2001. This is an increase of
$5,759,547 or 26.4%. This increase resulted primarily from
the additional real estate investments acquired by IRET as shown
by the following analysis:
Rent from 19 properties acquired in 2002 in excess of that received in 2002 | $ 5,227,909 |
Rent from 4 properties acquired in Fiscal 2003 | 500,470 |
Decrease in rental receipts on existing properties | -104,709 |
An increase in interest income | 161,463 |
An increase in straight-line rents | 71,084 |
A decrease in ancillary income | -10,478 |
A decrease in rent - properties sold | -86,192 |
$ 5,759,547 |
Straight-Line Rents
Accounting rules requires us
to record as revenue "straight-line rents" on our commercial
property leases that contain future rental increases. This
rule requires us to calculate the total rents that the tenant
has contracted to pay us for the entire term of the lease and
to divide that total by the number of months of the lease and
to record as revenue each month the resulting average monthly
rent. The result is that, in the beginning years of a lease,
we must record as revenue an amount that exceeds the actual cash
rent we have collected. In the later years of such leases,
we, of course, will record as revenue an amount less than the
actual cash then being received.
The amount of "straight-line rents" (that is, the amount that the recorded rent is greater than the actual cash rent we have collected) included in rental revenues in the above figures are:
1st Quarter Fiscal 2003 | $ 404,379 |
1st Quarter Fiscal 2002 | $ 333,295 |
Capital Gain Income
IRET realized capital gain
income of $262,568 during the first quarter of Fiscal 2003 ended
July 31, 2002. This resulted from the sale of the Eastwood,
Oak Manor, and Jenner Apartments in Dickinson, North Dakota.
Expenses
and Net Income
The following table shows the
changes in revenues, operating expenses, interest, and depreciation
for the three months ended July 31, 2002, as compared to the three
months ended July 31, 2001:
Three Months Ended | 07/31/02 | 07/31/01 |
Percent |
Real Estate Rental Income |
$ 27,176,943 |
$ 21,568,381 |
26.0% |
|
|
|
|
Real Estate Operating Expenses |
|
|
|
Utilities and Maintenance |
$ 4,053,543 |
$ 2,971,809 |
36.4% |
Real Estate Taxes |
2,949,623 |
2,115,630 |
39.4% |
Insurance |
484,052 |
314,685 |
53.8% |
Property Management |
2,025,960 |
1,630,079 |
24.3% |
Interest on Mortgage Indebtedness |
8,467,504 |
7,020,717 |
20.6% |
Total Property Expenses |
$ 17,980,682 |
$ 14,052,920 |
27.9% |
|
|
|
|
Net Real Estate Operating Income |
$ 9,196,261 |
$ 7,515,461 |
22.4% |
|
|
|
|
Interest Discount and Fee Income |
362,698 |
211,713 |
71.3% |
Other Interest Expense |
-328,559 |
-177,661 |
84.9% |
Depreciation |
-4,417,768 |
-3,656,762 |
20.8% |
Administrative Trustee & Operating |
-719,313 |
-512,929 |
40.2% |
Amortization Expense |
-128,269 |
-128,956 |
-0.5% |
Gain on Sale of Investments |
262,568 |
307,934 |
-14.7% |
Minority Interest Portion-Other Partnerships |
-282,486 |
-56,755 |
397.7% |
Minority Interest Portion-Operating Partnership |
-999,681 |
-726,318 |
37.6% |
Net Income for Generally Accepted Accounting Purposes |
$ 2,945,451 |
$ 2,775,727 |
6.1% |
As discussed above under Revenues the primary reason
for the changes in revenues, operating expenses, interest expense
and depreciation was the acquisition of additional real estate
properties. Other courses of change were:
|
7/31/02 |
7/31/01 |
% Change |
|
|
|
|
Net Income |
$ 2,945,451 |
$ 2,775,727 |
6.1% |
Add back portion allocated to: |
|
|
|
minority interests other partnerships |
282,486 |
56,755 |
|
minority interests operating partnerships |
999,681 |
726,318 |
|
Subtract capital gain income |
-262,568 |
-307,934 |
|
Total Portfolio Net Income |
$ 3,965,050 |
$ 3,250,866 |
21.9% |
Results from Stabilized Properties
IRET defines fully stabilized
properties, as those both owned at the beginning of the prior
fiscal year and having completed the rent-up phase (90% occupancy).
"Same-store" results for the first quarter of Fiscal
2003 and 2002 for residential and commercial were:
Same-Store Residential | 2003 | 2002 | % Change |
Total Receipts | $ 14,326,675 | $ 14,203,446 | .87 % |
Expenses: | |||
Utilities & Maintenance | 2,628,176 | 2,541,708 | 3.40% |
Property Management | 1,377,062 | 1,441,131 | -4.45% |
Taxes | 1,611,972 | 1,597,304 | .92% |
Insurance | 355,087 | 227,265 | 56.24% |
Mortgage Interest | 4,111,134 | 4,087,772 | .57% |
Total Expenses | 10,083,431 | 9,895,180 | 1.90% |
Net Operating Income | $ 4,243,244 | $ 4,308,266 | -1.51% |
Same-Store Commercial | 2003 | 2002 | % Change |
Total Receipts | $ 7,000,165 | $ 7,205,831 | -2.85% |
Expenses: | |||
Utilities & Maintenance | 367,005 | 380,950 | -3.66% |
Property Management | 192,407 | 166,965 | 15.24% |
Taxes | 579,125 | 514,369 | 12.59% |
Insurance | 53,604 | 40,987 | 30.78% |
Mortgage Interest | 2,796,636 | 2,884,422 | -3.04% |
Total Expenses | $ 3,988,777 | $ 3,987,693 | 0.0% |
Net Operating Income | $ 3,011,388 | $ 3,218,138 | -6.42% |
Comparison of Residential and Commercial Properties
The following is a comparison
of the net operating income from the two types of real estate
investments owned by IRET - residential and commercial - for the
three ended July 31, 2002 and 2001:
Net Real Estate Operating Income
Three Months Ended |
07/31/02 |
07/31/01 |
Percent Change |
Segment |
|
|
|
Residential |
$ 4,290,197 |
$ 3,902,477 |
9.9% |
Commercial |
4,906,064 |
3,612,984 |
35.8% |
Total |
$ 9,196,261 |
$ 7,515,461 |
22.4% |
The growth in the two operating segments resulted primarily from the acquisition of real estate properties during the prior and current fiscal years.
Occupancy Rates and Credit Risk
Occupancy rates are calculated
as a percentage of the actual rent paid to IRET versus the scheduled
rent charged by IRET for the period of time presented. The
following tables compare occupancy rates for stabilized properties
for the three months ended July 31, 2002 and 2001:
Three Months Ended |
07/31/02 |
07/31/01 |
Percent Change |
Segment |
|
|
|
Residential |
92.68% |
94.70% |
-2.13% |
Commercial | 94.79% | 98.77% | -4.03% |
The following table shows our tenants in commercial property that account for three percent or more of the total scheduled rent on August 1, 2002, from all commercial properties owned by IRET:
Lessee | Monthly Rent | % of Total |
Step II, Inc. DBA Edgewood Vista | $ 257,751 | 8% |
HealthEast Medical | 159,720 | 5% |
Great Plains Software, a subsidiary of Microsoft, Inc. | 156,250 | 5% |
Wilsons Leather | 113,750 | 3% |
All Others | 2,587,968 | 79% |
Total Scheduled Rent on August 1, 2002 | $ 3,275,439 | 100% |
Property Acquisitions and Dispositions
During the three months ended
July 31, 2002, IRET acquired 2 commercial properties and 2 apartment
complexes:
Acquisition Cost |
|
Commercial Property |
|
75,526 sq. ft. Three Paramont Plaza Bloomington, MN |
$ 7,367,227 |
353,049 sq. ft. Wilsons Leather Brooklyn Park, MN |
$ 13,010,645 |
|
|
Apartments |
|
84 units East Park Apartments Sioux Falls, SD |
$ 2,520,354 |
48 units Sycamore Village Apartments Sioux Falls, SD |
$ 1,417,699 |
These two apartment complexes were acquired by the issuance of 227,826 Partnership Units in exchange for $2,412,681 of equity and $1,512,372 cash and debt assumption.
Dispositions
The 37-unit Eastwood, 27-unit Oak
Manor, and 17-unit Jenner apartment complexes in Dickinson, North
Dakota, were sold during the first quarter of Fiscal 2003 at a
gain of $262,568.
Funds From Operations
IRET considers Funds from Operations
(FFO) a useful measure of performance for an equity
REIT. FFO is defined as net income available to shareholders
determined in accordance with accounting principles generally
accepted in the United States of America ("GAAP"), excluding
gains (or losses) from debt restructuring and sales of property,
plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures. IRET
uses the National Association of Real Estate Investment Trusts
(NAREIT) definition of FFO as amended by NAREIT to
be effective January 1, 2000.
FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition.
FFO should not be considered as an alternative to net income as determined in accordance with accounting principles generally accepted in the United States of America as a measure of IRETs liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of IRETs needs or its ability to service indebtedness or make distributions.
Funds from Operations for IRET for the three months ended July 31, 2002, increased to $8,160,230 compared to $6,842,284 for the three months ended July 31, 2001, an increase of 19.3%.
Funds from Operations continued
Three Months Ended |
07/31/02 |
07/31/01 |
Percent |
|
|
|
|
Net Income Available to IRET Shareholders and Unit Holders from operations and capital gains* | $ 4,227,618 | $ 3,558,800 | 18.8% |
Less gain from property sales |
-262,568 | -307,934 | -14.7% |
Operating income | $ 3,965,050 | $ 3,250,866 | 22.0% |
Less minority interest portion - other partnerships | -282,486 | -56,775 | 397.6% |
Net Operating Income | $ 3,682,564 | $ 3,194,091 | 15.3% |
Plus real estate depreciation and amortization (1) | 4,477,666 | 3,648,193 | 22.7% |
Funds from operations | $ 8,160,230 | $ 6,842,284 | 19.3% |
Weighted average shares and units outstanding(2) | 39,834,367 | 31,466,261 | 26.6% |
Distributions paid to Shareholders/Unitholders (3) | $ 6,344,535 | $ 4,589,764 | 38.2% |
(1) Depreciation on office equipment and other assets used by IRET are excluded. Amortization of financing and other expenses are excluded, except for amortization of leasing commissions which are included.
(2) Limited partnership units of the operating partnership are exchangeable for shares of beneficial interest of IRET only on a one-for-one basis.
(3) Distributions are paid equally on shares and units. It is our intent to distribute approximately 70% of FFO to our shareholders and unitholders.
* Includes $404,379 and $333,295 for 3 months ended 07/31/02 and 07/31/01 of straight-line rents.
Dividends
The following dividends were
paid during the first three months ended July 31, of fiscal years
2003 and 2002:
Date | 2003 | 2002 | Percent Change |
July 1 | $ .1540 | $ .1450 | 6.2% |
The Board of Trustees of IRET has declared a dividend of $.1560 per share payable October 1, 2002, to shareholders of record at the close of business on September 13, 2002.
Liquidity and Capital Resources
The important changes in IRETs
balance sheet during the first three months of Fiscal 2003 ended
July 31, 2002, were:
Acquired |
|
Three Paramont Plaza |
$ 7,367,227 |
Wilsons Leather |
$ 13,010,645 |
East Park Apartments |
$ 2,520,354 |
Sycamore Village Apartments |
$ 1,417,699 |
|
|
Sold |
|
Eastwood Apartments |
$ -540,120 |
Oak Manor Apartments |
$ -421,001 |
Jenner Apartments |
$ -292,238 |
As of the date of this report, IRET has entered into contracts to acquire the following real estate investments:
Property | Total Cost |
Loan or UPREIT Contribution |
Cash Required |
UH Medical, St. Paul, MN | $ 7,300,000 | $ 5,105,022 | $ 2,194,978 |
Abbott Northwestern, Sartell, MN | 12,700,000 | 12,662,525 | 37,475 |
Airport Medical, Bloomington, MN | 4,600,000 | 3,287,297 | 1,312,703 |
Brooklyn Center Park Dental, Bloomington, MN | 2,900,000 | 1,185,361 | 1,714,639 |
Total |
$ 27,500,000 | $ 22,240,205 | $ 5,259,795 |
IRET also plans to provide equity capital of approximately $5,000,000 to the NCSM Partnership (in which IRET holds a majority interest) for the purpose of constructing a 70,000 square foot addition to the Southdale Medical Center in Edina, Minnesota for an estimated total cost of $13,200,000. IRET is expecting to finance the balance of the construction cost.
IRET had cash on hand of $13,659,352 and marketable securities of $19,088,266 on July 31, 2002. As of July 31, 2002, IRETs unsecured credit lines with First International Bank & Trust, Bremer Bank, and First Western Bank & Trust, all of Minot, North Dakota, totaled $19,000,000. None of said credit lines were in use on July 31, 2002.
IRET believes that its existing cash and borrowing capacities are adequate to fund all of its acquisition and development obligations and all of its other short and long-term liquidity requirements. IRET believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends in accordance with Internal Revenue Code provisions pertaining to real estate investment trusts in both the short and long term. Budgeted expenditures for ongoing maintenance, capital improvements and renovations to its real estate portfolio are expected to be funded from the cash flow generated from the operation of these properties.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our exposure to market risk is limited to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. Even though our philosophy is to maintain a fairly low exposure to interest rate fluctuation risk, we are still vulnerable to significant fluctuations in interest rates on variable rate debt, on any future repricing or refinancing of fixed rate debt and on future debt.
We primarily use long-term (more than nine years) and medium-term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest-rate swaps or any other type of hedging activity to manage our costs of capital. As of July 31, 2002, we had the following amount of future principal payments on mortgages secured by our real estate:
Long Term Debt |
Bal. of 2003 |
2004 |
2005 |
2006 |
2007 |
Thereafter |
Total |
Fixed Rate |
$15,396,032 |
$9,099,425 |
$9,888,783 |
$10,624,611 |
$11,417,812 |
$375,548,244 |
$431,974,907 |
Variable Rate |
1,231,799 |
1,708,761 |
1,818,687 |
1,936,176 |
2,061,761 |
21,888,305 |
30,645,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) 462,620,396 |
(1) The weighted average interest rate as of July 31, 2002, was 7.36%. Any fluctuations on the variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $30,645,489 of variable rate indebtedness would increase our annual interest expense by $306,455.
Item 1. Legal Proceedings
In the course of our operations, we become involved in litigation. At this time, we know of no pending or threatened proceedings that would have a material impact upon us.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Steven B. Hoyt was a member of the Audit Committee for Fiscal 2002. Due to changes by the Nasdaq and SEC of the definition of an independent trustee, Mr. Hoyt has voluntarily resigned from the Audit committee for Fiscal 2003. The resignation is effective as of May 1, 2002.
Item 6. Exhibits and Reports on Form 8-K
None
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.
INVESTORS REAL ESTATE TRUST
(Registrant)
By: _/s/ Diane K. Bryantt _______________
Diane K. Bryantt, Chief
Financial Officer
and Secretary
By: _/s/Thomas A. Wentz, Sr.________________
Thomas A. Wentz, Sr., President
Date: __September 11, 2002________________
I, Thomas A. Wentz, Sr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
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; and
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.
Date __September 11, 2002_________
By _/s/Thomas A. Wentz, Sr ______
Thomas
A. Wentz, Sr.
President
I, Diane K. Bryantt, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
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; and
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.
Date _ September 11, 2002_________
By _/s/Diane K. Bryantt____________
Diane
K. Bryantt
Chief
Financial Officer and Secretary
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