-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SvtpHCS4plcXKIXS9Rm7LdXEt01Y34YLL4S3U/HsM5Cw34XxurKelGyLpl/lD7vy biIkMiwYNF4gC4oWsGq36A== 0000950144-97-005432.txt : 19970513 0000950144-97-005432.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950144-97-005432 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: AMEX SROS: CSX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOGER EQUITY INC CENTRAL INDEX KEY: 0000835664 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 592898045 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09997 FILM NUMBER: 97600261 BUSINESS ADDRESS: STREET 1: 3986 BLVD CTR DR STE 101 CITY: JACKSONVILLE STATE: FL ZIP: 32207 BUSINESS PHONE: 9043983403 MAIL ADDRESS: STREET 1: 3986 BLVD CTR DR STREET 2: SUITE 101 CITY: JACKSONVILLE STATE: FL ZIP: 32207 10-Q 1 KOGER EQUITY, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1997 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 1-9997 KOGER EQUITY, INC. (Exact name of registrant as specified in its charter) FLORIDA 59-2898045 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3986 BOULEVARD CENTER DRIVE, SUITE 101 JACKSONVILLE, FLORIDA 32207 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 398-3403 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. Class Outstanding at April 30, 1997 Common Stock, $.01 par value 21,058,743 shares 2 KOGER EQUITY, INC. AND SUBSIDIARIES INDEX
PAGE NO. PART I. FINANCIAL INFORMATION Independent Accountants' Report..................................... 2 Item 1. Financial Statements: Condensed Consolidated Balance Sheets March 31, 1997 and December 31, 1996............................. 3 Condensed Consolidated Statements of Operations for the Three Month Periods Ended March 31, 1997 and 1996.......................................... 4 Condensed Consolidated Statement of Changes in Shareholders' Equity for the Three Month Period Ended March 31, 1997............................................. 5 Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 1997 and 1996........ 6 Notes to Condensed Consolidated Financial Statements for the Three Month Periods Ended March 31, 1997 and 1996.................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................. 12 Item 5. Other Information.................................................. 12 Item 6. Exhibits and Reports on Form 8-K................................... 15 Signatures .............................................................. 16
1 3 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have reviewed the accompanying condensed consolidated balance sheet of Koger Equity, Inc. and subsidiaries (the "Company") as of March 31, 1997, and the related condensed consolidated statements of operations for the three month periods ended March 31, 1997 and 1996, the condensed consolidated statement of changes in shareholders' equity for the three month period ended March 31, 1997 and the condensed consolidated statements of cash flows for the three month periods ended March 31, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Company as of December 31, 1996, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1996 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Jacksonville, Florida May 7, 1997 2 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KOGER EQUITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED - SEE INDEPENDENT ACCOUNTANTS' REPORT) (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1997 1996 ------------ ----------- ASSETS Real Estate Investments: Operating properties: Land $ 98,567 98,567 Buildings 485,155 482,836 Furniture and equipment 1,630 1,569 Accumulated depreciation (87,605) (82,478) -------- -------- Operating properties - net 497,747 500,494 Properties under construction: Land 2,083 2,083 Buildings 3,310 930 Undeveloped land held for investment 21,688 20,558 Undeveloped land held for sale 2,891 6,550 Cash and temporary investments 41,849 35,715 Accounts receivable, net of allowance for uncollectible accounts of $247 and $231 4,682 5,600 Investment in Koger Realty Services, Inc. 393 259 Cost in excess of fair value of net assets acquired, net of accumulated amortization of $558 and $515 1,998 2,040 Other assets 10,171 10,437 -------- -------- TOTAL ASSETS $586,812 $584,666 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages and loans payable $202,250 $203,044 Accounts payable 2,361 4,662 Accrued real estate taxes payable 2,370 2,144 Accrued liabilities - other 4,297 5,467 Dividends payable 1,050 1,045 Advance rents and security deposits 4,474 4,169 -------- -------- Total Liabilities 216,802 220,531 -------- -------- Commitments and Contingencies Shareholders' Equity: Common stock 236 236 Capital in excess of par value 363,012 362,127 Warrants 2,240 2,243 Retained earnings 27,308 22,666 Treasury stock, at cost (22,786) (23,137) -------- -------- Total Shareholders' Equity 370,010 364,135 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $586,812 $584,666 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 5 KOGER EQUITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED - SEE INDEPENDENT ACCOUNTANTS' REPORT) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTH PERIOD ENDED MARCH 31, ---------------------------- 1997 1996 --------- -------- REVENUES Rental $ 25,383 $23,985 Other rental services 129 95 Management fees 641 528 Interest 534 373 Income from Koger Realty Services, Inc. 210 196 Gain on TKPL note to Southeast 46 --------- Total revenues 26,943 25,177 --------- ------- EXPENSES Property operations 9,968 9,919 Depreciation and amortization 5,493 5,047 Mortgage and loan interest 4,159 4,962 General and administrative 1,363 1,466 Direct cost of management fees 517 372 Undeveloped land costs 114 129 Provision for loss on land held for sale (381) Litigation costs 255 --------- ------- Total expenses 21,233 22,150 --------- ------- INCOME BEFORE INCOME TAXES 5,710 3,027 Income taxes 17 11 --------- ------- NET INCOME $ 5,693 $ 3,016 ========= ======= EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE: Primary $ 0.25 $ 0.16 ========= ======= Fully Diluted $ 0.25 $ 0.16 ========= ======= WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 22,360 18,577 ========= ======= Fully Diluted 22,360 18,577 ========= =======
See Notes to Condensed Consolidated Financial Statements. 4 6 KOGER EQUITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED - SEE INDEPENDENT ACCOUNTANTS' REPORT) (IN THOUSANDS)
COMMON STOCK TOTAL ------------ CAPITAL IN TREASURY STOCK SHARE- PAR EXCESS OF RETAINED ----------------- HOLDERS' SHARES VALUE PAR VALUE WARRANTS EARNINGS SHARES COST EQUITY ------ ----- --------- -------- -------- ------ -------- --------- Balance, January 1, 1997 23,560 $236 $362,127 $2,243 $22,666 2,668 $(23,137) $364,135 Treasury Stock Reissued 434 (44) 362 796 Warrants Exercised 2 14 (3) 11 Stock Options Exercised 55 437 1 (11) 426 Dividends Declared (1,051) (1,051) Net Income 5,693 5,693 ------ ---- -------- ------ ------- ------ -------- -------- Balance, March 31, 1997 23,617 $236 $363,012 $2,240 $27,308 2,625 $(22,786) $370,010 ====== ==== ======== ====== ======= ====== ======== ========
See Notes to Condensed Consolidated Financial Statements. 5 7 KOGER EQUITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - SEE INDEPENDENT ACCOUNTANTS' REPORT) (IN THOUSANDS)
THREE MONTH PERIOD ENDED MARCH 31, ---------------------- 1997 1996 --------- ------- OPERATING ACTIVITIES Net income $ 5,693 $ 3,016 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,493 5,047 Provision for loss on land held for sale (381) Income from Koger Realty Services, Inc. (210) (196) Provision for uncollectible accounts 37 Amortization of mortgage discounts 24 44 Accrued interest added to principal 37 Decrease in accounts payable, accrued liabilities and other liabilities (2,145) (765) Decrease in receivables and other assets 1,073 199 -------- ------- Net cash provided by operating activities 9,584 7,382 -------- ------- INVESTING ACTIVITIES Tenant improvements to existing properties (1,630) (768) Building improvements to existing properties (328) (425) Energy management improvements (361) (1,119) Building construction expenditures (2,380) Deferred tenant costs (172) (221) Additions to furniture and equipment (61) (23) Proceeds from sale of assets 2,910 Dividends received from Koger Realty Services, Inc. 76 -------- Net cash used in investing activities (1,946) (2,556) -------- ------- FINANCING ACTIVITIES Proceeds from sale of stock under Stock Investment Plan 75 44 Proceeds from exercise of warrants and stock options 363 48 Dividends paid (1,046) Principal payments on mortgages and loans (818) (997) Financing costs (78) (109) -------- ------- Net cash used in financing activities (1,504) (1,014) -------- ------- Net increase in cash and cash equivalents 6,134 3,812 Cash and cash equivalents - beginning of period 35,715 25,415 -------- ------- Cash and cash equivalents - end of period $ 41,849 $29,227 -------- ======= SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for interest, net of amount capitalized $ 4,134 $ 4,852 ======== ======= Cash paid during the period for income taxes $ 0 $ 12 ======== =======
See Notes to Condensed Consolidated Financial Statements. 6 8 KOGER EQUITY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED - SEE INDEPENDENT ACCOUNTANTS' REPORT) 1. BASIS OF PRESENTATION. The condensed consolidated financial statements include the accounts of Koger Equity, Inc. and its wholly-owned subsidiaries (the "Company"). All material intercompany transactions have been eliminated. The financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission related to interim financial statements. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 1996, included in the Company's Form 10-K Annual Report for the year ended December 31, 1996. The balance sheet at December 31, 1996, has been derived from the audited financial statements at that date and is condensed. All adjustments of a normal recurring nature which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods have been made. Results of operations for the three month period ended March 31, 1997, are not necessarily indicative of the results to be expected for the full year. Certain 1996 amounts have been reclassified to conform with 1997 presentation. 2. ORGANIZATION. Koger Equity, Inc. ("KE"), a Florida corporation, was incorporated in 1988 for the purpose of investing in the ownership of income producing properties, primarily commercial office buildings. KE is totally self-administered and self-managed. In addition to managing its own properties, KE, through certain related entities, provides property management services to third parties. In conjunction with Koger Real Estate Services, Inc. ("KRES"), a Florida corporation and a wholly-owned subsidiary of KE, KE manages 21 office buildings owned by Centoff Realty Company, Inc. ("Centoff"), a subsidiary of Morgan Guaranty Trust Company of New York. 3. FEDERAL INCOME TAXES. The Company is operated in a manner so as to qualify and has elected tax treatment as a real estate investment trust under the Code (a "REIT"). As a REIT, the Company is required to distribute annually at least 95 percent of its REIT taxable income to its shareholders. Since the Company had no REIT taxable income during 1996 and does not expect to have REIT taxable income during 1997, no provision has been made for Federal income taxes. To the extent that the Company pays dividends equal to 100 percent of REIT taxable income, the earnings of the Company are not taxed at the corporate level. However, the use of net operating loss carryforwards, which may reduce REIT taxable income to zero, are limited for alternative minimum tax purposes. 4. STATEMENTS OF CASH FLOWS. Cash in excess of daily requirements is invested in short-term monetary securities. Such temporary cash investments have an original maturity date of less than three months and are deemed to be cash equivalents for purposes of the statements of cash flows. During the three month period ended March 31, 1997, the Company contributed 23,657 shares of common stock to the Company's 401(K) Plan. These shares had a value of approximately 7 9 $444,000 based on the closing price of the Company's common stock on the American Stock Exchange on December 31, 1996. In addition, the Company issued 15,455 shares of common stock as payment for certain 1996 bonuses for senior management. These shares had a value of approximately $278,000 based on the closing price of the Company's common stock on the American Stock Exchange on January 6, 1997. During the three month period ended March 31, 1996, the Company contributed 43,804 shares of common stock to the Company's 401(K) Plan. These shares had a value of approximately $465,000 based on the closing price of the Company's common stock on the American Stock Exchange on December 31, 1995. 5. EARNINGS PER COMMON SHARE. Earnings per common share have been computed based on the weighted average number of shares of common stock and common stock equivalents outstanding during the applicable periods. 6. MORTGAGES AND LOANS PAYABLE. At March 31, 1997, the Company had $202,250,000 of loans outstanding, which are collateralized by mortgages on certain operating properties. Annual maturities for mortgages and loans payable, which are gross of $345,000 of discounts, are as follows (in thousands):
YEAR ENDING DECEMBER 31, 1997 $ 10,514 1998 3,909 1999 3,502 2000 17,971 2001 3,184 Subsequent Years 163,515 -------- Total $202,595 ========
7. DIVIDENDS. The Company paid a quarterly dividend of $0.05 per share on February 10, 1997, to shareholders of record on January 6, 1997. During the quarter ended March 31, 1997, the Company's Board of Directors declared a quarterly dividend of $0.05 per share payable on May 6, 1997, to shareholders of record on April 4, 1997. The Company currently expects that all dividends paid during 1997 will be treated as ordinary income for income tax purposes. 8. SUBSEQUENT EVENTS. On April 7, 1997, the Company closed on a $50 million secured revolving credit facility provided by First Union National Bank of Florida and Morgan Guaranty Trust Company of New York. Based on the Company's election, the interest rate on this revolving credit facility will be either (i) the lender's LIBOR rate plus 200 basis points or (ii) the lender's prime rate. Interest payments will be due monthly on this revolving credit facility which has a term of two years. At the election of the lender, the term of this credit facility may be extended for additional periods of one year each. This credit facility will require the Company to maintain certain financial ratios. On May 2, 1997, the Company's Board of Directors approved the repurchase of up to one million shares of the Company's common stock (the "Shares"). On that date, 372,000 Shares were repurchased by the Company. 8 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this Form 10-Q, and the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the period ended December 31, 1996. RESULTS OF OPERATIONS. Rental revenues totalled $25,383,000 for the quarter ended March 31, 1997, compared to $23,985,000 for the quarter ended March 31, 1996. The increase in rental revenues resulted primarily from increases in the percent leased rate and the Company's average rental rate. At March 31, 1997, the Company's buildings were on average 92 percent leased with an average rental rate of $14.37. Management fee revenues totalled $641,000 for the quarter ended March 31, 1997, compared to $528,000 for the quarter ended March 31, 1996. This increase was due primarily to (i) a leasing commission earned by KRES and (ii) an increase in fees earned under the management contract with Centoff. Property operating expenses include such charges as utilities, taxes, janitorial, maintenance, provision for uncollectible rents and management costs. The amounts of property operating expenses and their percentages of total rental revenues for the applicable periods are as follows:
PERCENT OF TOTAL RENTAL PERIOD AMOUNT REVENUES ------------------------ ---------- ------------- March 31, 1997 - Quarter $9,968,000 39.1% March 31, 1996 - Quarter $9,919,000 41.2%
Depreciation expense has been calculated on the straight line method based upon the useful lives of the Company's depreciable assets, generally 3 to 40 years. Depreciation expense increased $397,000 for the three month period ended March 31, 1997, compared to the same period last year, due to improvements made to the Company's existing properties during 1996. Amortization expense increased $49,000 for the three month period ended March 31, 1997, compared to the same period last year, due primarily to deferred financing costs which were incurred during 1996 for the mortgage with The Northwestern Mutual Life Insurance Company ("Northwestern"). Interest expense decreased by $803,000, during the three month period ended March 31, 1997, compared to the same period last year, primarily due to the reduction in the average balance of mortgages and loans payable. At March 31, 1997, the weighted average interest rate on the Company's outstanding debt was approximately 8.4 percent. General and administrative expenses for the three month periods ended March 31, 1997 and 1996, totalled $1,363,000 and $1,466,000, respectively, which is 0.9 percent and 1.0 percent (annualized) of average invested assets. This decrease is primarily due to the decrease in professional fees incurred. 9 11 Direct costs of management contracts increased $145,000 for the three month period ended March 31, 1997, compared to the same period last year, due to increased costs associated with providing property management services for all management contracts. Based on the proceeds received from the sale of the Miami land parcel and the Company's analysis of the fair value of the remaining land parcels held for sale, the Company reversed $381,000 of the provision for loss on land held for sale which had been previously recorded. Net income totalled $5,693,000 for the quarter ended March 31, 1997, compared to net income of $3,016,000 for the corresponding period of 1996. This improvement is due to the increase in rental revenues and the reduction in interest expense. These items were partially offset by the increases in (i) depreciation and amortization expense and (ii) direct cost of management fees. LIQUIDITY AND CAPITAL RESOURCES. OPERATING ACTIVITIES - During the three months ended March 31, 1997, the Company generated approximately $9.6 million in net cash from operating activities. The Company's primary internal sources of cash are (i) the collection of rents from buildings owned by the Company and (ii) the receipt of management fees paid to the Company in respect of properties managed on behalf of Centoff and others. As a REIT for Federal income tax purposes, the Company is required to pay out annually, as dividends, 95 percent of its REIT taxable income (which, due to non-cash charges, including depreciation and net operating loss carryforwards, may be substantially less than cash flow). In the past, the Company has paid out dividends in amounts at least equal to its REIT taxable income. The Company believes that its cash provided by operating activities will be sufficient to cover debt service payments and to pay the dividends required to maintain REIT status through 1997. The level of cash flow generated by rents depends primarily on the occupancy rates of the Company's buildings and changes in rental rates on new and renewed leases and under escalation provisions in existing leases. At March 31, 1997, leases representing approximately 20.9 percent of the gross annual rent from the Company's properties, without regard to the exercise of options to renew, were due to expire during the remainder of 1997. This represents 954 leases for space in buildings located in all of the 17 centers in which the Company owns buildings. Certain of these tenants may not renew their leases or may reduce their demand for space. During the three months ended March 31, 1997, leases were renewed on approximately 81 percent of the Company's net rentable square feet which were scheduled to expire during the three month period. For those leases which renewed during the three months ended March 31, 1997, the average rental rate increased from $14.16 to $15.86. However, current market conditions in certain markets may require that rental rates at which leases are renewed or at which vacated space is leased be lower than rental rates under existing leases. Based upon the significant number of leases which will expire during 1997 and the competition for tenants in the markets in which the Company operates, the Company has and expects to continue to offer incentives to certain new and renewal tenants. These incentives may include the payment of tenant improvements costs and in certain markets reduced rents during initial lease periods. The Company continues to benefit from improving economic conditions and reduced vacancy levels for office buildings in many of the metropolitan areas in which the Company owns buildings. The Company believes that the southeastern and southwestern regions of the United States provide 10 12 significant economic growth potential due to their diverse regional economies, expanding metropolitan areas, skilled work force and moderate labor costs. However, the Company cannot predict whether such economic growth will continue. Cash flow from operations could be reduced if economic growth were not to continue in the Company's markets and if this resulted in lower occupancy rates for the Company's buildings. Governmental tenants (including the State of Florida and the United States Government) which account for approximately 23.9 percent of the Company's leased space at March 31, 1997, may be subject to budget reductions in times of recession and governmental austerity measures. Consequently, there can be no assurance that governmental appropriations for rents may not be reduced. Additionally, certain of the private sector tenants which have contributed to the Company's rent stream may reduce their current demands, or curtail their future need, for additional office space. INVESTING ACTIVITIES - At March 31, 1997, substantially all of the Company's invested assets were in real properties. Improvements to the Company's existing properties have been financed through internal operations. During the three month period ended March 31, 1997, the Company's expenditures for improvements to existing properties remained basically unchanged from the corresponding period of the prior year. During the quarter ended March 31, 1997, the Company sold 8.1 acres of unimproved land located in Miami, Florida for approximately $2,910,000, net of selling costs. The Company has two buildings under construction which will contain approximately 106,000 net rentable square feet. Expenditures for construction of these two buildings are expected to total approximately $7.6 million, excluding land and tenant improvement costs. The Company expects to acquire approximately $14 million of office buildings and related land during May, 1997. FINANCING ACTIVITIES - On April 7, 1997, the Company closed on a $50 million secured revolving credit facility provided by First Union National Bank of Florida and Morgan Guaranty Trust Company of New York. In addition, the Company has a cash balance of $41.8 million at March 31, 1997. On May 2, 1997, the Company's Board of Directors approved the repurchase of up to one million shares of the Company's common stock (the "Shares"). On that date, the Company repurchased 372,000 Shares for approximately $5.7 million. Loan maturities and normal amortization of mortgages and loans payable are expected to total approximately $11.5 million over the next 12 months. The Company plans to draw $8.3 million of the remaining Northwestern loan proceeds when existing indebtedness on a building matures during August 1997 and believes that the remainder of these obligations will be paid from cash provided by operations or from current cash balances. Significant maturities of the Company's mortgages and loans payable do not begin to occur until 2006. On August 22, 1994, the Company filed a shelf registration statement with respect to the possible issuance of up to $100 million of its common and/or preferred stock. The Company has not yet issued any equity under such registration statement. 11 13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 5. OTHER INFORMATION (a) The following table sets forth, with respect to the Company's centers at March 31, 1997, number of buildings, net rentable square feet, percentage leased, and the average annual rent per net rentable square foot leased.
AVERAGE NET ANNUAL NUMBER RENTABLE RENT PER OF SQUARE PERCENT SQUARE KOGER CENTER BUILDINGS FEET LEASED(1) FOOT (2) - ------------- --------- -------- --------- --------- Atlanta Chamblee 22 947,920 95% $15.11 Austin 12 370,860 98% 17.06 Charlotte Carmel 1 109,600 100% 15.29 Charlotte East 11 468,820 83% 12.90 El Paso 14 251,930 96% 14.43 Greensboro South 13 610,470 95% 14.52 Greenville 8 290,560 90% 15.06 Jacksonville Baymeadows 4 468,000 99% 15.66 Jacksonville Central 31 666,500 90% 11.56 Memphis Germantown 3 258,400 96% 17.38 Orlando Central 22 565,220 92% 14.28 Orlando University 2 159,600 98% 16.78 San Antonio 26 788,670 95% 12.59 St. Petersburg 15 519,320 95% 13.20 Tallahassee Apalachee Pkwy 14 408,500 91% 16.49 Tallahassee Capital Circle 4 300,700 96% 17.53 Tulsa 13 476,280 73% 10.85 ----- ---------- TOTAL 215 7,661,350 92% $14.37 ==== ========= ==== ======
(1) The percent leased rates have been calculated by dividing total net rentable square feet leased in an office building by net rentable square feet in such building, which excludes public or common areas. (2) Rental rates are computed by dividing (a) total annualized rents for a center as of March 31, 1997 by (b) the net rentable square feet applicable to such total annualized rents. 12 14 (b) The following schedule sets forth for all of the Company's office buildings (i) the number of leases which will expire during the remainder of calender year 1997 and calendar years 1998 through 2005, (ii) the total net rentable area in square feet covered by such leases, (iii) the percentage of total net rentable square feet represented by such leases, (iv) the average annual rent per square foot for such leases, (v) the current annual rental represented by such leases, and (vi) the percentage of gross annual rental contributed by such leases. This information is based on the buildings owned by the Company on March 31, 1997 and on the terms of leases in effect as of March 31, 1997, on the basis of then existing base rentals, and without regard to the exercise of options to renew. Furthermore, the information below does not reflect that some leases have provisions for early termination for various reasons, including, in the case of government entities, lack of budget appropriations. Leases were renewed on approximately 81 percent of the Company's net rentable square feet which were scheduled to expire during the three month period ended March 31, 1997.
PERCENTAGE OF AVERAGE PERCENTAGE TOTAL SQUARE ANNUAL RENT TOTAL OF TOTAL NUMBER OF NUMBER OF FEET LEASED PER SQUARE ANNUALIZED ANNUAL. RENTS LEASES SQUARE FEET REPRESENTED BY FOOT UNDER RENTS UNDER REPRESENTED BY PERIOD EXPIRING EXPIRING EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES - ------ -------- ---------- --------------- --------------- --------------- --------------- 1997 954 1,496,239 21.0% $14.28 $ 21,369,484 20.9% 1998 639 1,596,598 22.5% 14.01 22,375,286 21.9% 1999 491 1,315,698 18.5% 13.44 17,684,364 17.3% 2000 195 780,058 11.0% 14.82 11,562,429 11.3% 2001 112 943,748 13.3% 15.17 14,317,791 14.0% 2002 27 205,208 2.9% 13.72 2,815,430 2.8% 2003 13 113,237 1.6% 13.95 1,579,639 1.6% 2004 6 111,975 1.6% 12.52 1,402,282 1.4% 2005 4 29,673 0.4% 12.33 366,001 0.4% OTHER 20 512,126 7.2% 16.84 8,625,271 8.4% ----- --------- ------ ------------ ------ TOTAL 2,461 7,104,560 100.0% $14.37 $102,097,977 100.0% ===== ========= ====== ====== ============ ======
13 15 (c) The Company believes that Funds from Operations is one measure of the performance of an equity real estate investment trust. Funds from Operations should not be considered as an alternative to net income as an indication of the Company's financial performance or to cash flow from operating activities (determined in accordance with generally accepted accounting principles) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. Funds from Operations is calculated as follows (in thousands):
THREE MONTH PERIOD ENDED MARCH 31, ------------------ 1997 1996 -------- ------ Net Income $ 5,693 $3,016 Depreciation - real estate 5,051 4,660 Amortization - deferred tenant costs 235 225 Amortization - goodwill 42 43 Litigation costs 255 Provision for loss on land held for sale (381) Gain on TKPL note to Southeast (46) ------- ------ Funds from Operations $10,594 $8,199 ======= ======
14 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NUMBER DESCRIPTION ------ ----------- 11 Earnings Per Share Computations. 15 Letter re: Unaudited interim financial information. 27 Financial Data Schedule(for SEC use only).
(b) Reports on Form 8-K On March 10, 1997, the Company filed a Form 8-K (dated December 16, 1996) reporting under Item 5, Other Events, that the Company had closed a loan with The Northwestern Mutual Life Insurance Company and providing under Item 7, Financial Statements and Exhibits, copies of the loan documents evidencing the refinancing of $190 million of debt of the Company by The Northwestern Mutual Life Insurance Company, $175.9 million of which was funded on December 16, 1996. 15 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KOGER EQUITY, INC. Registrant [VICTOR A. HUGHES] ------------------ VICTOR A. HUGHES CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER Dated: May 8, 1997 [JAMES L. STEPHENS] ------------------- JAMES L. STEPHENS VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER 16 EX-11 2 EARNINGS PER SHARE 1 EXHIBIT 11 EARNINGS PER SHARE COMPUTATIONS (IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTH PERIOD ENDED MARCH 31, 1997 1996 -------- -------- EARNINGS PER COMMON AND DILUTIVE COMMON EQUIVALENT SHARE: Net Income $ 5,693 $ 3,016 ======== ======== Shares: Weighted average number of common shares outstanding 20,962 17,802 Weighted average number of additional shares issuable for common stock equivalents (a) 1,398 775 -------- -------- Adjusted common shares 22,360 18,577 ======== ======== EARNINGS PER SHARE $ 0.25 $ 0.16 ======== ======== EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION: Net Income $ 5,693 $ 3,016 ======== ======== Shares: Weighted average number of common shares outstanding 20,962 17,802 Weighted average number of additional shares issuable for all dilutive common stock equivalents (a) 1,398 775 -------- -------- Shares as adjusted for all dilutants 22,360 18,577 ======== ======== EARNINGS PER SHARE $ 0.25 $ 0.16 ======== ========
(a) Shares issuable were derived using the "Treasury Stock Method" for all dilutive common stock equivalents. EX-15 3 LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION 1 EXHIBIT 15 May 7, 1997 Koger Equity, Inc. 3986 Boulevard Center Drive Jacksonville, Florida 32207 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Koger Equity, Inc. and subsidiaries for the periods ended March 31, 1997 and 1996, as indicated in our report dated May 7, 1997; because we did not perform an audit, we expressed no opinion on such financial information. We are aware that our report referred to above, which is included in your Quarterly Reports on Form 10-Q for the quarter ended March 31, 1997, is incorporated by reference in Registration Statement No. 33-55179 on Form S-3, Registration Statement No. 33-54617 on Form S-8, Registration Statement No. 333-20975 of Koger Equity, Inc. on Form S-3 and Registration Statement No 333-23429 of Koger Equity, Inc. on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Jacksonville, Florida EX-27 4 FINANCIAL DATA SCHEDULE
5 The company does not file a classified balance sheet, therefore these not provided: 5-02(9), 5-02 (21) 1000 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 41,849 0 4,929 247 0 0 615,324 87,605 586,812 0 202,250 0 0 236 369,774 586,812 0 26,943 0 10,448 6,589 37 4,159 5,710 17 5,693 0 0 0 5,693 0.25 0.25
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