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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2000 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 incorporation or organization) (I.R.S. Employer Identification No.)
8880 FREEDOM CROSSING TRAIL
JACKSONVILLE, FLORIDA 32256
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (904) 732-1000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
1. Common Stock, Par Value $.01 New York Stock Exchange
2. Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 1, 2001 was approximately $415,861,000.
The number of shares of registrant's Common Stock outstanding on March 1, 2001
was 26,795,144.
Documents Incorporated by Reference
The Company's Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Act of 1934 for the 2001 Annual Meeting of Shareholders is
incorporated by reference in Part III of this report.
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TABLE OF CONTENTS
ITEM NO. DESCRIPTION PAGE NO.
PART I
1. BUSINESS.................................................................................... 3
2. PROPERTIES.................................................................................. 5
3. LEGAL PROCEEDINGS........................................................................... 10
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................... 10
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................................................... 10
6. SELECTED FINANCIAL DATA..................................................................... 11
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................................... 12
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................. 23
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................. 24
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE....................................................... 45
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................................... 45
11. EXECUTIVE COMPENSATION...................................................................... 46
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................................................ 46
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................. 46
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K....................................................................... 47
15. SIGNATURES.................................................................................. 57
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PART I
ITEM 1. BUSINESS
GENERAL
Koger Equity, Inc. ("KE") is a self-administered and self-managed
equity real estate investment trust (a "REIT") which develops, owns, operates
and manages suburban office buildings (the "Office Buildings") primarily
located in 20 office centers (each a "Koger Center") located in 13 metropolitan
areas throughout the southeastern and southwestern United States. As of
December 31, 2000, KE owns 194 Office Buildings, of which 190 are in Koger
Centers and four are outside Koger Centers but in metropolitan areas where
Koger Centers are located. Koger-Vanguard Partners, L.P. ("KVP") is a limited
partnership, for which KE is the general partner, which owns suburban office
buildings located in a Koger Center. As of December 31, 2000, KVP owns 13
Office Buildings. The Office Buildings contain approximately 9.5 million
multi-tenant usable square feet and were on average 90 percent leased as of
December 31, 2000. During 2000, KE began construction of two buildings, which
will contain approximately 148,000 usable square feet and will be ready for
occupancy at various times throughout 2001. While KE expects to continue the
development of suburban office properties for its own account, it may from time
to time acquire developed properties compatible with its properties in other
markets primarily in the Southeast and Southwest if such acquisitions can be
made on terms favorable to KE. During 2000, KE sold two mature Koger Centers,
containing approximately 792,000 usable square feet, which were located in
Tulsa, Oklahoma and El Paso, Texas.
KE owns approximately 89 acres of unencumbered land held for
development and approximately one acre of unencumbered land held for sale. A
majority of the land held for development adjoins Office Buildings in ten Koger
Centers, which have infrastructure, including roads and utilities, in place. KE
intends over time to develop and construct office buildings using this land and
currently has two buildings under construction on approximately 12 acres of the
89 acres of land held for development. KE expects to acquire additional land
for development. In addition, KE provides leasing, management and other
customary tenant-related services for the Koger Centers.
In addition to managing its own properties, KE provides property and
asset management services through its wholly-owned subsidiaries, Southeast
Properties Holding Corporation ("Southeast") and Koger Real Estate Services,
Inc. ("KRES"), for office buildings owned by unaffiliated parties (KE, KVP,
Southeast and KRES are hereafter referred to as the "Company"). In conjunction
with KRES, KE managed eight office buildings, containing approximately 440,000
usable square feet, owned by Centoff Realty Company, Inc. ("Centoff"), a
subsidiary of Morgan Guaranty Trust Company of New York. This management
agreement was terminated during November 2000 due to the sale of these office
buildings by Centoff. The Company currently provides asset management services
to Crocker Realty Trust for 127 office properties, containing approximately 6.1
million square feet.
KE operates in a manner so as to qualify as a REIT under the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). As a
REIT, the Company will not, with certain limited exceptions, be taxed at the
corporate level on taxable income distributed to its shareholders on a current
basis. The Company distributes at least 95 percent of its annual REIT taxable
income (which term is used herein as defined and modified in the Code) to its
shareholders. To qualify as a REIT, a corporation must meet certain substantive
tests: (a) at least 95 percent of its gross income must be derived from certain
passive and real estate sources; (b) at least 75 percent of its gross income
must be derived from certain real estate sources; (c) at the close of each
calendar quarter, it must meet certain tests designed to ensure that its assets
consist principally (at least 75 percent by value) of real estate assets, cash
and cash equivalents and that its holdings of securities are adequately
diversified; (d) each year, it must distribute at least 95 percent of its REIT
taxable income; and (e) at no time during the second half of any calendar year
may the Company be "closely held" (i.e., have more than 50 percent in value of
its outstanding stock owned, directly, indirectly or constructively, by not
more than five individuals). The constructive ownership rules, among other
things, treat the shareholders of a corporation as owning proportionately any
stock in another corporation owned by the first corporation. Management fee
revenue does not qualify as real estate or passive income for purposes of
determining whether the Company has met the REIT requirements that at least 95
percent of the Company's
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gross income be derived from certain real estate and passive sources and that
at least 75 percent of its gross income be derived from certain real estate
sources. Accordingly, in the event the Company derives income in excess of five
percent from management and other "non-real estate" and "non-passive"
activities, the Company would no longer qualify as a REIT for federal income
tax purposes and would be required to pay federal income taxes as a business
corporation.
No tenant leases more than 10 percent of the usable area of the
Company's buildings. However, a major governmental tenant, when all of its
respective departments and agencies which lease space in the Company's
buildings are combined, contributes more than 10 percent of the Company's
annualized rentals as of December 31, 2000. At that date, the United States of
America accounted for an aggregate of 10.8 percent of the Company's total
annualized rental revenues. Some of the Company's principal tenants are the
United States of America, the State of Florida, Blue Cross and Blue Shield of
Florida, United Healthcare, Landstar System Holdings, Wellspring Resources,
General Electric, Hoechst Celanese Corp., Siemens Westinghouse and Hanover
Insurance. Governmental tenants (including the State of Florida and the United
States of America), which account for 19.8 percent of the Company's leased
space, may be subject to budget reductions in times of recession and
governmental austerity measures. There can be no assurance that governmental
appropriations for rents may not be reduced. Additionally, certain
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.
COMPETITION
The Company competes in the leasing of office space with a
considerable number of other realty concerns, including local, regional and
national, some of which have greater resources than the Company. Through its
ownership and management of suburban office parks, the Company seeks to attract
tenants by offering office space convenient to residential areas. In recent
years local, regional and national concerns have built competing office parks
and single buildings in suburban areas in which the Company's Office Buildings
are located. In addition, the Company competes for tenants with large high-rise
office buildings generally located in the downtown business districts of these
metropolitan areas. Although competition from other lessors of office space
varies from city to city, the Company has been able to attain and maintain what
it considers satisfactory occupancy levels at satisfactory rental rates.
INVESTMENT POLICIES
The Company is currently in a position to capitalize on some of its
strengths, such as the value of its franchise in the suburban office park
market and its operating systems, development expertise, acquisition expertise
and unimproved land available for development. The Company intends to continue
to develop and construct office buildings primarily using its existing
inventory of 89 acres of land held for development, most of which is partially
or wholly improved with streets and/or utilities and is located in various
metropolitan areas where the Company currently operates suburban office parks.
The Company may also acquire existing office buildings or additional land for
development in other markets primarily in the Southeast and Southwest that the
Company considers favorable. Although all of the Company's properties are
located in the Southeast and Southwest, management does not consider that the
Company's development and acquisitions activities are limited to any particular
area. The Company may also sell Office Buildings or Koger Centers located in
certain markets. In addition, the Company has adopted a plan to repurchase up
to 2.65 million shares of its common stock.
The investment policies of the Company may be changed by its directors
at any time without notice to, or a vote of, shareholders. Although the Company
has no fixed policy which limits the percentage of its assets which may be
invested in any one type of investment or the geographic areas in which the
Company may acquire properties, the Company intends to continue to operate so
as to qualify for tax treatment as a REIT. The Company may in the future invest
in other types of office buildings, apartment buildings, shopping centers, and
other properties. The Company also may invest in the securities (including
mortgages) of companies primarily engaged in real estate activities; however,
it does not intend to become an investment company regulated under the
Investment Company Act of 1940.
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For the year ended December 31, 2000, all of the Company's rental
revenues were derived from buildings purchased or constructed by the Company.
The Company's 2000 interest revenues were derived from temporary cash
investments and notes receivable from current and former employees.
EMPLOYEES
The Company has a combined financial, administrative, leasing, and
center maintenance staff of 175 employees. A resident general manager is
responsible for the leasing and operations of all buildings in a Koger Center
or metropolitan area. The Company has approximately 68 employees who perform
maintenance activities.
ITEM 2. PROPERTIES
GENERAL
As of December 31, 2000, the Company owned 194 Office Buildings
located in the 13 metropolitan areas of Birmingham, Alabama; Jacksonville,
Orlando, St. Petersburg, and Tallahassee, Florida; Atlanta, Georgia; Charlotte
and Greensboro, North Carolina; Greenville, South Carolina; Memphis, Tennessee;
Austin and San Antonio, Texas; and Richmond, Virginia. In addition, the Company
has two buildings under construction. The Koger Centers have been developed in
campus-like settings with extensive landscaping and ample tenant parking. The
Office Buildings are generally one to five-story structures of contemporary
design and constructed of masonry, concrete and steel, with facings of brick,
concrete and glass. The Koger Centers are generally located with easy access,
via expressways, to the central business district and to shopping and
residential areas in the respective communities. The properties are well
maintained and adequately covered by insurance.
Leases on the Office Buildings vary between net leases (under which
the tenant pays some operating expenses, such as utilities, insurance and
repairs) and gross leases (under which the Company pays all such items). Most
leases are on a gross basis and are for terms generally ranging from three to
five years. In some instances, such as when a tenant rents the entire building,
leases are for terms of up to 20 years. As of December 31, 2000, the Office
Buildings were on average 90 percent leased and the average annual rent per
multi-tenant usable square foot leased was $18.07. The buildings are occupied
by numerous tenants (approximately 1,915 leases), many of whom lease relatively
small amounts of space, conducting a broad range of commercial activities.
New leases and renewals of existing leases are negotiated at the
current market rate at the date of execution. The Company endeavors to include
escalation provisions in all of its gross leases. As of December 31, 2000,
approximately 12 percent of the Company's annualized gross rental revenues were
derived from existing leases containing rental escalation provisions based upon
changes in the Consumer Price Index (some of which contain maximum rates of
increases); approximately 86 percent of such revenues were derived from leases
containing escalation provisions based upon fixed steps or real estate tax and
operating expense increases; and approximately 2 percent of such revenues were
derived from leases without escalation provisions. Some of the Company's leases
contain options which allow the lessee to renew for varying periods, generally
at the same rental rate and subject, in most instances, to Consumer Price Index
escalation provisions.
The Company owns approximately 100 acres of unimproved land (89 acres
held for development, one acre held for sale and 10 acres not suitable for
development) located in the metropolitan areas of Birmingham, Alabama;
Jacksonville, Orlando and St. Petersburg, Florida; Atlanta, Georgia; Charlotte
and Greensboro, North Carolina; Columbia and Greenville, South Carolina; and
Austin, Texas. Each of these parcels of land has been partially or wholly
developed with streets and/or utilities. The Company currently has two
buildings under construction on approximately 12 acres of this unimproved land.
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PROPERTY LOCATION AND OTHER INFORMATION
The following table sets forth information relating to the properties
owned by the Company as of December 31, 2000.
AVERAGE LAND
NUMBER AGE OF IMPROVED UNIMPROVED
OF BUILDINGS USABLE WITH BLDGS. LAND
KOGER CENTER/LOCATION BUILDINGS (IN YEARS)(1) SQ. FT. (IN ACRES) (IN ACRES)
--------------------- --------- ------------- --------- ----------- ----------
Atlanta Chamblee 21 18 986,243 76.2 2.5
Atlanta Gwinnett 3 4 228,186 15.9 19.6
Atlanta Perimeter 1 15 150,789 5.3
Austin 12 20 371,048 29.6 1.8
Birmingham Colonnade 5 8 393,926 31.0 16.5
Birmingham Colonnade - Retail 1 11 112,186 15.7
Charlotte Carmel 3 5 285,542 25.3 7.7
Charlotte University 2 3 161,805 18.7
Charlotte Vanguard 13 18 484,400 39.7 17.1
Columbia Spring Valley 1.0
Greensboro South 13 18 614,397 46.0
Greensboro Wendover 1 1 80,226 7.8 10.7
Greenville Park Central 3 16 138,792 9.9 3.5
Greenville Roper Mt. 9 15 351,039 29.2
Jacksonville Baymeadows 7 8 663,747 51.1
Jacksonville JTB 3 2 276,544 24.3 7.7(2)
Memphis Germantown 6 7 458,732 34.6
Orlando Central 21 29 552,728 44.7 1.3
Orlando Lake Mary 2 2 268,563 20.2
Orlando University 4 7 276,921 23.0 4.1(3)
Richmond Paragon 1 15 126,267 8.1
San Antonio Airport 2 16 202,167 7.9
San Antonio West 27 20 919,766 70.7
St. Petersburg 15 17 588,882 68.7 6.7
Tallahassee 19 18 788,324 62.7
---- --------- ------ -----
Total 194 9,481,220 766.3 100.2
=== ========= ===== =====
Average 14
==
(1) The age of each building was weighted by the multi-tenant usable
square feet for such building to determine the weighted average age of
(a) the buildings in each Koger Center or location and (b) all
buildings owned by the Company.
(2) The Company currently has a building under construction on
approximately 7.7 acres of this parcel.
(3) The Company currently has a building under construction on
approximately 4.1 acres of this parcel.
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PERCENT LEASED AND AVERAGE RENTAL RATES
The following table sets forth, with respect to each Koger Center or
location, the number of buildings, number of leases, multi-tenant usable square
feet, percent leased, and the average annual rent per multi-tenant usable
square foot leased, in each case as of December 31, 2000.
AVERAGE
NUMBER NUMBER USABLE ANNUAL
OF OF SQUARE PERCENT RENT PER
KOGER CENTER/LOCATION BUILDINGS LEASES FEET LEASED(1) SQUARE FOOT(2)
--------------------- --------- ------ --------- --------- --------------
Atlanta Chamblee 21 143 986,243 96% $19.23
Atlanta Gwinnett(3) 3 43 228,186 85% 20.51
Atlanta Perimeter 1 16 150,789 94% 23.69
Austin 12 172 371,048 99% 22.98
Birmingham Colonnade(3) 5 36 393,926 78% 18.31
Birmingham Colonnade - Retail 1 32 112,186 70% 12.03
Charlotte Carmel 3 44 285,542 95% 19.70
Charlotte University 2 21 161,805 100% 20.09
Charlotte Vanguard 13 70 484,400 90% 17.25
Greensboro South 13 186 614,397 74% 15.99
Greensboro Wendover 1 12 80,226 72% 19.45
Greenville Park Central 3 61 138,792 85% 18.71
Greenville Roper Mt. 9 132 351,039 87% 18.18
Jacksonville Baymeadows 7 41 663,747 99% 13.11(4)
Jacksonville JTB 3 6 276,544 100% 13.32
Memphis Germantown(3) 6 83 458,732 93% 20.01
Orlando Central 21 153 552,728 96% 16.71
Orlando Lake Mary 2 21 268,563 98% 22.33
Orlando University 4 62 276,921 100% 19.83
Richmond Paragon 1 27 126,267 99% 20.08
San Antonio Airport 2 73 202,167 90% 20.41
San Antonio West 27 266 919,766 85% 16.50
St. Petersburg(3) 15 120 588,882 85% 16.67
Tallahassee 19 95 788,324 81% 19.40
--- ----- ---------
Total 194 1,915 9,481,220
=== ===== =========
Weighted Average - Total Company 90% $18.07
=== ======
Weighted Average - Operational Buildings 91% $17.98
=== ======
Weighted Average - Buildings in Lease-up 64% $21.90
=== ======
(1) The percent leased rates have been calculated by dividing total
multi-tenant usable square feet leased in a building by multi-tenant
usable square feet in such building.
(2) Rental rates are computed by dividing (a) total annualized base rents
(which excludes expense pass-throughs and reimbursements) for a Koger
Center or location as of December 31, 2000 by (b) the multi-tenant
usable square feet applicable to such total annualized base rents.
(3) Includes a building which is currently in the lease-up period.
(4) Excludes corporate office space from calculation. Includes the effect
of three net leases where tenants lease the entire building and pay
certain operating costs in addition to base rent.
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LEASE EXPIRATIONS ON THE COMPANY'S PROPERTIES
The following schedule sets forth with respect to all of the Office
Buildings (a) the number of leases which will expire in calendar years 2001
through 2009, (b) the total multi-tenant usable area in square feet covered by
such leases, (c) the percentage of total multi-tenant usable square feet leased
represented by such leases, (d) the average annual rent per square foot for
such leases, (e) the current annualized rents represented by such leases, and
(f) the percentage of gross annualized rents contributed by such leases. This
information is based on the buildings owned by the Company on December 31, 2000
and on the terms of leases in effect as of December 31, 2000, 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 61 percent, 66 percent and 60 percent of the Company's
multi-tenant usable square feet, which were scheduled to expire during 2000,
1999 and 1998, respectively.
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
------ --------- ----------- --------------- --------------- --------------- ---------------
2001 647 1,968,472 23.4% $16.94 $ 33,336,891 22.0%
2002 386 1,229,235 14.6% 18.51 22,756,864 15.0%
2003 427 1,620,384 19.3% 18.40 29,813,558 19.7%
2004 252 1,353,124 16.1% 17.42 23,570,167 15.5%
2005 146 714,168 8.5% 19.40 13,851,682 9.1%
2006 13 232,299 2.8% 21.79 5,061,675 3.3%
2007 12 340,482 4.0% 18.06 6,149,050 4.1%
2008 13 231,625 2.8% 19.57 4,532,411 3.0%
2009 8 199,845 2.4% 22.88 4,573,280 3.0%
Other 11 508,761 6.1% 15.88 8,079,607 5.3%
----- --------- ----- ------------ -----
Total 1,915 8,398,395 100.0% $18.07 $151,725,185 100.0%
===== ========= ===== ====== ============ =====
BUILDING IMPROVEMENTS, TENANT IMPROVEMENTS AND DEFERRED TENANT COSTS ON THE
COMPANY'S PROPERTIES
The following table sets forth certain information with respect to the
building improvements made, and tenant improvement costs and deferred tenant
costs (leasing commissions and tenant relocation costs) incurred, by the
Company during the three years ended December 31, 2000. The information set
forth below is not necessarily indicative of future expenditures for these
items.
BUILDING IMPROVEMENTS TENANT IMPROVEMENTS DEFERRED TENANT COSTS
---------------------------- ---------------------------- --------------------------
PER AVERAGE PER AVERAGE PER AVERAGE
USABLE SQ. USABLE SQ. USABLE SQ.
YEAR TOTAL FT. OWNED TOTAL FT. OWNED TOTAL FT. OWNED
------ ---------- ----------- ----------- ----------- ---------- -----------
1998(1) $4,255,000 $0.48 $11,655,000 $1.31 $1,755,000 $0.20
1999(2) 4,545,000 0.50 13,204,000 1.46 1,736,000 0.19
2000(3) 4,005,000 0.48 8,362,000 1.00 1,711,000 0.20
(1) Excludes the eight buildings for which construction was completed
during 1997 and 1998.
(2) Excludes the 14 buildings for which construction was completed during
1997, 1998, and 1999.
(3) Excludes the 18 buildings for which construction was completed during
1998, 1999, and 2000.
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FIXED RATE INDEBTEDNESS ON THE COMPANY'S PROPERTIES
The following table sets forth with respect to each Koger Center or
location the principal amount (dollars in thousands) of, and the weighted
average interest rate on, the indebtedness of the Company having a fixed
interest rate and encumbering the Company's properties in such Koger Center or
location as of December 31, 2000.
WEIGHTED
MORTGAGE AVERAGE
LOAN INTEREST
KOGER CENTER/LOCATION BALANCE RATE
---------------------- --------- -------
Atlanta Chamblee $ 0 --
Atlanta Gwinnett 0 --
Atlanta Perimeter 0 --
Austin 17,855 8.33%
Birmingham Colonnade 0 --
Birmingham Colonnade - Retail 0 --
Charlotte Carmel 0 --
Charlotte University 0 --
Charlotte Vanguard 21,415 8.13%
Greensboro South 0 --
Greensboro Wendover 0 --
Greenville Park Central 0 --
Greenville Roper Mt. 15,384 8.02%
Jacksonville Baymeadows 40,376 7.98%
Jacksonville JTB 0 --
Memphis Germantown 24,660 7.81%
Orlando Central 26,258 8.33%
Orlando Lake Mary 0 --
Orlando University 14,441 7.10%
Richmond Paragon 8,074 8.00%
San Antonio Airport 0 --
San Antonio West 22,224 8.25%
St. Petersburg 18,914 8.25%
Tallahassee 43,686 7.99%
--------
Total $253,287 8.04%
======== =====
For additional information on these loans see Note 3, "Mortgages and
Loans Payable" of the Notes to Consolidated Financial Statements.
INDEBTEDNESS WITH VARIABLE INTEREST RATES
As of December 31, 2000, the Company had a $150 million secured
revolving credit facility with variable interest rates and encumbering certain
of the Company's properties. The following table sets forth historical
information with respect to indebtedness having variable interest rates
(dollars in thousands):
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10
WEIGHTED APPROXIMATE APPROXIMATE
BALANCE AVERAGE MAXIMUM AVERAGE WTD. AVG. INT.
YEAR ENDED AT END INT. RATE AT AMOUNT AMOUNT RATE DURING
DECEMBER 31 OF PERIOD END OF PERIOD OUTSTANDING OUTSTANDING THE PERIOD
----------- --------- ------------- ----------- ----------- -------------
2000 $90,000 8.1% $123,500 $96,262 7.9%
1999 94,000 8.0% 128,000 95,277 6.7%
1998 92,000 7.1% 92,000 45,181 7.0%
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange
under the ticker symbol KE. The high and low closing sales prices for the
periods indicated in the table below were:
YEARS
-------------------------------------------------------------------------------------------------
2000 1999 1998
--------------------------- --------------------------- ---------------------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- --------- ---------- ---------- ---------- ---------- ----------
March 31 $17.9375 $15.5000 $17.5625 $12.6875 $23.7500 $20.6250
June 30 18.8750 16.5625 18.4375 12.8750 22.5000 18.6250
September 30 17.4375 16.6250 18.0000 15.5000 21.8125 16.3750
December 31 16.9375 15.0625 16.8750 14.2500 18.2500 15.6250
Any dividend paid in respect of the Company's common stock during the
last quarter of each year will, if necessary, be adjusted to satisfy the REIT
qualification requirement that at least 95 percent of the Company's REIT
taxable income for such taxable year be distributed. The Company's secured
revolving credit facility requires the Company to maintain certain financial
ratios, which includes a limitation on dividends. However, this covenant does
not restrict the Company from paying the dividends required to maintain its
qualification as a REIT.
Set forth below are the dividends per share paid during the three
years ended December 31, 2000.
YEARS
------------------------------
QUARTER ENDED 2000 1999 1998
------------- ---- ---- ----
March 31 $.35 $.30 $.25
June 30 .35 .30 .25
September 30 .35 .35 .30
December 31 .35 .35 .30
On February 1, 2001, the Company paid a quarterly dividend of $0.35
per share to shareholders of record on December 31, 2000. In addition, the
Company's Board of Directors has declared a quarterly dividend of $0.35 per
share payable on May 3, 2001, to shareholders of record on March 31, 2001.
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On March 1, 2001, there were approximately 1,128 shareholders of
record and the closing price of the Company's common stock on the New York
Stock Exchange was $15.52.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements (as defined below) and
the notes thereto.
(IN THOUSANDS EXCEPT PER SHARE AND PROPERTY DATA)
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
INCOME INFORMATION
Rental revenues and other rental services $164,733 $156,153 $133,663 $109,501 $ 98,805
Interest revenues 703 457 446 1,274 1,951
Total revenues 167,874 160,093 138,082 113,989 104,072
Property operations expense 61,868 60,582 53,719 44,453 41,597
Depreciation and amortization 35,133 32,314 28,381 24,073 21,127
Mortgage and loan interest 27,268 21,893 16,616 16,517 18,701
General and administrative expense 20,217 8,633 6,953 6,374 6,623
Net income 27,153 36,586 29,602 21,204 10,501
Earnings per share - diluted 1.01 1.35 1.10 .94 .54
Dividends declared per common share 1.40 1.35 1.15 .55 .05
Weighted average shares outstanding - diluted 26,962 27,019 26,901 22,495 19,500
BALANCE SHEET INFORMATION
Operating properties (before depreciation) $946,780 $927,523 $872,183 $681,249 $582,972
Undeveloped land 13,975 17,137 20,535 14,761 27,108
Total assets 851,022 885,739 834,995 656,097 584,666
Mortgages and loans payable 343,287 351,528 307,903 181,963 203,044
Total shareholders' equity 448,493 467,826 464,763 444,262 364,135
OTHER INFORMATION
Funds from operations(1) $ 56,107 $ 65,011 $ 56,486 $ 42,324 $ 33,154
Income before interest, income taxes,
depreciation and amortization $ 89,533 $ 90,980 $ 75,555 $ 62,729 $ 51,144
Number of buildings (at end of period) 194 218 251 228 215
Percent leased (at end of period) 90% 93% 90% 92% 92%
(1) The Company believes that Funds from Operations is one measure of the
performance of an equity REIT. 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 GAAP) 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):
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
Net income $27,153 $36,586 $29,602 $21,204 $10,501
Depreciation - real estate 31,720 28,800 25,146 21,795 19,538
Amortization - deferred tenant costs 1,923 2,132 1,464 1,031 929
Amortization - goodwill 170 170 170 170 171
Minority interest 1,156 1,174 139
Gain on sale or disposition of operating properties (5,963) (3,846)
Loss (gain) on sale or disposition of non-operating assets (52) (5) (35) (1,955) 497
Recovery of loss on land held for sale (379)
Loss on early retirement of debt 458 1,386
------- ------- ------- ------- -------
Funds from Operations $56,107 $65,011 $56,486 $42,324 $33,022
======= ======= ======= ======= =======
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
selected financial data and the consolidated financial statements (the
"Consolidated Financial Statements") appearing elsewhere in this report.
Historical results and percentage relationships in the Consolidated Financial
Statements, including trends which might appear, should not be taken as
indicative of future operations or financial position. The Consolidated
Financial Statements include the accounts of KE, Southeast, KRES and KVP
(collectively, the "Company").
GENERAL
The Company has prepared, and is responsible for, the accompanying
Consolidated Financial Statements and the related consolidated financial
information included in this report. Such Consolidated Financial Statements
were prepared in accordance with generally accepted accounting principles and
include amounts determined using management's best judgments and estimates of
the expected effects of events and transactions that are being accounted for
currently.
The Company's independent auditors have audited the accompanying
Consolidated Financial Statements. The objective of their audit, conducted in
accordance with auditing standards generally accepted in the United States of
America, was to express an opinion on the fairness of presentation, in all
material respects, of the Company's consolidated financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. They evaluated the Company's internal control structure to the
extent considered necessary by them to determine the audit procedures required
to support their report on the Consolidated Financial Statements and not to
provide assurance on such structure.
The Company maintains accounting and other control systems which
management believes provide reasonable assurance that the Company's assets are
safeguarded and that the Company's books and records reflect the authorized
transactions of the Company, although there are inherent limitations in any
internal control structure, as well as cost versus benefit considerations. The
Audit Committee of the Company's Board of Directors, which is composed
exclusively of directors who are not officers of the Company, directs matters
relating to audit functions, annually appoints the auditors subject to
ratification of the Company's Board of Directors, reviews the auditors'
independence, reviews the scope and results of the annual audit, and
periodically reviews the adequacy of the Company's internal control structure
with its external auditors, its internal auditors and its senior management.
RESULTS OF OPERATIONS
RENTAL REVENUES. For 2000, rental revenues increased $8,365,000 or 5.4
percent from the year ended December 31, 1999. This increase resulted primarily
from (i) the increase in the Company's average rental rate and (ii) increases
in rental revenues ($15,364,000) from properties acquired and construction
completed during 1999 and 2000. The effect of these increases was partially
offset by the reduction of rental revenues ($13,497,000) caused by the sale of
two office parks during 1999 and two office parks during 2000. Rental revenues
increased $22,390,000 or 16.8 percent from the year ended December 31, 1998 to
the year ended December 31, 1999. This increase resulted primarily from (i) the
increase in the Company's average rental rate and (ii) increases in the rental
revenues ($19,281,000) from properties acquired and construction completed
during 1998 and 1999. As of December 31, 2000, the Company's buildings were on
average 90 percent leased. As of December 31, 1999 and 1998, the buildings
owned by the Company were on average 93 and 90 percent leased, respectively.
MANAGEMENT FEE REVENUES. Management fee revenues decreased $591,000
for 2000, as compared to 1999, due primarily to a decrease in fees earned under
the Centoff management contract. On January 1, 2000, the management contract
for one of the Centoff centers was transferred from the Company to Koger Realty
Services, Inc. ("KRSI"). During November 2000, the management contract for the
remaining Centoff center was terminated when the property was sold by the third
party owner. The effect of these decreases was partially offset by the asset
management fees ($296,000) earned from Crocker Realty Trust during 2000. For
1999, management fee revenues increased $107,000, as compared to 1998,
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due primarily to an increase in construction management fees earned. During
March 1999, Centoff sold one of the centers for which the Company had provided
property management services. The Company earned management fee revenues
totaling $194,000 for the management and leasing of this property during 1999.
Another agreement to manage one commercial office building was terminated by
the Company during February 1999. The Company earned fees of $82,000 for the
management of this building during 1999.
INCOME FROM KOGER REALTY SERVICES, INC. For 2000, income from Koger
Realty Services, Inc. decreased $454,000, as compared to 1999, due primarily to
an increase in general and administrative expenses. For 1999, income from Koger
Realty Services, Inc. decreased $597,000, as compared to 1998, due primarily to
an increase in the accrual for compensation expense related to a bonus plan
which is based on KE's common stock price.
INTEREST REVENUES. Interest revenues increased $246,000 for 2000, as
compared to 1999, due to the interest earned from loans to certain current and
former employees. For 1999, interest revenues remained basically unchanged from
those earned in 1998.
EXPENSES. Property operations expense includes such charges as
utilities, real estate taxes, janitorial, maintenance, property insurance,
provision for uncollectible rents and management costs. During 2000, property
operations expense increased by $1,286,000 or 2.1 percent, compared to 1999,
primarily due to (i) increases in property operations expense ($5,662,000) for
properties acquired and construction completed during 1999 and 2000 and (ii)
increases in real estate taxes. These increases were partially offset by the
decrease in property operations expense ($5,847,000) for the properties sold
during 1999 and 2000. During 1999, property operations expense increased by
$6,863,000 or 12.8 percent, compared to 1998, primarily due to (i) increases in
property operations expense ($7,634,000) for properties acquired and
construction completed during 1998 and 1999 and (ii) increases in real estate
taxes. These increases were partially offset by the decrease in property
operations expense ($1,993,000) for the properties sold during 1999. For 2000,
1999 and 1998, property operations expense as a percentage of total rental
revenues was 37.6 percent, 38.8 percent and 40.2 percent, respectively.
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. For 2000, depreciation expense increased $2,976,000 or 10.2 percent,
compared to the prior year, due to the properties acquired and construction
completed during 1999 and 2000. For 1999, depreciation expense increased
$3,499,000 or 13.6 percent, compared to the prior year, due to the properties
acquired and construction completed during 1998 and 1999.
During 2000, amortization expense decreased $157,000, compared to
1999, due to deferred tenant costs associated with properties sold during 1999
and 2000. Amortization expense increased $434,000 during 1999, compared to
1998, due to deferred tenant costs incurred during 1999.
For 2000, interest expense increased $5,375,000, compared to 1999,
primarily due to (i) the increase in the average balance of mortgages and loans
payable, (ii) the reduction in interest capitalized to construction and (iii)
the increase in the average interest rate on the Company's variable rate loans.
Interest expense increased by $5,277,000 during 1999, compared to 1998,
primarily due to the increase in the average balance of mortgages and loans
payable. During 2000, 1999, and 1998, the weighted average interest rate on the
Company's variable rate loans was 7.9 percent, 6.7 percent and 7.0 percent,
respectively. The Company's average outstanding amount under such loans during
2000, 1999, and 1998 was $96,262,000, $95,277,000 and $45,181,000,
respectively. During 2000, 1999, and 1998, the weighted average interest rate
on the Company's fixed rate loans was 8.0 percent, 8.2 percent and 8.3 percent,
respectively. The Company's average outstanding amount under its fixed rate
loans during 2000, 1999, and 1998 was $255,439,000, $225,391,000 and
$195,592,000, respectively.
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General and administrative expenses increased by $11,584,000 during
2000, compared to 1999. This increase is primarily due to certain non-recurring
charges for (i) corporate reorganization costs ($8,767,000), (ii) severance
payments made to certain former senior executives ($2,562,000), (iii) changes
in termination benefits under the Supplemental Executive Retirement Plan
($704,000), (iv) payments to retiring directors ($138,000) and (v) initial fees
for listing on the New York Stock Exchange ($161,000). For 1999, general and
administrative expenses increased $1,680,000, compared to 1998, primarily due
to increases in (i) legal and other professional fees, (ii) compensation
expense and certain employee benefit accruals and (iii) franchise taxes.
For 2000, direct cost of management fees decreased $534,000, compared
to 1999, due to decreased costs associated with providing property management
services under the Centoff contract. Direct costs of management fees increased
$64,000 during 1999, compared to 1998, due primarily to increased costs of
providing construction management services.
During 2000, other expenses decreased $926,000, compared to 1999,
primarily due to (i) the reduction in costs for certain corporate strategic
issues and (ii) the reduction in real estate taxes on unimproved land due to
the reduction in acres held for investment and held for sale. Other expenses
increased $760,000 during 1999, compared to 1998, due to professional fees
incurred for certain corporate strategic issues.
Management periodically reviews its investment in properties for
evidence of impairments in value. Factors considered consist of, but are not
limited to, the following: current and projected occupancy rates, market
conditions in different geographic regions, and management's plans with respect
to its properties. Where management concludes that expected cash flows will not
enable the Company to recover the carrying amount of its investments, losses
are recorded and asset values are reduced. No such impairments in value existed
during 2000, 1999 or 1998.
OPERATING RESULTS. Net income totaled $27,153,000, $36,586,000 and
$29,602,000 for 2000, 1999 and 1998, respectively. For 2000, net income
decreased $9,433,000 or 25.8 percent from the prior year due primarily to
increases in (i) general and administrative expenses due to corporate
reorganization costs and other non-recurring charges, (ii) property operations
expense, (iii) depreciation expense and (iv) interest expense. The effect of
these increases was partially offset by increases in (i) rental revenues and
(ii) gain on sale or disposition of assets. For 1999, net income increased
$6,984,000 or 23.6 percent over the prior year due primarily to (i) the
increase in rental revenues, which was partially offset by the increases in
property operations expense, depreciation and amortization expense, interest
expense and general and administrative expense and (ii) the increase in gain on
sale or disposition of assets.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. During the year ended December 31, 2000, the
Company generated approximately $48.6 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 Crocker Realty Trust. 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 2001.
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. As of December 31, 2000,
approximately 98 percent of the Company's annualized gross rental revenues were
derived from existing leases containing provisions for rent escalations.
However, market conditions may prevent the Company from escalating rents under
such provisions.
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As of December 31, 2000, leases representing approximately 22 percent
of the gross annualized rent from the Company's properties, without regard to
the exercise of options to renew, were due to expire during 2001. This
represents 647 leases for space in buildings located in 21 of the 23 Koger
Centers or locations in which the Company owns buildings. Certain of these
tenants may not renew their leases or may reduce their demand for space. Leases
were renewed on approximately 61 percent, 66 percent and 60 percent of the
Company's multi-tenant usable square feet, which were scheduled to expire
during 2000, 1999 and 1998, respectively. For those leases, which renewed
during 2000, the average rental rate increased from $16.65 to $18.05. 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 amount of leases which will
expire during 2001 and the competition for tenants in the markets in which the
Company operates, the Company has offered, and expects to continue to offer,
incentives to certain new and renewal tenants. These incentives may include the
payment of tenant improvement costs and, in certain markets, reduced rents
during initial lease periods.
The Company continues to benefit from existing economic conditions and
stable 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 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 of America) which accounted for 19.8 percent of the Company's leased
space as of December 31, 2000 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.
On January 1, 2000, the Company had a contract for the management of
eight commercial office properties owned by Centoff. The agreement to manage
these commercial office buildings was terminated during November 2000 when the
properties were sold by Centoff. The Company earned fees of $998,000 and
$846,000 for the management of these properties during 2000 and 1999,
respectively. At the end of 1999, Centoff terminated the management agreement
with the Company related to eight commercial office buildings. The Company
earned fees of $780,000 for the management and leasing of these properties
during 1999. Another agreement to manage one commercial office building was
terminated by the Company during February 1999. During 1999, the Company earned
fees of $82,000 for the management of this building.
During 2000, the Company reached an agreement with Crocker Realty
Trust to provide asset management services for the 6.1 million square foot
portfolio of Crocker Realty Trust. The Company earned fees of $296,000 under
this agreement during the period from June 15, 2000 through December 31, 2000.
INVESTING ACTIVITIES. At December 31, 2000, 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 2000, the Company's expenditures for improvements to existing properties
decreased by approximately $5.3 million from the prior year, primarily due to
decreases in expenditures for tenant improvements and building improvements.
This decrease in expenditures for tenant improvements was primarily due to (i)
the sale of two office parks during the third quarter of 1999, (ii) the sale of
two office parks during 2000 and (iii) fewer leased square feet expiring during
2000 compared to 1999.
During 2000, the Company completed the construction of six buildings,
which contain 476,500 multi-tenant usable square feet. During 1999, the Company
completed the construction of six buildings, which contain 532,900 multi-tenant
usable square feet. During 1998, the Company completed the construction of six
buildings, which contain 503,300 multi-tenant usable square feet. The Company
has two buildings under construction, on approximately 12 acres of undeveloped
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land, which will contain approximately 148,000 multi-tenant usable square feet.
Expenditures for construction of these two buildings are expected to total
approximately $14.9 million, excluding land and tenant improvement costs.
On November 1, 1999, the Company acquired four buildings, containing
431,000 multi-tenant usable square feet, located in Charlotte, North Carolina
and Orlando, Florida for a purchase price of $64.1 million. During 1998, the
Company acquired 20 buildings, containing 1,020,300 multi-tenant usable square
feet, for a total purchase price of $121.9 million in four separate
transactions. One of these transactions was structured as a contribution of the
property to a down-REIT partnership (Koger-Vanguard Partners, L.P.), whose
general partner is KE. In addition, KE acquired 70.3 acres of land for a total
purchase price of $13.6 million.
On June 1, 2000, the Company sold the Tulsa Center (containing 476,400
multi-tenant usable square feet and 10 acres of undeveloped land) for
approximately $28,841,000, net of selling costs. The Company sold approximately
5.6 acres of unimproved land located in Richmond, Virginia, for approximately
$800,000, net of selling costs, on July 10, 2000. On August 11, 2000, the
Company sold the El Paso Center (containing 315,600 multi-tenant usable square
feet) for approximately $20,075,000, net of selling costs. The sale of these
properties when combined with certain property adjustments resulted in a gain
of $6,015,000. On August 31, 1999, the Company sold the Jacksonville Central
Center (containing 666,000 multi-tenant usable square feet and 1.4 acres of
undeveloped land) and the Charlotte East Center (containing 468,900
multi-tenant usable square feet and 3.9 acres of undeveloped land) for
approximately $68,761,000, net of selling costs.
FINANCING ACTIVITIES. The Company's primary external sources of cash
are bank borrowings, mortgage financings, and public and private offerings of
equity securities. The proceeds of these financings are used by the Company to
acquire buildings and land or to refinance debt. The Company has a $150 million
secured revolving credit facility provided by First Union National Bank of
Florida, AmSouth Bank, N.A., Citizens Bank of Rhode Island, Compass Bank and
Guaranty Federal Bank.
During 1997, the Company's Board of Directors (the "Board") approved
the repurchase of up to one million shares of the Company's common stock (the
"Shares"). The Company repurchased 35,600 Shares for approximately $583,000
during 1998 and repurchased 54,000 Shares for approximately $852,000 during
1999. During 2000, the Board approved the repurchase of up to 2.65 million
Shares and the Company repurchased 1,209,980 Shares for approximately $20.4
million.
On March 27, 1998, the Company sold one million shares of its common
stock to Wheat First Securities, Inc. for an aggregate sales price of $20.2
million. The Company applied approximately $15 million of the proceeds from
this sale to the repayment of indebtedness with an average interest rate of
approximately 7.94 percent.
During 1999, the Company increased its non-recourse loan with
Northwestern Mutual Life Insurance Company ("Northwestern") by $45 million to a
total of $235 million, which is secured by 9 office parks. This loan is divided
into (i) a tranche in the amount of $100.5 million with a 10 year maturity and
an average interest rate of 8.19 percent, (ii) a tranche in the amount of $89.5
million with a maturity of 12 years and an interest rate of 8.33 percent, (iii)
a tranche in the amount of $14.7 million which matures January 2, 2007 and an
interest rate of 7.1 percent and (iv) a tranche in the amount of $30.3 million
which matures on January 2, 2009 and an interest rate of 7.1 percent.
Amortization with respect to this indebtedness is based on equal monthly
installments over a 25 year amortization period. This indebtedness requires the
Company to maintain certain financial ratios.
In conjunction with the acquisition of certain office buildings during
1998, the Company assumed mortgage loans with outstanding balances of $30.7
million and a weighted average interest rate of 8.09 percent. Amortization with
respect to this indebtedness is based on an equal monthly installment over 25
year amortization periods.
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During December 1998, the Company increased its secured revolving
credit facility from $100 million to $150 million. This facility provides for
monthly interest payments, requires the Company to maintain certain financial
ratios and matures in December 2001.
At December 31, 2000, the Company had 18 buildings (containing
approximately 1.5 million usable square feet) which were unencumbered.
Loan maturities and normal amortization of mortgages and loans payable
during the year 2001 are expected to total approximately $94.6 million. In
order to generate funds sufficient to make principal payments in respect of
indebtedness of the Company during 2001 and over the long term, as well as
necessary capital and tenant acquisition expenditures, the Company will be
required to successfully refinance its indebtedness or procure additional
equity capital. However, there can be no assurance that any such refinancing or
equity financing will be achieved or will generate adequate funds on a timely
basis for these purposes. If additional funds are raised by issuing equity
securities, further dilution to existing shareholders may result. Unfavorable
conditions in the financial markets, the degree of leverage of the Company and
various other factors may limit the ability of the Company to successfully
undertake any such financings, and no assurance can be given as to the
availability of alternative sources of funds. The Company has filed shelf
registration statements with respect to the issuance of up to $300 million of
its common and/or preferred stock. The Company has issued $91.6 million of its
common stock under such registration statements.
In addition, in the event the Company is unable to generate sufficient
funds both to meet principal payments in respect of its indebtedness and to
satisfy distribution requirements of 95 percent of annual REIT taxable income
to its shareholders, the Company may be unable to qualify as a REIT. In such an
event, the Company (i) will incur federal income taxes and perhaps penalties,
(ii) if the Company is then paying dividends, may be required to decrease any
dividend payments to its shareholders, and (iii) the market price of the
Company's common stock may decrease. The Company would also be prohibited from
requalifying as a REIT for five years.
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR PURPOSE OF
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for forward-looking statements to encourage companies
to provide prospective information about their businesses without fear of
litigation so long as those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
projected in such statements. The Company desires to take advantage of the
"safe harbor" provisions of the Act.
This Annual Report on Form 10-K contains forward-looking statements,
together with related data and projections, about the Company's projected
financial results and its future plans and strategies. However, actual results
and needs of the Company may vary materially from forward-looking statements
and projections made from time to time by the Company on the basis of
management's then-current expectations. The business in which the Company is
engaged involves changing and competitive markets and a high degree of risk,
and there can be no assurance those forward-looking statements and projections
will prove accurate. Accordingly, the Company hereby identifies the following
important factors, which could cause the Company's actual performance and
financial results to differ materially from any results, which might be
projected, forecast, estimated or budgeted by the Company.
REAL ESTATE FINANCING RISKS
EXISTING DEBT. The Company is subject to risks normally associated
with debt financing, including (a) the risk that the Company's cash flow will
be insufficient to meet required payments of principal and interest, (b) the
risk that the existing debt in respect of the Company's properties (which in
substantially all cases will not have been fully amortized at maturity) will
not be able to be refinanced and (c) the risk that the terms of any refinancing
of any existing debt will not be as favorable as the
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terms of such existing debt. The Company currently has outstanding debt of
approximately $343.3 million, all of which is secured by certain of the
Company's properties. Approximately $246 million of such debt will mature
before 2008, with the majority of the remaining balance maturing in 2009. The
$150 million secured revolving credit facility ($90 million of which was
outstanding at year end) matures in December 2001. If principal payments due at
maturity cannot be refinanced, extended or paid with proceeds of other capital
transactions, such as new equity capital, the Company expects that its cash
flow will not be sufficient to repay all such maturing debt. Furthermore, if
prevailing interest rates or other factors at the time of refinancing (such as
the reluctance of lenders to make commercial real estate loans) result in
higher interest rates upon refinancing than the interest rates on the existing
debt, the interest expense relating to such refinanced debt would increase,
which would adversely affect the Company's cash flow and the amount of
distributions the Company would be able to make to its shareholders. If the
Company has mortgaged a property to secure payment of debt and the Company is
unable to meet the mortgage payments, then the mortgagee may foreclose upon, or
otherwise take control of, such property, with a consequent loss of income and
asset value to the Company.
RISK OF RISING INTEREST RATES AND VARIABLE RATE DEBT. The Company
currently has a $150 million secured revolving credit facility with variable
interest rates. The Company may incur additional variable rate debt in the
future. Increases in interest rates on such debt could increase the Company's
interest expense, which would adversely affect the Company's cash flow and its
ability to pay distributions to its shareholders.
EXISTING LEVERAGE; NO LIMITATION ON DEBT. As of December 31, 2000, the
debt to total market capitalization ratio of the Company was approximately 44
percent. The Company's policy regarding this ratio (i.e., total consolidated
debt as a percentage of the sum of the market value of issued and outstanding
capital stock plus total consolidated debt) is not subject to any limitation in
the organizational documents of the Company. Accordingly, the Board of
Directors could establish policies which would increase the Company's debt to
total market capitalization ratio. If this action were taken, the Company could
become more highly leveraged, resulting in an increase in debt service that (a)
could adversely affect the Company's cash flow and, consequently, the amount of
cash available for distribution to shareholders and (b) could increase the risk
of default on the Company's debt.
For purposes of establishing and evaluating its debt policy, the
Company measures its leverage by reference to the total market capitalization
of the Company rather than by reference to the book value of its assets. The
Company has used total market capitalization because it believes that the book
value of its assets (which to a large extent is comprised of the depreciated
value of real property, the Company's primary tangible asset) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company at all times. The Company also considers factors other
than its market capitalization in making decisions regarding the incurrence of
indebtedness, such as the purchase price of properties to be acquired with debt
financing, the estimated market value of its properties upon refinancing and
the ability of particular properties, and the Company as a whole, to generate
cash flow to cover expected debt service.
GEOGRAPHIC CONCENTRATION
The Company's revenues and the value of its properties may be affected
by a number of factors, including the regional and local economic climates of
the metropolitan areas in which the Company's buildings are located (which may
be adversely impacted by business layoffs or downsizing, industry slowdowns,
changing demographics and other factors) and regional and local real estate
conditions in such areas (such as oversupply of, or reduced demand for, office
and other competing commercial properties). All of the Company's properties are
located in the southeastern and southwestern United States. There is also the
problem of over building in certain sub-markets located in markets which the
Company currently serves. While the Company has avoided acquiring or developing
property in these sub-markets such over built condition may move over into the
sub-markets where the Company has property. The Company's performance and its
ability to make distributions to its shareholders are, therefore, dependent on
economic conditions in these market areas. The Company's
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historical growth has occurred during periods when the economy in the
southeastern and southwestern United States has out-performed the national
economy. There can be no assurance as to the continued growth of the economy in
the southeastern and southwestern United States or the future growth rate of
the Company.
RISING PETROLEUM COSTS
Although the Company has not yet been adversely affected by the recent
rise in oil prices, the increasing costs of gasoline may affect commuting
patterns thereby adversely affecting the desirability of suburban office
property like those owned by the Company.
RENEWAL OF LEASES AND RELETTING OF SPACE
The Company is subject to the risks that upon expiration of leases for
space located in its buildings (a) such leases may not be renewed, (b) such
space may not be relet or (c) the terms of renewal or reletting (taking into
account the cost of required renovations) may be less favorable than current
lease terms. Leases on a total of 23.4 percent and 14.6 percent of the total
usable square feet leased in the Company's buildings will expire in 2001 and
2002, respectively. If the Company is unable to promptly relet, or renew the
leases for, all or a substantial portion of the space located in its buildings,
or if the rental rates upon such renewal or reletting are significantly lower
than expected rental rates, or if the Company's reserves for these purposes
prove inadequate, then the Company's cash flow and its ability to make expected
distributions to its shareholders may be adversely affected.
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS. Real property investments are subject to varying
degrees of risk. The yields available from equity investments in real estate
depend in large part on the amount of income generated and expenses incurred.
If the Company's properties do not generate revenues sufficient to meet
operating expenses, including current levels of debt service, tenant
improvements, leasing commissions and other capital expenditures, the Company
may have to borrow additional amounts to cover fixed costs and the Company's
cash flow and its ability to make distributions to its shareholders will be
adversely affected. The Company must obtain external financing to meet future
debt maturities.
The Company's net revenues and the value of its properties may be
adversely affected by a number of factors, including the national, regional and
local economic climates; regional and local real estate conditions; the
perceptions of prospective tenants as to the attractiveness of the property;
the ability of the Company to provide adequate management, maintenance and
insurance; and increased operating costs (including real estate taxes and
utilities). In addition, real estate values and income from properties are also
affected by such factors as applicable laws, including tax laws, interest rate
levels and the availability of financing.
ILLIQUIDITY OF REAL ESTATE. Equity real estate investments are
relatively illiquid. Such illiquidity will tend to limit the ability of the
Company to vary its portfolio promptly in response to changes in economic or
other conditions.
COMPETITION. Numerous office buildings compete with the Company's
buildings in attracting tenants to lease space. Some of these competing
buildings are newer, better located or better capitalized than some of the
Company's buildings. Moreover, the Company believes that major national or
regional commercial property developers will continue to seek development
opportunities in the southeastern and southwestern United States. These
developers may have greater financial resources than the Company. The number of
competitive commercial properties in a particular area could have a material
adverse affect on the Company's ability to lease space in its buildings or at
newly developed or acquired properties and the rents charged.
19
20
CHANGES IN LAWS. Because increases in income, service or transfer
taxes are generally not passed through to tenants under leases, such increases
may adversely affect the Company's cash flow and its ability to make
distributions to its shareholders. The Company's properties are also subject to
various federal, state and local regulatory requirements, such as requirements
of the Americans with Disabilities Act (the "ADA") and state and local fire and
life safety requirements. Failure to comply with these requirements could
result in the imposition of fines by governmental authorities or awards of
damages to private litigants. The Company believes that its properties are
currently in compliance with all such regulatory requirements. However, there
can be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Company and could have an adverse affect on the Company's
cash flow and expected distributions.
UNINSURED LOSS. The Company presently carries comprehensive liability,
fire, and flood (where appropriate), extended coverage and rental loss
insurance with respect to its properties, with policy specifications and
insured limits customary for similar properties. There are, however, certain
types of losses (such as from wars) that may be either uninsurable or not
economically insurable. Should an uninsured loss or a loss exceeding policy
limits occur, the Company could lose both its capital invested in, and
anticipated profits from, one or more of its properties.
BANKRUPTCY AND FINANCIAL CONDITION OF TENANTS. At any time, a tenant
of the Company's buildings may seek the protection of the bankruptcy laws,
which could result in the rejection and termination of such tenant's lease and
thereby cause a reduction in the cash flow available for distribution by the
Company. No assurance can be given that tenants will not file for bankruptcy
protection in the future or, if any tenants file, that they will affirm their
leases and continue to make rental payments in a timely manner. In addition, a
tenant from time to time may experience a downturn in its business which may
weaken its financial condition and result in its failure to make rental
payments when due. If a tenant's lease is not affirmed following bankruptcy or
if a tenant's financial condition weakens, the Company's income may be
adversely affected.
AMERICANS WITH DISABILITIES ACT COMPLIANCE. Under the ADA, all public
accommodations and commercial facilities are required to meet certain federal
requirements relating to access and use by disabled persons. These requirements
became effective in 1992. Compliance with the requirements of the ADA could
require removal of access barriers and non-compliance could result in
imposition of fines by the U.S. Government or an award of damages to private
litigants. Although the Company believes that its properties are substantially
in compliance with these requirements, the Company may incur additional costs
to comply with the ADA. Although the Company believes that such costs will not
have a material adverse affect on the Company, if required changes involve a
greater expenditure than the Company currently anticipates, the Company's
ability to make distributions to its shareholders could be adversely affected.
RISKS INVOLVED IN PROPERTY OWNERSHIP THROUGH PARTNERSHIP AND JOINT
VENTURES. Although the Company owns fee simple interests in all but 13 of its
properties, in the future the Company could, if then permitted by the covenants
in its loan agreements and its financial position, participate with other
entities in property ownership through partnerships or joint ventures. KE is
currently the general partner of Koger-Vanguard Partners, L.P., which owns 13
office buildings. Partnership or joint venture investments may, under certain
circumstances, involve risks not otherwise present in property ownership,
including the possibility that (a) the Company's partners or co-ventures might
become bankrupt, (b) such partners or co-ventures might at any time have
economic or other business interests or goals which are inconsistent with the
business interests or goals of the Company, and (c) such partners or
co-ventures may be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or
objectives, including the Company's policy to maintain its qualification as a
REIT. The Company will, however, seek to maintain sufficient control of such
participants or joint ventures to permit the Company's business objectives to
be achieved. There is no limitation under the Company's organizational
documents as to the amount of available funds that may be invested in
partnerships or joint ventures.
IMPACT OF INFLATION. The Company may experience increases in its
expenses, including debt service, as a result of inflation. The Company's
exposure to inflationary cost increases in property level expenses is reduced
by escalation clauses, which are included in most of its leases. However,
market conditions may prevent the Company from escalating
20
21
rents. Inflationary pressure may increase operating expenses, including labor
and energy costs (and, indirectly, real estate taxes) above expected levels at
a time when it may not be possible for the Company to increase lease rates to
offset such higher operating expenses. In addition, inflation can have
secondary effects upon occupancy rates by decreasing the demand for office
space in many of the markets in which the Company operates.
Although, inflation has historically often caused increases in the
value of income-producing real estate through higher rentals, the Company can
provide no assurance that inflation will increase the value of its properties
in the future and, in fact, the rate of inflation over recent years has been
considerably below that which has been experienced previously.
RISK OF DEVELOPMENT, CONSTRUCTION AND ACQUISITION ACTIVITIES
Within the constraints of its policy concerning leverage, the Company
has and will continue to develop and construct office buildings, particularly
on its undeveloped land. Risks associated with the Company's development and
construction activities, including activities relating to its undeveloped land,
may include: abandonment of development opportunities; construction costs of a
property exceeding original estimates and possibly making the property
uneconomical; insufficient occupancy rates and rents at a newly completed
property to make the property profitable; unavailability of financing on
favorable terms for development of a property; and the failure to complete
construction and lease-up on schedule, resulting in increased debt service
expense and construction costs. In addition, new development activities,
regardless of whether or not they are ultimately successful, typically require
a substantial portion of management's time and attention. Development
activities are subject to risks relating to the inability to obtain, or delays
in obtaining, all necessary zoning, land-use, building, occupancy and other
required governmental permits and authorizations.
The Company will continue to acquire office buildings. Acquisitions of
office buildings entail risks that investments will fail to perform in
accordance with expectations. Estimates of the cost of improvements to bring an
acquired building up to standards established for the market position intended
for such building may prove inaccurate. In addition, there are general
investment risks associated with any new real estate investment.
The Company anticipates that any future developments and acquisitions
would be financed through a combination of internally generated cash, equity
investments and secured or unsecured financing. If new developments are
financed through construction loans, there is a risk that, upon completion of
construction, permanent financing for newly developed properties may not be
available or may be available only on disadvantageous terms.
CHANGES IN POLICIES WITHOUT SHAREHOLDER APPROVAL
The investment, financing, borrowing and distribution policies of the
Company, as well as its policies with respect to all other activities,
including growth, debt, capitalization and operations, are determined by the
Board of Directors. Although the Board of Directors has no present intention to
do so, these policies may be amended or revised at any time and from time to
time at the discretion of the Board of Directors without a vote of the
shareholders of the Company. A change in these policies could adversely affect
the financial condition or results of operations of the Company or the market
price of the Common Stock.
LIMITATIONS OF REIT STATUS ON BUSINESS OF SUBSIDIARIES
Certain requirements for REIT qualification may in the future limit
the Company's ability to increase fee development, management and leasing
operations conducted, and related services offered, by the Company's
subsidiaries without jeopardizing the Company's qualification as a REIT.
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22
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company believes it has operated so as to qualify as a REIT under
the Internal Revenue Code since its inception in 1988. Although management of
the Company intends that the Company continue to operate so as to qualify as a
REIT, no assurance can be given that the Company will remain qualified as a
REIT. Qualification as a REIT involves the application and satisfaction of
highly technical and complex Code requirements for which there are only limited
judicial and administrative interpretations. Uncertainty in the application of
such requirements, as well as circumstances not entirely within the Company's
control, may affect the Company's ability to qualify as a REIT. In addition, no
assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification. The Company, however, is not aware of any pending tax
legislation that would adversely affect the Company's ability to operate as a
REIT.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibility and liability without regard
to whether the owner knew, or caused the presence, of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using
such property as collateral. Any person who arranges for the disposal or
treatment of hazardous or toxic substances at a disposal or treatment facility
also may be liable for the costs of removal or remediation of a release of
hazardous or toxic substances at such disposal or treatment facility, whether
or not such facility is owned or operated by such person. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs that it incurs in connection with the
contamination. Finally, the owner of a site may be subject to common law claims
by third parties based on damages and costs resulting from environmental
contamination emanating from a site.
Certain federal, state and local laws, regulations and ordinances
govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACM") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACM and may provide for third parties to seek
recovery from owners or operators of real properties for personal injury
associated with ACM. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs. All ACM in
the Company's buildings has been found to be in good condition and non-friable,
and should not present a risk as long as it continues to be properly managed.
The Company's environmental assessments of its properties have not
revealed any environmental liability that the Company believes would have a
material adverse affect on its business, assets or results of operations taken
as a whole, nor is the Company aware of any such material environmental
liability. Nevertheless, it is possible that the Company's assessments do not
reveal all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. Moreover, there can be no
assurance that future laws, ordinances or regulations will not impose any
material environmental liability or the current environmental condition of the
Company's properties will not be affected by tenants, by the condition of land
or operations in the vicinity of such properties (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.
22
23
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that will influence the market price of the
Company's common stock in public markets will be the annual dividend yield on
the share price reflected by dividend distributions by the Company. An increase
in market interest rates could reduce cash available for distribution by the
Company to its shareholders and, accordingly, adversely affect the market price
of the common stock.
ADDITIONAL INFORMATION
For additional disclosure of risk factors to which the Company is
subject, see the other sections of "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company currently has a $150 million secured revolving credit
facility with variable interest rates. The Company may incur additional
variable rate debt in the future to meet its financing needs. Increases in
interest rates on such debt could increase the Company's interest expense,
which would adversely affect the Company's cash flow and its ability to pay
distributions to its shareholders. The Company has not entered into any
interest rate hedge contracts in order to mitigate the interest rate risk with
respect to the secured revolving credit facility. As of December 31, 2000, the
Company had $90 million outstanding under the secured revolving credit
facility. If the weighted average interest rate on this variable rate debt were
100 basis points higher or lower, annual interest expense would be increased or
decreased by approximately $900,000.
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24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE NO.
Independent Auditors' Report............................................................................ 25
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2000
and 1999........................................................................................ 26
Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 2000............................................................................... 27
Consolidated Statements of Changes in Shareholders'
Equity for Each of the Three Years in the
Period Ended December 31, 2000................................................................ 28
Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 2000............................................................................... 29
Notes to Consolidated Financial Statements for
Each of the Three Years in the Period Ended
December 31, 2000............................................................................... 30
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
for the Three Years Ended December 31, 2000..................................................... 41
Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 2000............................................................ 42
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25
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Koger Equity, Inc.
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Koger Equity,
Inc. and subsidiaries (the "Company") as of December 31, 2000 and 1999, and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedules listed in the
Index at Item 8. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Koger Equity, Inc. and subsidiaries
as of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Jacksonville, Florida
February 23, 2001
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26
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(IN THOUSANDS EXCEPT SHARE DATA)
2000 1999
---------- ----------
ASSETS
Real estate investments:
Operating properties:
Land $ 138,214 $ 140,061
Buildings 805,935 784,769
Furniture and equipment 2,631 2,693
Accumulated depreciation (155,817) (137,452)
---------- ----------
Operating properties - net 790,963 790,071
Properties under construction:
Land 2,128 8,347
Buildings 12,023 41,912
Undeveloped land held for investment 13,899 16,034
Undeveloped land held for sale, net of allowance 76 1,103
Cash and cash equivalents 1,615 --
Accounts receivable, net of allowance for uncollectible
accounts of $584 and $440 13,232 10,512
Investment in Koger Realty Services, Inc. 2,533 2,319
Cost in excess of fair value of net assets acquired,
net of accumulated amortization of $1,195 and $1,025 1,360 1,530
Other assets 13,193 13,911
---------- ----------
TOTAL ASSETS $ 851,022 $ 885,739
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages and loans payable $ 343,287 $ 351,528
Accounts payable 4,961 12,716
Accrued real estate taxes payable 4,175 1,383
Accrued liabilities - other 10,562 13,162
Dividends payable 9,392 9,370
Advance rents and security deposits 7,014 6,570
---------- ----------
Total Liabilities 379,391 394,729
---------- ----------
Minority interest 23,138 23,184
---------- ----------
Commitments and contingencies (Notes 2 and 10)
Shareholders' equity:
Preferred stock, $.01 par value; 50,000,000 shares
authorized; issued: none
Common stock, $.01 par value; 100,000,000 shares
authorized; issued: 29,559,381 and 28,756,121 shares;
outstanding: 26,829,239 and 26,770,862 shares 296 288
Capital in excess of par value 468,277 457,945
Notes receivable from stock sales (6,250) --
Retained earnings 20,261 30,546
Treasury stock, at cost; 2,730,142 and 1,985,259 shares (34,091) (20,953)
---------- ----------
Total Shareholders' Equity 448,493 467,826
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 851,022 $ 885,739
========== ==========
See Notes to Consolidated Financial Statements.
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27
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 2000
(IN THOUSANDS EXCEPT PER SHARE DATA)
2000 1999 1998
-------- -------- --------
REVENUES
Rental $163,831 $155,466 $133,076
Other rental services 902 687 587
Management fees 1,793 2,384 2,277
Income from Koger Realty Services, Inc. 645 1,099 1,696
Interest 703 457 446
-------- -------- --------
Total revenues 167,874 160,093 138,082
-------- -------- --------
EXPENSES
Property operations 61,868 60,582 53,719
Depreciation and amortization 35,133 32,314 28,381
Mortgage and loan interest 27,268 21,893 16,616
General and administrative 20,217 8,633 6,953
Direct cost of management fees 898 1,432 1,368
Other 217 1,143 383
-------- -------- --------
Total expenses 145,601 125,997 107,420
-------- -------- --------
INCOME BEFORE GAIN ON SALE OR DISPOSITION OF
ASSETS, INCOME TAXES AND MINORITY INTEREST 22,273 34,096 30,662
Gain on sale or disposition of assets 6,015 3,851 35
-------- -------- --------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 28,288 37,947 30,697
Income taxes (21) 187 956
-------- -------- --------
INCOME BEFORE MINORITY INTEREST 28,309 37,760 29,741
Minority interest 1,156 1,174 139
-------- -------- --------
NET INCOME $ 27,153 $ 36,586 $ 29,602
======== ======== ========
EARNINGS PER SHARE:
Basic $ 1.02 $ 1.37 $ 1.13
======== ======== ========
Diluted $ 1.01 $ 1.35 $ 1.10
======== ======== ========
WEIGHTED AVERAGE SHARES:
Basic 26,730 26,689 26,294
======== ======== ========
Diluted 26,962 27,019 26,901
======== ======== ========
See Notes to Consolidated Financial Statements.
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28
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 2000
(IN THOUSANDS)
COMMON STOCK CAPITAL NOTES TOTAL
------------------- IN EXCESS RECEIVABLE SHARE-
SHARES PAR OF PAR FROM STOCK RETAINED TREASURY HOLDERS'
ISSUED VALUE VALUE SALES EARNINGS STOCK EQUITY
------ ----- --------- ---------- -------- --------- ---------
BALANCE,
DECEMBER 31, 1997 28,389 $ 284 $441,451 $ 30,947 $ (28,420) $ 444,262
Common stock sold 12,104 8,430 20,534
Treasury stock purchased (583) (583)
Options exercised 171 2 1,307 (34) 1,275
401(k) Plan contribution 126 76 202
Dividends declared (30,529) (30,529)
Net income 29,602 29,602
------ ----- -------- -------- -------- --------- ---------
BALANCE,
DECEMBER 31, 1998 28,560 286 454,988 30,020 (20,531) 464,763
Common stock sold 207 235 442
Treasury stock reissued 123 162 285
Treasury stock purchased (852) (852)
Options exercised 174 2 2,120 (40) 2,082
Restricted stock issued 22 368 (56) 312
401(k) Plan contribution 139 129 268
Dividends declared (36,060) (36,060)
Net income 36,586 36,586
------ ----- -------- -------- -------- --------- ---------
BALANCE,
DECEMBER 31, 1999 28,756 288 457,945 30,546 (20,953) 467,826
Common stock sold 220 $ (5,066) 7,005 2,159
Treasury stock purchased (20,434) (20,434)
Options exercised 803 8 10,026 (1,184) 163 9,013
Restricted stock issued (48) (48)
401(k) Plan contribution 134 128 262
Dividends declared (37,438) (37,438)
Net income 27,153 27,153
------ ----- -------- -------- -------- --------- ---------
BALANCE
DECEMBER 31, 2000 29,559 $ 296 $468,277 $ (6,250) $ 20,261 $ (34,091) $ 448,493
====== ===== ======== ======== ======== ========= =========
See Notes to Consolidated Financial Statements.
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29
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 2000
(IN THOUSANDS)
2000 1999 1998
-------- -------- --------
OPERATING ACTIVITIES
Net income $ 27,153 $ 36,586 $ 29,602
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,133 32,314 28,381
Income from Koger Realty Services, Inc. (645) (1,099) (1,696)
Provision for uncollectible accounts 721 349 300
Minority interest 1,156 1,174 139
Gain on sale or disposition of assets (6,015) (3,851) (35)
Changes in assets and liabilities:
Increase (decrease) in accounts payable, accrued
liabilities and other liabilities (6,096) 3,677 8,095
Increase in accounts receivable and other assets (2,765) (3,665) (1,735)
-------- -------- --------
Net cash provided by operating activities 48,642 65,485 63,051
-------- -------- --------
INVESTING ACTIVITIES
Proceeds from sales of assets 49,726 68,763 35
Dividends received from Koger Realty Services, Inc. 431 441 507
Property acquisitions (10) (64,158) (83,337)
Building construction expenditures (16,184) (55,979) (53,137)
Tenant improvements to first generation space (7,133) (7,053) (5,020)
Tenant improvements to existing properties (8,362) (13,204) (11,655)
Building improvements (4,065) (4,573) (4,267)
Energy management improvements (252) (245) (283)
Deferred tenant costs (3,812) (2,663) (2,702)
Additions to furniture and equipment (402) (427) (1,358)
-------- -------- --------
Net cash provided by (used in) investing activities 9,937 (79,098) (161,217)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from mortgages and loans 76,783 171,052 136,002
Proceeds from sales of common stock 2,159 442 20,534
Proceeds from exercise of stock options 8,204 1,835 1,128
Principal payments on mortgages and loans (85,024) (127,427) (40,749)
Dividends paid (37,416) (34,661) (28,910)
Distributions paid to limited partners (1,202) (1,082) --
Treasury stock purchased (20,434) (852) (583)
Financing costs (34) (521) (1,384)
-------- -------- --------
Net cash provided by (used in) financing activities (56,964) 8,786 86,038
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,615 (4,827) (12,128)
Cash and cash equivalents - beginning of year 0 4,827 16,955
-------- -------- --------
Cash and cash equivalents - end of year $ 1,615 $ 0 $ 4,827
======== ======== ========
See Notes to Consolidated Financial Statements.
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30
KOGER EQUITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
ORGANIZATION. Koger Equity, Inc. ("KE") was incorporated in Florida on
June 21, 1988. KE has two wholly-owned subsidiaries, which are Southeast
Properties Holding Corporation ("Southeast"), a Florida corporation, and Koger
Real Estate Services, Inc. ("KRES"), a Florida corporation. Koger-Vanguard
Partners, L.P. ("KVP") is a Delaware limited partnership, for which KE is the
general partner.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of KE, its wholly-owned subsidiaries and KVP (the
"Company"). All material intercompany transactions and accounts have been
eliminated in consolidation.
INVESTMENT IN KOGER REALTY SERVICES, INC. Koger Realty Services, Inc.,
a Delaware corporation ("KRSI"), provides leasing and property management
services to owners of commercial office buildings. The Company owns all of the
preferred stock of KRSI, which preferred stock represents at least 95 percent of
the economic value of KRSI. Such preferred stock is non-voting and is not
convertible into the common stock of KRSI while held by the Company. The Company
has accounted for its investment in the preferred stock of KRSI using the equity
method.
REAL ESTATE INVESTMENTS. Operating properties, properties under
construction, furniture and equipment, and undeveloped land held for investment
are stated at cost less accumulated depreciation. Undeveloped land held for sale
is carried at the lower of cost or fair value less selling costs.
Periodically, management reviews its portfolio of operating properties,
undeveloped land held for investment and related goodwill and in those instances
where properties have suffered an impairment in value, the properties and
related goodwill will be reduced to their fair value. This review includes a
quarterly analysis of occupancy levels and rental rates for the Company's
properties in order to identify properties, which may have suffered an
impairment in value. Management prepares estimates of future undiscounted cash
flows for these properties to determine whether the Company will be able to
recover its investment. In making such estimates, management considers the
conditions in the commercial real estate markets in which the properties are
located, current and expected occupancy rates, current and expected rental
rates, and expected changes in operating costs. As of December 31, 2000, there
were no such impairments in value. Maintenance and repairs are charged to
operations. Acquisitions, additions, and improvements are capitalized.
MINORITY INTEREST. During October 1998, KE acquired a suburban office
park for a purchase price of $52.3 million. The transaction was structured as a
contribution of the property to KVP in exchange for limited partner units valued
at $22.95 million. In connection with this transaction, KVP assumed $22.2
million of debt and received a contribution of $7.2 million from KE in exchange
for general partner interests. The limited partner units are entitled to a
cumulative preferred return, which approximates the average dividend rate on
KE's shares. In addition, the limited partner units carry with them the right to
redeem the units for common shares of KE on a one-unit-for-one-share basis or,
at the option of KE, the units may be redeemed for cash. KE has reported KVP's
assets, liabilities and operations in its consolidated financial statements. The
limited partnership units and earnings thereon are reported as minority
interests.
DEPRECIATION AND AMORTIZATION. The Company uses the straight-line
method for depreciation and amortization. Acquisition costs, building
improvements and tenant improvements are depreciated over the periods benefited
by the expenditures which range from 3 to 40 years. Deferred tenant costs
(leasing commissions and tenant relocation costs) are amortized over the term of
the related leases. Deferred financing costs are amortized over the terms of the
related debt
30
31
agreements using a method which approximates the interest method. Cost in excess
of fair value of net assets acquired is being amortized over 15 years.
REVENUE RECOGNITION. Rentals are generally recognized as revenue over
the lives of leases according to provisions of the lease agreements. However,
the straight-line basis, which averages annual minimum rents over the terms of
leases, is used to recognize minimum rental revenues under leases which provide
for material varying rents over their terms. For 2000, 1999 and 1998, the
recognition of rental revenues on this basis for applicable leases increased
rental revenues by $1,897,000, $1,764,000 and $1,335,000, respectively, over the
amount which would have been recognized based upon the contractual provisions of
these leases. Interest revenue is recognized on the accrual basis for
interest-earning investments.
FEDERAL INCOME TAXES. The Company is qualified and has elected tax
treatment as a real estate investment trust under the Internal Revenue Code (a
"REIT"). A corporate REIT is a legal entity that holds real estate, and through
distributions to shareholders, is permitted to reduce or avoid the payment of
Federal income taxes at the corporate level. To maintain qualification as a
REIT, the Company must distribute to shareholders at least 95 percent of REIT
taxable income. To the extent that the Company pays dividends equal to 100
percent of REIT taxable income, the earnings of the Company are taxed at the
shareholder level. However, the use of net operating loss carryforwards, which
may reduce REIT taxable income to zero, are limited for alternative minimum tax
purposes. Distributed capital gains on sales of real estate are not subject to
tax; however, undistributed capital gains are taxed as capital gain.
STOCK OPTIONS. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply Accounting Principles Board Opinion No. 25 ("APB 25"), which recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The Company has continued to apply APB 25 to its stock based compensation awards
to employees and has disclosed the required pro forma effect on net income and
earnings per share.
EARNINGS PER COMMON SHARE. Basic earnings per common share has been
computed based on the weighted average number of shares of common stock
outstanding for each period. Diluted earnings per common share is similar to
basic earnings per share except that the weighted average number of common
shares outstanding is increased to include the number of additional common
shares that would have been outstanding if the dilutive common shares (options)
had been issued. The treasury stock method is used to calculate dilutive shares
which reduces the gross number of dilutive shares by the number of shares
purchasable from the proceeds of the options assumed to be exercised. Following
is a reconciliation of number of shares (in thousands) used in the computation
of basic and diluted earnings per share.
2000 1999 1998
------ ------ ------
Weighted average number of common
shares outstanding - Basic 26,730 26,689 26,294
Effect of dilutive securities:
Stock options 232 330 607
------ ------ ------
Adjusted common shares - Diluted 26,962 27,019 26,901
====== ====== ======
FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company believes that the
carrying amount of its financial instruments (temporary investments, accounts
receivable, accounts payable, and mortgages and loans payable) is a reasonable
estimate of fair value of these instruments.
31
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CASH AND CASH EQUIVALENTS. Cash in excess of daily requirements is
invested in short-term monetary securities. Such temporary cash investments have
an original maturity of less than three months and are deemed to be cash
equivalents for purposes of the statements of cash flows.
STATEMENTS OF CASH FLOWS. During 1998, the Company contributed 9,197
shares of common stock to the Company's 401(k) Plan. These shares had a value of
approximately $202,000 based on the closing price of the Company's common stock
on the American Stock Exchange on December 31, 1997. The Company assumed certain
mortgage loans with outstanding balances of $30.7 million in conjunction with
certain property acquisitions during 1998. In addition, KVP issued $22,953,000
of limited partner units in conjunction with a property acquisition during 1998.
During 1999, the Company contributed 15,603 shares of common stock to the
Company's 401(k) Plan. These shares had a value of approximately $268,000 based
on the closing price of the Company's common stock on the American Stock
Exchange on December 31, 1998. In addition, the Company issued 19,695 shares of
common stock as payment for certain 1998 bonuses for senior management. These
shares had a value of approximately $285,000 based on the closing price of the
Company's common stock on the American Stock Exchange on February 18, 1999.
During 2000, the Company contributed 15,557 shares of common stock to the
Company's 401(k) Plan. These shares had a value of approximately $262,000 based
on the closing price of the Company's common stock on the American Stock
Exchange on December 31, 1999. The Company's common stock is currently traded on
the New York Stock Exchange.
For 2000, 1999 and 1998, total interest payments (net of amounts
capitalized) were $27,307,000, $21,353,000 and $15,015,000, respectively, for
the Company. Interest capitalized during 2000, 1999 and 1998 totaled $1,059,000,
$3,343,000 and $2,974,000, respectively. For 2000, 1999 and 1998, payments for
income taxes totaled $155,000, $455,000 and $1,233,000, respectively.
ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during each reporting period. Actual results could differ
from those estimates.
NEW ACCOUNTING STANDARDS. In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." The objective of this SAB is to provide
further guidance on revenue recognition issued in the absence of authoritative
literature addressing a specific arrangement or a specific industry. The Company
was required to conform to the guidance in the SAB no later than the fourth
quarter of 2000. Compliance with this guidance did not have a material impact on
the Company's financial position or results of operations. The SEC has recently
indicated it intends to issue further guidance with respect to compliance with
specific issues addressed by SAB No. 101. Until such time as this additional
guidance is issued, the Company is unable to assess the impact, if any, it may
have on its financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In June 2000, the FASB issued
SFAS No. 138, which amends certain provisions of SFAS 133 to clarify four areas
causing difficulties in implementation. The amendment included expanding the
normal purchase and sale exemption for supply contracts, permitting the
offsetting of certain intercompany foreign currency derivatives and thus
reducing the number of third party derivatives, permitting hedge accounting for
foreign-currency denominated assets and liabilities, and redefining interest
rate risk to reduce sources of ineffectiveness. The Company will adopt SFAS 133
and the corresponding amendments under SFAS 138 on January 1, 2001. SFAS 133, as
amended by SFAS 138, is not expected to have a material impact on the Company's
consolidated results of operations, financial position or cash flows.
32
33
2. TRANSACTIONS WITH RELATED PARTIES.
Three directors were elected to the Company's Board of Directors under
the terms of an agreement dated October 10, 1996 between the Company and an
affiliate of Apollo Real Estate Investment Fund II, L.P. ("Apollo") pursuant to
which Apollo purchased three million shares of common stock from the Company for
$43.5 million ($14.50 per share). Such agreement granted to Apollo registration
rights and a conditional exemption from certain of the Company's takeover
defenses for a period of three years, which period ended on October 10, 1999.
During 2000, the Company reached an agreement with Crocker Realty Trust
to provide asset management services for the 6.1 million square foot portfolio
of Crocker Realty Trust. The Company earned fees of $296,000 under this
agreement during 2000.
In conjunction with the Company's plan to repurchase up to 2.65 million
shares of common stock (the "Shares"), the Board of Directors granted to Mr.
Crocker the right to purchase up to 500,000 Shares and to Mr. Onisko, the right
to purchase up to 150,000 Shares. These officers are entitled to make purchases
of one Share of every three Shares purchased by the Company as part of this
plan. The Shares may be purchased from the Company at the same time and for the
same price as the Company purchases Shares. In addition, the Company will loan
up to 75% of the purchase price for these Shares to Mr. Crocker and to Mr.
Onisko. These loans will be collateralized by the Shares purchased. The loan
amount cannot exceed 75% of the collateral value at any point in time. These
loans will bear interest at 150 basis points over the applicable LIBOR rate.
Approximately $836,000 of these loans are subject to recourse and the remaining
loans will be without recourse. Accrued interest on these loans is a recourse
obligation and any paid interest is not refundable if the stock is returned in
settlement of the loans. Through December 31, 2000, Mr. Crocker acquired 302,495
Shares and Mr. Onisko acquired 100,831 Shares under this plan.
During 2000, the Company's Board approved a program to lend up to $2.5
million to executive officers and department heads for the purpose of exercising
options. The loans have a term of 60 months and bear interest at 150 basis
points over the applicable LIBOR rate. Through December 31, 2000, options have
been exercised to acquire 185,027 Shares under this program.
3. MORTGAGES AND LOANS PAYABLE.
The Company has $235 million of non-recourse loans ($223.8 million of
which was outstanding on December 31, 2000) with Northwestern Mutual Life
Insurance Company ("Northwestern") which are secured by 9 office parks. These
loans are divided into (i) a tranche in the amount of $100.5 million with a 10
year maturity and an average interest rate of 8.19 percent, (ii) a tranche in
the amount of $89.5 million with a maturity of 12 years and an interest rate of
8.33 percent, (iii) a tranche in the amount of $14.7 million which matures on
January 2, 2007 and an interest rate of 7.1 percent and (iv) a tranche in the
amount of $30.3 million which matures on January 2, 2009 and an interest rate of
7.1 percent. Monthly payments on this loan include principal amortization based
on a 25-year amortization period. This indebtedness requires the Company to
maintain certain financial ratios and is collateralized by properties with a
carrying value of approximately $302.6 million at December 31, 2000. In
conjunction with the sale of the El Paso Center, the Company amended the $89.5
million promissory note with Northwestern. This amendment provided for the
release of the El Paso Center from the collateral for this loan and required
that collateral properties be substituted within 180 days. Until collateral is
substituted, $9 million of the outstanding balance of the loan will be subject
to recourse to the Company. If collateral is not substituted within 180 days,
the Company will be required to make a prepayment of principal in the amount of
$9 million plus pay a prepayment penalty based upon yield maintenance provisions
in the loan agreement.
The Company has a $150 million secured revolving credit facility ($90
million of which was outstanding on December 31, 2000) provided by First Union
National Bank of Florida, AmSouth Bank, N.A., Citizens Bank of Rhode Island,
Compass Bank and Guaranty Federal Bank. Based on the Company's election, the
interest rate on this revolving credit facility (8.07
33
34
percent at December 31, 2000) will be either (i) the lender's LIBOR rate plus
either 130, 145 or 160 basis points (depending on the Company's leverage ratio)
or (ii) the lender's prime rate. Interest payments will be due monthly on this
credit facility which has a term of three years. This credit facility requires
the Company to maintain certain financial ratios, which includes a limitation on
dividends, and is collateralized by properties with a carrying value of
approximately $234.4 million at December 31, 2000. This credit facility matures
in December 2001.
During 1998, the Company assumed other non-recourse loans with
outstanding balances of $30.7 million ($29.5 million of which was outstanding on
December 31, 2000) in conjunction with certain property acquisitions. The
contractual interest rates on these loans range from 7.25 percent to 8.2
percent. Amortization with respect to this indebtedness is based on equal
monthly installments based on 25-year amortization periods. These three loans
mature in 2002, 2006 and 2021. This indebtedness is collateralized by properties
with a carrying value of approximately $60.1 million at December 31, 2000.
The annual maturities of mortgages and loans payable, as of December
31, 2000, are summarized as follows:
YEAR ENDING AMOUNT
DECEMBER 31, (IN THOUSANDS)
------------ --------------
2001 $ 94,633
2002 12,722
2003 5,238
2004 5,674
2005 6,150
Subsequent Years 218,870
---------
Total $ 343,287
=========
4. LEASES.
The Company's operations consist principally of owning and leasing of
office space. Most of the leases are for terms of three to five years.
Generally, the Company pays all operating expenses, including real estate taxes
and insurance. At December 31, 2000, approximately 98 percent of the Company's
annualized rentals were subject to rent escalations based on changes in the
Consumer Price Index, fixed rental increases or increases in real estate taxes
and certain operating expenses. A substantial number of leases contain options
that allow leases to renew for varying periods.
The Company's leases are operating leases and expire at various dates
through 2020. Minimum future rental revenues from leases in effect at December
31, 2000, determined without regard to renewal options, are summarized as
follows:
YEAR ENDING AMOUNT
DECEMBER 31, (IN THOUSANDS)
------------ --------------
2001 $ 142,102
2002 121,855
2003 93,780
2004 63,893
2005 42,996
Subsequent Years 123,446
---------
Total $ 588,072
=========
The above minimum future rental revenue does not include contingent
rentals that may be received under provisions of the lease agreements.
Contingent rentals amounted to $10,415,000, $9,638,000 and $4,724,000 for the
years 2000, 1999, and 1998, respectively.
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35
At December 31, 2000, annualized rental revenues totaled approximately
$16,385,000 for the United States of America, when all of its departments and
agencies which lease space in the Company's buildings were combined.
5. STOCK OPTIONS AND RIGHTS.
1988 STOCK OPTION PLAN. The Company's Amended and Restated 1988 Stock
Option Plan (the "1988 Plan") provided for the granting of options to purchase
up to 500,000 shares of its common stock to key employees of the Company and its
subsidiaries. To exercise the option, payment of the option price is required
before the option shares are delivered. These options expire seven years from
the date of grant and are generally exercisable beginning one year from the date
of the grant at the rate of 20 percent per annum of the shares covered by each
option on a cumulative basis, being fully exercisable five years after the date
of grant. In accordance with the terms of the 1988 Plan, additional options
cannot be granted after ten years from the date of adoption of this plan.
1993 STOCK OPTION PLAN. The Company's 1993 Stock Option Plan (the "1993
Plan") provides for the granting of options to purchase up to 1,000,000 shares
of its common stock to key employees of the Company and its affiliates. To
exercise the option, payment of the option price is required before the option
shares are delivered. These options expire ten years from the date of grant and
are generally exercisable beginning one year from the date of the grant at the
rate of 20 percent per annum of the shares covered by each option on a
cumulative basis, being fully exercisable five years after the date of grant.
1996 STOCK OPTION PLAN. The Company's 1996 Stock Option Plan (the "1996
Plan") provides for the granting of options to purchase up to 650,000 shares of
its common stock to key employees of the Company. To exercise the option,
payment of the option price is required before the option shares are delivered.
These options expire ten years from the date of grant and are exercisable
beginning one year from the date of the grant at the rate of 20 percent per
annum of the shares covered by each option on a cumulative basis, being fully
exercisable five years after the date of grant.
1998 EQUITY AND CASH INCENTIVE PLAN. The Company's 1998 Equity and Cash
Incentive Plan (the "1998 Plan") provides for the issuance of up to 2,000,000
shares of its common stock pursuant to the grant of awards under this plan which
may include stock options, stock appreciation rights, restricted stock,
unrestricted stock, deferred stock and performance awards (in cash or stock or
combinations thereof). Options granted pursuant to the 1998 Plan would expire
ten years from the date of grant.
INFORMATION CONCERNING OPTIONS GRANTED. Substantially all of the
options granted have been granted with an exercise price equal to the market
value at the date of grant. If compensation cost for stock option grants had
been determined based on the fair value at the grant dates for 2000, 1999 and
1998 consistent with the method prescribed by SFAS No. 123, the Company's net
earnings and earnings per share would have been adjusted to the pro forma
amounts indicated below:
2000 1999 1998
------------ ----------- ------------
Net income - As reported $ 27,153,000 $36,586,000 $ 29,602,000
- Pro forma $ 24,938,000 $35,208,000 $ 27,688,000
Diluted earnings per share - As reported $ 1.01 $ 1.35 $ 1.10
- Pro forma $ 0.92 $ 1.30 $ 1.03
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Under SFAS No. 123, the fair value of each option grant is estimated on
the date of grant using the binomial option-pricing model with the following
weighted average assumptions used for grants in 2000, 1999 and 1998:
2000 1999 1998
------- ------- -------
1993 PLAN, 1996 PLAN, 1998 PLAN AND OTHER
Dividend yield 8.00% -- 6.50%
Expected volatility 28.02% -- 20.29%
Risk-free interest rates 6.62% -- 5.47%
Expected lives (months) 82 -- 67
A summary of the status of fixed stock option grants as of December 31,
2000, 1999 and 1998, and changes during the years ending on those dates is
presented below:
2000 1999 1998
----------------------- ---------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
Outstanding - beginning of year 2,257,293 $ 15.97 2,514,721 $ 15.68 1,756,773 $ 11.98
Granted 1,746,000 16.57 -- -- 934,000 21.05
Exercised (824,707) 11.40 (174,571) 10.74 (170,556) 6.80
Expired -- -- -- -- -- --
Forfeited (294,752) 19.52 (82,857) 18.17 (5,496) 19.81
--------- --------- ---------
Outstanding - end of year 2,883,834 $ 17.28 2,257,293 $ 15.97 2,514,721 $ 15.68
========= ======= ========= ======= ========= =======
The weighted average fair values of options granted during 2000 and
1998 were $3.15 and $2.71, respectively. There were no options granted during
1999.
The following table summarizes information about fixed stock options
outstanding at December 31, 2000:
EXERCISE OPTIONS OPTIONS WEIGHTED AVERAGE
PRICE OUTSTANDING EXERCISABLE REMAINING LIFE
--------- ----------- ----------- ----------------
(Months)
$ 7.5000 23,200 23,200 50
7.6250 54,850 54,850 35
8.1250 3,600 3,600 52
11.5000 82,754 81,074 53
15.3750 265,100 229,100 71
15.8750 56,000 8,500 110
16.0625 1,050,000 0 110
17.5625 600,000 0 114
19.1250 5,000 3,000 80
19.8125 86,330 86,330 79
20.0000 212,500 124,600 92
21.2500 25,000 25,000 89
21.5625 11,500 4,600 85
21.8750 283,000 283,000 86
22.8125 125,000 125,000 86
--------- ---------
2,883,834 1,051,854 98
========= ========= =====
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Remaining non-exercisable options as of December 31, 2000 become
exercisable as follows:
NUMBER
YEAR OF OPTIONS
---- ----------
2001 623,111
2002 585,434
2003 584,435
2004 19,500
2005 19,500
---------
1,831,980
=========
SHAREHOLDER RIGHTS PLAN. Pursuant to a Shareholder Rights Plan (the
"Rights Plan"), on September 30, 1990, the Board of Directors of the Company
declared a dividend of one common stock purchase right (the "Rights") for each
outstanding share of common stock of the Company. Under the terms of the Rights
Plan, the rights which were distributed to the shareholders of record on October
11, 1990, trade together with the Company's Shares and are not exercisable until
the occurrence of certain events (none of which have occurred through December
31, 2000), including acquisition of, or commencement of a tender offer for, 15
percent or more of the Company's common stock. In such event, each right
entitles its holder (other than the acquiring person or bidder) to acquire
additional shares of the Company's common stock at a fifty percent discount from
the market price. The rights are redeemable under circumstances as specified in
the Rights Plan. The Rights Plan was amended effective October 10, 1996 for
Apollo and its affiliates. See Note 2 for further discussion of this amendment.
Pursuant to an amendment to the Common Stock Rights Agreement dated as of August
17, 2000, the Rights have been extended ten years, through September 30, 2010.
6. STOCK INVESTMENT PLAN.
The Company has a stock investment plan (the "SIP") which provides for
regular purchases of the Company's Shares by all employees and directors. The
SIP provides for monthly payroll and directors' fees deductions up to $1,700 per
month with the Company making monthly contributions for the account of each
participant as follows: (i) 25 percent of amounts up to $50; (ii) 20 percent of
amounts between $50 and $100; and (iii) 15 percent of amounts between $100 and
$1,700, which amounts are used by an unaffiliated Administrator to purchase
Shares from the Company.
The Company has reserved a total of 200,000 Shares for issuance under
the SIP. The Company's contribution and the expenses incurred in administering
the SIP totaled approximately $50,500, $54,700 and $58,500 for 2000, 1999 and
1998, respectively. Through December 31, 2000, 140,916 Shares have been issued
under the SIP.
7. EMPLOYEE BENEFIT PLANS.
The Company has a 401(k) plan (the "401(k) Plan") which permits
contributions by employees. For 1998, the Company's Board of Directors approved
a Company contribution to the 401(k) Plan in the form of the Company's Shares
(15,603 Shares which had a value of approximately $268,000 on December 31,
1998). The contribution for 1998 was made during February 1999. For 1999, the
Company's Board of Directors approved a Company contribution to the 401(k) Plan
in the form of the Company's Shares (15,557 Shares which had a value of
approximately $262,000 on December 31, 1999). The contribution for 1999 was made
during February 2000. For 2000, the Company's Board of Directors approved a cash
contribution to the 401(k) Plan which totaled $182,000.
The Company has a supplemental executive retirement plan (the "SERP"),
an unfunded defined benefit plan. The purpose of the SERP is to facilitate the
retirement of select key executive employees by supplementing their benefits
under the Company's 401(k) Plan. The benefits are based on years of service and
the employee's average base salary during the last three calendar years of
employment. The SERP was curtailed during 2000 when as part of the corporate
reorganization 12 of the 13 active participants terminated employment with the
Company. SERP benefits were settled, via single cash payments, for 9 of these 12
individuals. Currently, there are four retired participants (all receiving
monthly benefits) and one active participant in the SERP.
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Net periodic pension cost for the SERP for 2000, 1999 and 1998 was as
follows (in thousands):
2000 1999 1998
------ ------ ------
Service cost $ 47 $ 182 $ 28
Interest cost 433 481 328
Amortization of unrecognized prior service cost 257 418 203
Amortization of unrecognized net loss 4 39 67
------ ------ ------
Net periodic benefit cost 741 1,120 626
Curtailment - unrecognized prior service
cost acceleration 2,512 -- --
Curtailment gain (586) -- --
Termination benefit cost 1,128 -- --
------ ------ ------
Total Cost $3,795 $1,120 $ 626
====== ====== ======
Assumptions used in the computation of net periodic pension cost for
the SERP were as follows:
2000 1999 1998
---- ---- ----
Discount rate 7.5% 7.5% 7.5%
Rate of increase in salary levels 5.0% 5.0% 5.0%
The following table provides a reconciliation of benefit obligations,
the status of the unfunded SERP and the amounts included in accrued
liabilities-other in the Consolidated Balance Sheet at December 31, 2000 and
1999 (in thousands):
2000 1999
-------- --------
Change in benefit obligation
Benefit obligation at beginning of year $ 6,981 $ 4,681
Service cost 47 182
Interest cost 433 481
Amendments 0 1,788
Actuarial (gain)/loss (1,503) (19)
Benefits paid (3,317) (132)
Termination benefit cost 1,129 0
-------- --------
Benefit obligation at end of year 3,770 6,981
-------- --------
Change in plan assets
Fair value of plan assets at beginning of year 0 0
Expected return on plan assets 0 0
Employer contribution 3,317 132
Benefits paid (3,317) (132)
-------- --------
Fair value of plan assets at end of year 0 0
-------- --------
Funded status (3,770) (6,981)
Unrecognized prior service cost 616 3,257
Unrecognized actuarial loss 0 1,048
-------- --------
Net amount recognized $ (3,154) $ (2,676)
======== ========
Amounts recognized in the statement of financial position consist of:
Accrued benefit liability $ (3,154) $ (2,676)
Additional minimum liability (470) (2,362)
Intangible asset 470 2,362
-------- --------
Net amount recognized $ (3,154) $ (2,676)
======== ========
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8. DIVIDENDS.
During 2000, 1999 and 1998, the Company paid a total of $1.40, $1.30
and $1.10 per share of dividends, respectively. For income tax purposes, the
components of the dividends paid during 2000 are as follows:
Unrecaptured
Section 1250
Payment Date Ordinary Income Return of Capital Gain (25%)
------------ --------------- ----------------- ------------
February 3, 2000 $ 0.350 -- --
May 4, 2000 0.350 -- --
August 3, 2000 0.350 -- --
November 2, 2000 0.215 -- $ 0.135
-------- --- -------
$ 1.265 -- $ 0.135
======== === =======
The Company intends that the quarterly dividend payout in the last
quarter of each year will be adjusted to reflect the distribution of at least 95
percent of the Company's REIT taxable income as required by the Federal income
tax laws. The Company's secured revolving credit facility requires the Company
to maintain certain financial ratios, which includes a limitation on dividends.
During November 2000, the Company's Board of Directors declared a quarterly
dividend of $0.35 per share payable on February 1, 2001, to shareholders of
record on December 31, 2000.
9. FEDERAL INCOME TAXES.
The Company is operated in a manner so as to qualify and has elected
tax treatment as a REIT. For the year ended December 31, 2000, the Company's
taxable income prior to the dividends paid deduction was approximately
$26,445,000. The Company's taxable income prior to the dividends paid deduction
for the years ended December 31, 1999 and 1998 was approximately $34,661,000 and
$28,910,000, respectively. The difference between net income for financial
reporting purposes and taxable income results primarily from different methods
of accounting for bad debts, depreciable lives related to the properties owned,
advance rents received and net operating loss carryforwards. At December 31,
2000, the net book basis of the Company's assets and liabilities exceeded the
net tax basis of assets and liabilities in the amount of approximately $32.6
million.
The Company utilized approximately $2,539,000 and $1,901,000 of net
operating loss carryforwards to reduce REIT taxable income for 1999 and 1998,
respectively. The Company's net operating loss carryforward available to offset
REIT taxable income for 2000 is approximately $2,481,000. The use of net
operating loss carryforwards and other tax attributes by the Company is subject
to certain limitations imposed by Internal Revenue Code Sections 382 and 383.
These limitations apply to both regular and alternative minimum taxes. These net
operating loss carryforwards and other tax attributes can be used in varying
degrees to offset REIT taxable income or tax through 2007. For 1999 and 1998,
the Company incurred alternative minimum taxes of approximately $508,000 and
$380,000, respectively, and recorded a provision for alternative minimum taxes
of approximately $130,000 for 2000. This provision has been reduced by the
$147,000 refund of 1999 alternative minimum tax received during 2000.
10. COMMITMENTS AND CONTINGENCIES.
At December 31, 2000, the Company had commitments for the construction
of buildings and improvements to existing buildings of approximately $2.5
million.
39
40
11. SUBSEQUENT EVENTS (UNAUDITED).
During January 2001, KE organized KRSI Merger, Inc., a Florida
corporation, as a wholly owned taxable subsidiary. Effective February 1, 2001,
KRSI was merged into this new subsidiary. Pursuant to the merger, the common
stock of KRSI was repurchased at the formula price set forth in KRSI's Articles
of Incorporation. Subsequent to the merger, the name of the new taxable
subsidiary was changed to Koger Realty Services, Inc. This merger will be
accounted for using the purchase method.
12. INTERIM FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly information for the two years in the period ended
December 31, 2000 is presented below (in thousands except per share amounts):
TOTAL DILUTED
RENTAL TOTAL NET EARNINGS
QUARTERS ENDED REVENUES REVENUES INCOME PER SHARE
-------------- --------- --------- --------- ---------
March 31, 1999 $ 38,121 $ 39,372 $ 8,750 $ .33
June 30, 1999 39,062 39,446 8,124 .30
September 30, 1999 (1) 39,157 40,458 11,538 .43
December 31, 1999 39,813 40,817 8,174 .30
March 31, 2000 (2) 41,406 41,802 5,355 .20
June 30, 2000 (3) 42,131 42,796 5,840 .22
September 30, 2000 (4) 40,750 41,774 9,346 .35
December 31, 2000 (5) 40,446 41,502 6,612 .25
(1) The results for the quarter ended September 30, 1999 were
affected by a gain on the sale of assets, which totaled
$3,861.
(2) The results for the quarter ended March 31, 2000 were affected
by certain non-recurring charges, which totaled $3,510.
(3) The results for the quarter ended June 30, 2000 were affected
by corporate reorganization costs, which totaled $7,180, and
by a gain on the sale or disposition of assets, which totaled
$4,404.
(4) The results for the quarter ended September 30, 2000 were
affected by a gain on the sale or disposition of assets, which
totaled $2,033.
(5) The results for the quarter ended December 31, 2000 were
affected by corporate reorganization costs, which totaled
$2,095.
40
41
SCHEDULE II
KOGER EQUITY, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
(In Thousands)
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
2000
Allowance for uncollectible accounts $ 440 $ 721 $ 0 $ 577(a) $ 584
====== ====== ==== ====== ======
Valuation allowance - land held for sale $ 279 $ 0 $ 0 $ 205(b) $ 74
====== ====== ==== ====== ======
1999
Allowance for uncollectible accounts $ 436 $ 349 $ 0 $ 345(a) $ 440
====== ====== ==== ====== ======
Valuation allowance - land held for sale $ 279 $ 0 $ 0 $ 0 $ 279
====== ====== ==== ====== ======
1998
Allowance for uncollectible accounts $ 250 $ 300 $ 0 $ 114(a) $ 436
====== ====== ==== ====== ======
Valuation allowance - land held for sale $ 279 $ 0 $ 0 $ 0 $ 279
====== ====== ==== ====== ======
(a) Receivable balance which was determined to be uncollectible and
written-off in the applicable year.
(b) Land parcel was sold for which valuation allowance had been recorded.
41
42
SCHEDULE III
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION TOTAL COST
-------------------- ---------------------- --------------------------------
(d)
BLDGS & IMPROVE- CARRYING BLDGS & (b)(c) ACCUM.
CENTER/LOCATION LAND IMPROV. MENTS COSTS LAND IMPROV. TOTAL DEPR.
--------------- --------- --------- --------- -------- --------- -------- --------- ---------
OPERATING REAL ESTATE:
ATLANTA CHAMBLEE $ 14,667 $ 68,696 $ 16,869 $ 0 $ 14,667 $ 85,565 $ 100,232 $ 23,177
ATLANTA GWINNETT 3,100 21,435 2,347 0 3,100 23,782 26,882 1,659
ATLANTA PERIMETER 2,785 18,407 964 0 2,785 19,371 22,156 1,777
AUSTIN 4,274 13,650 4,950 0 4,274 18,600 22,874 5,507
BIRMINGHAM COLONNADE 8,518 44,729 2,188 0 8,518 46,917 55,435 2,873
BIRMINGHAM RETAIL 5,055 6,479 118 0 5,055 6,597 11,652 499
CHARLOTTE CARMEL 3,170 23,202 4,290 0 3,170 27,492 30,662 4,762
CHARLOTTE UNIVERSITY 3,132 20,007 0 0 3,132 20,007 23,139 598
CHARLOTTE VANGUARD 5,136 48,019 1,498 0 5,136 49,517 54,653 2,923
GREENSBORO SOUTH 6,384 38,700 8,420 0 6,384 47,120 53,504 12,851
GREENSBORO WENDOVER 691 6,463 853 0 691 7,316 8,007 558
GREENVILLE PARK CENTRAL 1,237 12,377 1,150 0 1,237 13,527 14,764 1,532
GREENVILLE ROPER MT. 4,782 21,250 5,076 0 4,782 26,326 31,108 7,662
JACKSONVILLE BAYMEADOWS 10,514 40,261 1,404 0 10,514 41,665 52,179 6,610
JACKSONVILLE JTB 4,189 26,140 1,633 0 4,189 27,773 31,962 1,550
MEMPHIS GERMANTOWN 8,472 38,537 5,527 0 8,472 44,064 52,536 9,615
ORLANDO CENTRAL 8,092 29,825 10,759 0 8,092 40,584 48,676 14,370
ORLANDO LAKE MARY 5,506 35,523 0 0 5,506 35,523 41,029 1,064
ORLANDO UNIVERSITY 5,018 22,233 3,586 0 5,018 25,819 30,837 4,350
RICHMOND PARAGON 1,422 15,144 1,257 0 1,422 16,401 17,823 1,507
ST. PETERSBURG 7,135 35,986 9,010 0 7,135 44,996 52,131 11,527
SAN ANTONIO AIRPORT 3,243 12,791 1,686 0 3,243 14,477 17,720 1,730
SAN ANTONIO WEST 11,068 38,049 14,179 0 11,068 52,228 63,296 16,132
TALLAHASSEE 10,624 59,536 10,635 0 10,624 70,171 80,795 19,951
--------- --------- --------- --- --------- --------- --------- ---------
SUBTOTALS 138,214 697,439 108,399 0 138,214 805,838 944,052 154,784
FURNITURE & EQUIPMENT 0 2,631 0 0 2,631 2,631 1,033
IMPROVEMENTS IN PROGRESS 0 0 97 0 97 97
--------- --------- --------- --- --------- --------- --------- ---------
TOTAL OPERATING REAL ESTATE $ 138,214 $ 700,070 $ 108,496 $ 0 $ 138,214 $ 808,566 $ 946,780 $ 155,817
--------- --------- --------- --- --------- --------- --------- ---------
(a)
MORT- DATE DEPRECIABLE
CENTER/LOCATION GAGES ACQUIRED LIFE
--------------- --------- ------------ ----------------
OPERATING REAL ESTATE:
ATLANTA CHAMBLEE $ 0 1988 - 2000 3 - 40 YRS.
ATLANTA GWINNETT 0 1993 - 2000 3 - 39 YRS.
ATLANTA PERIMETER 0 1997 3 - 39 YRS.
AUSTIN 17,855 1990 - 1993 3 - 40 YRS.
BIRMINGHAM COLONNADE 0 1998 - 2000 3 - 39 YRS.
BIRMINGHAM RETAIL 0 1998 3 - 39 YRS.
CHARLOTTE CARMEL 0 1993 - 1998 3 - 40 YRS.
CHARLOTTE UNIVERSITY 0 1999 3 - 39 YRS.
CHARLOTTE VANGUARD 21,415 1998 3 - 40 YRS.
GREENSBORO SOUTH 0 1988 - 1993 3 - 40 YRS.
GREENSBORO WENDOVER 0 1999 3 - 39 YRS.
GREENVILLE PARK CENTRAL 0 1997 3 - 39 YRS.
GREENVILLE ROPER MT. 15,384 1988 - 1998 3 - 40 YRS.
JACKSONVILLE BAYMEADOWS 40,376 1993 - 1998 3 - 40 YRS.
JACKSONVILLE JTB 0 1997 - 1999 3 - 39 YRS.
MEMPHIS GERMANTOWN 24,660 1988 - 2000 3 - 40 YRS.
ORLANDO CENTRAL 26,258 1988 - 1993 3 - 40 YRS.
ORLANDO LAKE MARY 0 1999 3 - 39 YRS.
ORLANDO UNIVERSITY 14,441 1990 - 2000 3 - 40 YRS.
RICHMOND PARAGON 8,074 1998 3 - 39 YRS.
ST. PETERSBURG 18,914 1988 - 2000 3 - 40 YRS.
SAN ANTONIO AIRPORT 0 1997 3 - 39 YRS.
SAN ANTONIO WEST 22,224 1990 - 1999 3 - 40 YRS.
TALLAHASSEE 43,686 1988 - 1997 3 - 40 YRS.
---------
SUBTOTALS 253,287
FURNITURE & EQUIPMENT 3 - 15 YRS.
IMPROVEMENTS IN PROGRESS
---------
TOTAL OPERATING REAL ESTATE $ 253,287
=========
42
43
SCHEDULE III
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION TOTAL COST
----------------------- ------------------ ------------------------------------
BLDGS & CARRYING BLDGS & (b)(c)
CENTER/LOCATION LAND IMPROV. IMPROV. COSTS LAND IMPROV. TOTAL
--------------- --------- --------- --------- ----- --------- --------- ---------
PROPERTIES UNDER CONSTRUCTION:
ATLANTA GWINNETT $ 0 $ 158 $ 0 $ 0 $ 0 $ 158 $ 158
BIRMINGHAM COLONNADE 0 29 0 0 0 29 29
GREENVILLE PARK CENTRAL 0 116 0 0 0 116 116
JACKSONVILLE JTB 1,366 8,670 0 0 1,366 8,670 10,036
ORLANDO UNIVERSITY 762 3,050 0 0 762 3,050 3,812
--------- --------- --------- --- --------- --------- ---------
TOTAL UNDER CONSTRUCTION 2,128 12,023 0 0 2,128 12,023 14,151
--------- --------- --------- --- --------- --------- ---------
UNIMPROVED LAND:
ATLANTA GWINNETT 3,744 0 0 0 3,744 0 3,744
BIRMINGHAM COLONNADE 4,886 0 0 0 4,886 0 4,886
CHARLOTTE CARMEL 991 0 0 0 991 0 991
CHARLOTTE VANGUARD 1,516 0 0 0 1,516 0 1,516
COLUMBIA SPRING VALLEY 76 0 0 0 76 0 76
GREENSBORO WENDOVER 800 0 0 0 800 0 800
GREENVILLE PARK CENTRAL 438 0 0 0 438 0 438
ORLANDO CENTRAL 817 0 0 0 817 0 817
ST. PETERSBURG 707 0 0 0 707 0 707
--------- --------- --------- --- --------- --------- ---------
TOTAL UNIMPROVED LAND 13,975 0 0 0 13,975 0 13,975
--------- --------- --------- --- --------- --------- ---------
TOTAL $ 154,317 $ 712,093 $ 108,496 $ 0 $ 154,317 $ 820,589 $ 974,906
========= ========= ========= === ========= ========= =========
(d) (a)
ACCUM. MORT- DATE DEPRECIABLE
CENTER/LOCATION DEPR. GAGES ACQUIRED LIFE
--------------- --------- -------- -------- -----------
PROPERTIES UNDER CONSTRUCTION:
ATLANTA GWINNETT $ 0 $ 0
BIRMINGHAM COLONNADE 0 0
GREENVILLE PARK CENTRAL 0 0
JACKSONVILLE JTB 0 0
ORLANDO UNIVERSITY 0 0
--------- ---------
TOTAL UNDER CONSTRUCTION 0 0
--------- ---------
UNIMPROVED LAND:
ATLANTA GWINNETT 0 0 1993
BIRMINGHAM COLONNADE 0 0 1998
CHARLOTTE CARMEL 0 0 1993
CHARLOTTE VANGUARD 0 0 1998
COLUMBIA SPRING VALLEY 0 0 1993
GREENSBORO WENDOVER 0 0 1993
GREENVILLE PARK CENTRAL 0 0 1997
ORLANDO CENTRAL 0 0 1989
ST. PETERSBURG 0 0 1993
--------- ---------
TOTAL UNIMPROVED LAND 0 0
--------- ---------
TOTAL $ 155,817 $ 253,287
========= =========
43
44
SCHEDULE III
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
(a) At December 31, 2000, the outstanding balance of mortgages payable was
$253,287. In addition, the Company has a secured revolving credit
facility with variable interest rates which is collateralized by
mortgages on a pool of buildings. At December 31, 2000, the outstanding
balance of the secured revolving credit facility was $90,000.
(b) Aggregate cost basis for Federal income tax purposes was $999,206 at
December 31, 2000.
(c) Reconciliation of total real estate carrying value for the years ended
December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
---------- ---------- ----------
Balance at beginning of year $ 994,919 $ 935,598 $ 723,596
Acquisitions and construction 16,599 120,564 191,472
Improvements 19,812 25,075 21,225
Sale of unimproved land (1,027) (628) --
Sale or disposition of operating real estate (55,397) (85,690) (695)
---------- ---------- ----------
Balance at close of year $ 974,906 $ 994,919 $ 935,598
========== ========== ==========
(d) Reconciliation of accumulated depreciation for the years ended December
31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
---------- ---------- ----------
Balance at beginning of year $ 137,452 $ 129,682 $ 104,700
Depreciation expense:
Operating real estate 31,720 28,800 25,146
Furniture and equipment 432 376 531
Sale or disposition of operating real estate (13,787) (21,406) (695)
---------- ---------- ----------
Balance at close of year $ 155,817 $ 137,452 $ 129,682
========== ========== ==========
44
45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about directors of the Company who are not executive
officers is contained in the Company's Proxy Statement (the "2001 Proxy
Statement") and is incorporated herein by reference.
The following tabulation lists the executive officers of the Company,
their ages and their occupations for the past five years:
Victor A. Hughes, Jr. .......................................... Chairman of the Board
Thomas J. Crocker............................................... Chief Executive Officer and Director
Robert E. Onisko................................................ Chief Financial Officer
Christopher L. Becker........................................... Senior Vice President
Thomas C. Brockwell............................................. Senior Vice President
Drew P. Cunningham.............................................. Senior Vice President
James L. Stephens............................................... Vice President and Chief Accounting Officer
Mr. Hughes, age 65, was elected Chairman of the Board on June 21, 1996.
He also served as Chief Executive Officer from June 21, 1996 to February 29,
2000. He held the position of Chief Financial Officer of the Company from March
31, 1991 to April 1, 1998, and the position of President from August 22, 1995 to
November 14, 1997.
Mr. Crocker, age 47, became Chief Executive Officer of the Company on
March 1, 2000, and was elected to the Board of Directors of the Company on
February 17, 2000. He previously held the position of Chief Executive Officer of
Crocker Realty Trust, Inc., a private real estate investment trust, from
November 1997 to February 29, 2000, and Chief Executive Officer of Crocker &
Associate, L.P., a private real estate limited partnership, from July 1996 to
November 1997. Mr. Crocker served as Chairman and Chief Executive Officer of
Crocker Realty Trust, Inc., a public real estate investment trust, from July 1,
1995 to June 30, 1996.
Mr. Onisko, age 53, became Chief Financial Officer of the Company on
March 1, 2000. He previously held the position of Secretary and Treasurer of
Crocker Realty Trust, Inc., a private real estate investment trust, from
November 1997 to February 29, 2000. From July 1996 to November 1997, Mr. Onisko
served as Secretary and Treasurer of Crocker & Associates, L.P., a private real
estate limited partnership. He was Executive Vice President, Chief Financial
Officer and Secretary of Crocker Realty Trust, Inc., a public real estate
investment trust, from July 1, 1995 to June 30, 1996.
Mr. Becker, age 44, has been Senior Vice President of the Company since
June 19, 2000, and previously held the position of Senior Vice President of
Crocker Realty Trust, Inc., a private real estate investment trust from November
1997 to June 2000. Prior to that he was Senior Vice President of Crocker &
Associates, L.P., a private real estate limited partnership, from July 1996 to
November 1997. Mr. Becker served as Senior Vice President of Crocker Realty
Trust, Inc., a public real estate investment trust from July 1, 1995 to June 30,
1996.
Mr. Brockwell, age 37, has been Senior Vice President of the Company
since June 19, 2000. He previously held the position of Vice President of
Crocker Realty Trust, Inc. for the past five years.
Mr. Cunningham, age 37, has been Senior Vice President of the Company
since June 19, 2000, and previously held the position of Senior Vice President
of Crocker Realty Trust, Inc., a private real estate investment trust from
November 1997 to June 2000. Prior to that he was Senior Vice President of
Crocker & Associates, L.P., a private real estate limited
45
46
partnership, from July 1996 to November 1997. Mr. Cunningham served as Senior
Vice President of Crocker Realty Trust, Inc., a public real estate investment
trust from July 1, 1995 to June 30, 1996.
Mr. Stephens, age 43, has been Vice President of the Company since May
7, 1996, and was the Treasurer of the Company from March 31, 1991 to May 7,
1996. He has served as Chief Accounting Officer of the Company since March 31,
1991.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers file with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of the Company's equity
securities. Executive officers and directors are required by regulations of the
SEC to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000, the
Company's executive officers and directors complied with all Section 16(a)
filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by
reference to the section headed "Executive Compensation" in the 2001 Proxy
Statement (except for information contained under the headings "Compensation
Committee Report on Executive Compensation" and "Shareholder Return Performance
Presentation").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The stock ownership of each person known to the Company to be the
beneficial owner of more than five percent (5%) of its outstanding common stock
is incorporated by reference to the section headed "Principal Holders of Voting
Securities" of the 2001 Proxy Statement. The beneficial ownership of common
stock of all directors of the Company is incorporated by reference to the
section headed "Election of Directors" contained in the 2001 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Item 1. "Business," 2. "Properties," 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 2 "Transactions With Related Parties" to the Notes to
Consolidated Financial Statements contained in this Report and to the heading
"Certain Relationships and Transactions" contained in the 2001 Proxy Statement
for information regarding certain relationships and related transactions which
information is incorporated herein by reference.
46
47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) See "Item 8 - Financial Statements and Supplementary Data -
Index to Consolidated Financial Statements and Financial
Statement Schedules" for a list of the financial statements
included in this report.
(2) The consolidated supplemental financial statement schedules
required by Regulation S-X are included on pages 41 through 44
in this Form.
(b) Reports on Form 8-K:
October 19, 2000, the Company filed a Form 8-K reporting under
Item 5, Other Events, an agreement with Crocker Realty Trust
whereby the Company would assume management of the properties
of Crocker Realty Trust and an additional management
reorganization involving staff reductions and the moving of
certain functions to its Boca Raton, Florida office and
providing under Item 7, Financial Statements and Exhibits,
Koger Equity, Inc. News Release dated October 19, 2000.
November 14, 2000, the Company filed a Form 8-K reporting
under Item 5, Other Events, the Company's financial results
and other activities for its quarter ended September 30, 2000
and providing under Item 7, Financial Statements and Exhibits,
the Koger Equity, Inc. News Release dated November 13, 2000
and the Koger Equity, Inc. News Release dated November 14,
2000.
November 14, 2000, the Company filed a Form 8-K reporting
under Item 5, Other Events, the termination of several leases
and the prospective impact on the Company's funds from
operations and providing under Item 7, Financial Statements
and Exhibits, Koger Equity, Inc. News Release dated November
14, 2000.
(c) The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1 Underwriting Agreement dated December 12, 1997, between Koger Equity, Inc. and J.P. Morgan Securities,
Inc., Bear Stearns and Company, Inc. and BT Alex Brown Incorporated, as Representatives of the several
underwriters. Incorporated by reference to Exhibit 1 of the Form 8-K, dated December 12, 1997, filed
by the Registrant on December 15, 1997 (File No. 1-9997).
1(a) Underwriting Agreement dated March 24, 1998, between Koger Equity, Inc. and Wheat, First Securities,
Inc. Incorporated by reference to Exhibit 1 of the Form 8-K, dated March 24, 1998, filed by the
Registrant on March 30, 1998 (File No. 1-9997).
2 Agreement and Plan of Merger, dated as of December 21, 1993 between the Company and Koger Properties,
Inc. Incorporated by reference to Exhibit 2 of Form 10-K filed by the Registrant for the period ended
December 31, 1993 (File No. 1-9997).
3(a) Articles of Amendment and Restatement of Articles of Incorporation of Koger Equity, Inc., dated May
18, 2000. Incorporated by reference to Exhibit 3(a) of the Form 10-Q filed by the Registration for
the quarter ended September 30, 2000 (File No. 1-9997).
47
48
EXHIBIT
NUMBER DESCRIPTION
------------ ----------------------------------------------------------------
3(b) Koger Equity, Inc. By Laws, as Amended and Restated on February
17, 2000. Incorporated by reference to Exhibit 3(b) of the Form
10-Q filed by the Registrant for the quarter ended September 30,
2000 (File No. 1-9997).
4(a) Common Stock Certificate of Koger Equity, Inc. Incorporated by
reference to Exhibit 4(a) to Registration Statement on Form S-11
(Registration No. 33-22890).
4(b)(1)(A) Koger Equity, Inc. Rights Agreement (the "Rights Agreement")
dated as of September 30, 1990 between the Company and Wachovia
Bank and Trust Company, N.A. as Rights Agent ("Wachovia").
Incorporated by reference to Exhibit 1 to a Registration
Statement on Form 8-A, dated October 3, 1990 (File No. 1-9997).
4(b)(1)(B) First Amendment to the Rights Agreement, dated as of March 22,
1993, between the Company and First Union National Bank of North
Carolina, as Rights Agent ("First Union"), entered into for the
purpose of replacing Wachovia. Incorporated by reference to
Exhibit 4(b)(4) of the Form 10-Q filed by the Registrant for the
quarter ended March 31, 1993 (File No. 1-9997).
4(b)(1)(C) Second Amendment to the Rights Agreement, dated as of December
21, 1993, between the Company and First Union. Incorporated by
reference to Exhibit 5 to an Amendment on Form 8-A/A, dated
December 21, 1993, to a Registration Statement of the Registrant
on Form 8-A, dated October 3, 1990 (File No. 1-9997).
4(b)(1)(D) Third Amendment to Rights Agreement, dated as of October 10,
1996, between Koger Equity, Inc. and First Union. Incorporated by
reference to Exhibit 6 to an Amendment on Form 8-A/A, dated
November 7, 1996, to a Registration Statement of the Registrant
on Form 8-A, dated October 3, 1990 (File No. 1-9997).
4(b)(1)(E) Fourth Amendment to Rights Agreement, dated as of February 27,
1997, between Koger Equity, Inc. and First Union. Incorporated by
reference to Exhibit 8 to an Amendment on Form 8-A/A, dated March
17, 1997, to a Registration Statement of the Registrant on Form
8-A, dated October 3, 1990 (File No. 1-9997).
4(b)(1)(F) Fifth Amendment to Rights Agreement, dated as of November 23,
1999, between Koger Equity, Inc. and Norwest Bank Minnesota,
National Association, as successor Rights Agent. Incorporated by
reference to Exhibit 11 to an Amendment on Form 8-A/A, dated
November 23, 1999, to a Registration Statement of the Registrant
on Form 8-A, dated October 3, 1990 (File No. 1-9997).
4(b)(1)(G) Sixth Amendment to Rights Agreement, dated as of August 17, 2000,
between Koger Equity, Inc. and Wells Fargo Bank Minnesota, N.A.,
as successor Rights Agent. Incorporated by reference to Exhibit
4(1) to an Amendment on Form 8-A/A, dated August 17, 2000, to the
Registration Statement of the Registrant on Form 8-A, dated
January 28, 2000 (File No. 1-9997).
4(b)(2) Form of Common Stock Purchase Rights Certificate (attached as
Exhibit A to the Rights Agreement). Pursuant to the Rights
Agreement, printed Common Stock Purchase Rights Certificates will
not be mailed until the Distribution Date (as defined in the
Rights Agreement).
4(b)(3) Summary of Common Stock Purchase Rights (attached as Exhibit B to
the Rights Agreement, Exhibit 4(b)(1)(A)).
10(a)(1)(A) Koger Equity, Inc. Amended and Restated 1988 Stock Option Plan.
Incorporated by reference to Exhibit 10(e)(1)(A) of Form 10-Q
filed by the Registrant for the quarter ended June 30, 1992 (File
No. 1-9997).
48
49
EXHIBIT
NUMBER DESCRIPTION
------------ ----------------------------------------------------------------
10(a)(1)(B) Form of Stock Option Agreement pursuant to Koger Equity, Inc.
Amended and Restated 1988 Stock Option Plan. Incorporated by
reference to Exhibit 10(e)(2)(A) of Form 10-Q filed by the
Registrant for the quarter ended June 30, 1992 (File No. 1-9997).
10(a)(1)(C) Form of Amendment to Stock Option Agreement pursuant to Koger
Equity, Inc. Amended and Restated 1988 Stock Option Plan.
Incorporated by reference to Exhibit 10(a)(1)(C) of Form 10-K
filed by the Registrant for the period ended December 31, 1996
(File No. 1-9997).
10(a)(2)(A) Koger Equity, Inc. 1993 Stock Option Plan. Incorporated by
reference to Exhibit II to Registrant's Proxy Statement dated
June 30, 1993 (File No. 1-9997).
10(a)(2)(B) Form of Stock Option Agreement pursuant to Koger Equity, Inc.
1993 Stock Option Plan. Incorporated by reference to Exhibit
10(e)(3)(B) of Form 10-K filed by the Registrant for the period
ended December 31, 1994 (File No. 1-9997).
10(a)(2)(C) Form of Amendment to Stock Option Agreement pursuant to Koger
Equity, Inc. 1993 Stock Option Plan. Incorporated by reference to
Exhibit 10(a)(2)(C) of Form 10-K filed by the Registrant for the
period ended December 31, 1996 (File No. 1-9997).
10(a)(3)(A) Koger Equity, Inc. 1996 Stock Option Plan. Incorporated by
reference to Exhibit 10(a)(3)(A) of Form 10-K filed by the
Registrant for the period ended December 31, 1996 (File No.
1-9997).
10(a)(3)(B) Form of Stock Option Agreement pursuant to Koger Equity, Inc.
1996 Stock Option Plan. Incorporated by reference to Exhibit
10(a)(3)(B) of Form 10-K filed by the Registrant for the period
ended December 31, 1996 (File No. 1-9997).
10(a)(4) Form of Koger Equity, Inc. Restricted Stock Award effective as of
May 1, 1999. Incorporated by reference to Exhibit 10(a) on Form
10-Q filed by the Registrant for the quarter ended June 30, 1999
(File No. 1-9997).
10(a)(5) Koger Equity, Inc. 1998 Equity and Cash Incentive Plan, as
Amended and Restated. Incorporated by reference to Exhibit A to
Registrant's Proxy Statement, dated April 18, 2000 (File No.
1-9997).
10(a)(6) Stock Option Agreement between Koger Equity, Inc. and Thomas J.
Crocker, dated as of February 17, 2000. Incorporated by reference
to Exhibit 10(a)(6) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 2000 (File No. 1-9997).
10(a)(7) Stock Option Agreement between Koger Equity, Inc. and Robert E.
Onisko, dated as of February 17, 2000. Incorporated by reference
to Exhibit 10(b)(6) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 2000 (File No. 1-9997).
10(b)(1) Shareholders Agreement, dated August 9, 1993, between the Company
and TCW Special Credits, a California general partnership.
Incorporated by reference to Exhibit 10(o) of Form 10-K filed by
the Registrant for the period ended December 31, 1993 (File No.
1-9997).
10(b)(2) Registration Rights Agreement, dated as of August 9, 1993,
between the Company and TCW Special Credits, a California general
partnership. Incorporated by reference to Exhibit 10(p) of Form
10-K filed by the Registrant for the period ended December 31,
1993 (File No. 1-9997).
10(c) License Agreement, dated as of July 28, 1995, between Koger
Equity, Inc. and Koger Realty Services, Inc. Incorporated by
reference to Exhibit 10(v) of Form 10-Q filed by the Registrant
for the quarter ended June 30, 1995 (File No. 1-9997).
10(d)(1) Amended and Restated Supplemental Executive Retirement Plan,
effective as of May 20, 1999. Incorporated by reference to
Exhibit 10(b) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 1999 (File No. 1-9997).
10(d)(2) Amendment No. 1 to Supplemental Executive Retirement Plan,
effective June 21, 1996. Incorporated by reference to Exhibit
10(d)(2) of Form 10-K filed by the Registrant for the period
ended December 31, 1997 (File No. 1-9997).
49
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10(d)(3) Amendment No. 2 to Supplemental Executive Retirement Plan,
effective May 19, 1998. Incorporated by reference to Exhibit
10(d)(3) of Form 10-K filed by the Registrant for the period
ended December 31, 1998 (File No. 1-9997).
10(d)(4) Amendment No. 3 to Supplemental Executive Retirement Plan,
effective May 19, 1998. Incorporated by reference to Exhibit
10(d)(4) of the Form 10-K filed by the Registrant for the period
ended December 31, 1998 (File No. 1-9997).
10(e) Form of Indemnification Agreement between Koger Equity, Inc. and
its Directors and certain of its officers. Incorporated by
reference to Exhibit 10(x) of Form 10-K filed by the Registrant
for the year ended December 31, 1995 (File No. 1-9997).
10(f)(1)(A) Amended and Restated Employment Agreement between Koger Equity,
Inc. and Victor A. Hughes, Jr. effective as of April 1, 1998.
Incorporated by reference to Exhibit 10(f)(1) of Form 10-K filed
by the Registrant for the period ended December 31, 1998 (File
No. 1-9997).
10(f)(1)(B) Amended and Restated Employment Agreement between Koger Equity,
Inc. and James C. Teagle, effective as of April 1, 1998.
Incorporated by reference to Exhibit 10(f)(2) of Form 10-K filed
by the Registrant for the period ended December 31, 1998 (File
No. 1-9997).
10(f)(1)(C) Employment Agreement between Koger Equity, Inc. and David B.
Hiley, effective as of April 1, 1998. Incorporated by reference
to Exhibit 10(f)(3) of Form 10-K filed by the Registrant for the
period ended December 31, 1998 (File No. 1-9997).
10(f)(1)(D) Employment Agreement between Koger Equity, Inc. and Thomas J.
Crocker, effective January 17, 2000. Incorporated by reference to
Exhibit 10(a)(1) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 2000 (File No. 1-9997).
10(f)(1)(E) Employment Agreement between Koger Equity, Inc. and Robert E.
Onisko, effective January 17, 2000. Incorporated by reference to
Exhibit 10(b)(1) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 2000 (File No. 1-9997).
10(f)(2)(A) Change of Control Agreement between Koger Equity, Inc. and Victor
A. Hughes, Jr., effective as of May 20, 1999. Incorporated by
reference to Exhibit 10(c) of Form 10-Q filed by the Registrant
for the quarter ended June 30, 1999 (File No. 1-9997).
10(f)(2)(B) Change of Control Agreement between Koger Equity, Inc. and James
C. Teagle, effective as of May 20, 1999. Incorporated by
reference to Exhibit 10(d) of Form 10-Q filed by the Registrant
for the quarter ended June 30, 1999 (File No. 1-9997).
10(f)(2)(C) Change of Control Agreement between Koger Equity, Inc. and David
B. Hiley, effective as of May 20, 1999. Incorporated by reference
to Exhibit 10(e) of Form 10-Q filed by the Registrant for the
quarter ended June 30, 1999 (File No. 1-9997).
10(f)(3)(A) Promissory Note (No Recourse Note), dated as of February 17,
2000, executed by Thomas J. Crocker as maker in favor of Koger
Equity, Inc. as lender. Incorporated by reference to Exhibit
10(a)(2) of Form 10-Q filed by the Registrant for the quarter
ended June 30, 2000 (File No. 1-9997).
10(f)(3)(B) Promissory Note (25% Recourse Note), dated as of February 17,
2000, executed by Thomas J. Crocker as maker in favor of Koger
Equity, Inc. as lender. Incorporated by reference to Exhibit
10(a)(3) of Form 10-Q filed by the Registrant for the quarter
ended June 30, 2000 (File No. 1-9997).
10(f)(3)(C) Stock Pledge Security Agreement between Koger Equity, Inc. and
Thomas J. Crocker, dated as of February 17, 2000. Incorporated by
reference to Exhibit 10(a)(4) of Form 10-Q filed by the
Registrant for the quarter ended June 30, 2000 (File No. 1-9997).
10(f)(3)(D) Stock Purchase and Loan Agreement between Thomas J. Crocker and
Koger Equity, Inc., dated as of February 17, 2000. Incorporated
by reference to Exhibit 10(a)(5) of Form 10-Q filed by the
Registrant for the quarter ended June 30, 2000 (File No. 1-9997).
50
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EXHIBIT
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10(f)(4)(A) Promissory Note (No Recourse Note), dated as of February 17,
2000, executed by Robert E. Onisko as maker in favor of Koger
Equity, Inc. as lender. Incorporated by reference to Exhibit
10(b)(2) of Form 10-Q filed by the Registrant for the quarter
ended June 30, 2000 (File No. 1-9997).
10(f)(4)(B) Promissory Note (25% Recourse Note), dated as of February 17,
2000, executed by Robert E. Onisko as maker in favor of Koger
Equity, Inc. as lender. Incorporated by reference to Exhibit
10(b)(3) of Form 10-Q filed by the Registrant for the quarter
ended June 30, 2000 (File No. 1-9997).
10(f)(4)(C) Stock Pledge Security Agreement between Koger Equity, Inc. and
Robert E. Onisko, dated as of February 17, 2000. Incorporated by
reference to Exhibit 10(b)(4) of Form 10-Q filed by the
Registrant for the quarter ended June 30, 2000 (File No. 1-9997).
10(f)(4)(D) Stock Purchase and Loan Agreement between Robert E. Onisko and
Koger Equity, Inc., dated as of February 17, 2000. Incorporated
by reference to Exhibit 10(b)(5) of Form 10-Q filed by the
Registrant for the quarter ended June 30, 2000 (File No. 1-9997).
10(g)(1)(A) Stock Purchase Agreement, dated as of October 10, 1996, between
Koger Equity, Inc. and AP-KEI Holdings, LLC, a Delaware limited
liability company. Incorporated by reference to Exhibit 7 to an
Amendment on Form 8-A/A, dated November 7, 1996, to a
Registration Statement of the Registrant on Form 8-A, dated
October 3, 1990 (File No. 1-9997).
10(g)(1)(B) Registration Rights Agreement, dated as of October 10, 1996,
between Koger Equity, Inc. and AP-KEI Holdings, LLC, a Delaware
limited liability company. Incorporated by reference to Exhibit A
of the Stock Purchase Agreement, dated as of October 10, 1996,
between Koger Equity, Inc. and AP-KEI Holdings, LLC, which is
Exhibit 7 to an Amendment on Form 8-A/A, dated November 7, 1996,
to a Registration Statement on Form 8-A, dated October 3, 1990
(File No. 1-9997).
10(g)(2)(A) Amendment No. 1 to Stock Purchase Agreement, dated as of February
27, 1997, between Koger Equity, Inc. and AP-KEI Holdings, LLC.
Incorporated by reference to Exhibit 9 to an Amendment on Form
8-A/A, dated March 17, 1997, to a Registration Statement of the
Registrant on Form 8-A, dated October 3, 1990 (File No. 1-9997).
10(g)(2)(B) Assignment and Assumption Agreement, dated as of February 27,
1997, among and between Koger Equity, Inc. and AP-KEI Holdings,
LLC and AREIF II Realty Trust, Inc. Incorporated by reference to
Exhibit 10 to an Amendment on Form 8-A/A, dated March 17, 1997,
to a Registration Statement of the Registrant on Form 8-A, dated
October 3, 1990 (File No. 1-9997).
10(g)(3) Purchase Agreement, dated December 12, 1997, between Koger
Equity, Inc. and AREIF II Realty Trust, Inc. Incorporated by
reference to Exhibit 10 of the Form 8-K, dated December 12, 1997,
filed by the Registrant on December 15, 1997 (File No. 1-9997).
10(h)(1) Loan Application, dated July 29, 1996, by Koger Equity, Inc. to
The Northwestern Mutual Life Insurance Company. Incorporated by
reference to Exhibit 10(j)(1) on Form 8-K, dated December 16,
1996, filed by the Registrant on March 10, 1997 (File No.
1-9997).
10(h)(2)(A) Koger Equity, Inc. Tranche A Promissory Note, dated December 16,
1996, in the principal amount of $100,500,000 payable to The
Northwestern Mutual Life Insurance Company. Incorporated by
reference to Exhibit 10(j)(2)(A) on Form 8-K, dated December 16,
1996, filed by the Registrant on March 10, 1997 (File No.
1-9997).
10(h)(2)(B) Koger Equity, Inc. Tranche B Promissory Note, dated December 16,
1996, in the principal amount of $89,500,000 payable to The
Northwestern Mutual Life Insurance Company. Incorporated by
reference to Exhibit 10(j)(2)(B) on Form 8-K, dated December 16,
1996, filed by the Registrant on March 10, 1997 (File No.
1-9997).
51
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EXHIBIT
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10(h)(2)(C) Koger Equity, Inc. Tranche C Promissory Note, dated September 2,
1999, in the principal amount of $14,700,000 payable to The
Northwestern Mutual Life Insurance Company. Incorporated by
reference to Exhibit 10(j)(6) on Form 8-K, dated September 2,
1999, filed by the Registrant on November 17, 1999 (File No.
1-9997)
10(h)(2)(D) Koger Equity, Inc. Tranche D Promissory Note, dated September 2,
1999, in the principal amount of $30,300,000 payable to The
Northwestern Mutual Life Insurance Company. Incorporated by
reference to Exhibit 10(j)(7) on Form 8-K, dated September 2,
1999, filed by the Registrant on November 17, 1999 (File No.
1-9997).
10(h)(2)(E) First Amendment of Tranche B Promissory Note, dated August 11,
2000, between Koger Equity, Inc. and The Northwestern Mutual Life
Insurance Company. Incorporated by reference to Exhibit
10(j)(2)(E) of Form 10-Q filed by the Registrant for the quarter
ended September 30, 2000 (File No. 1-9997).
10(h)(3)(A) Master Lien Instrument from Koger Equity, Inc. to The
Northwestern Mutual Life Insurance Company, dated December 16,
1996, (1) with Mortgage and Security Agreement for Duval, Leon,
Orange and Pinellas Counties, Florida and (2) with Deed of Trust
and Security Agreement for Greenville County, South Carolina,
Shelby County, Tennessee and Bexar, El Paso and Travis Counties,
Texas. Incorporated by reference to Exhibit 10(j)(3)(A) on Form
8-K, dated December 16, 1996, filed by the Registrant on March
10, 1997 (File No. 1-9997).
10(h)(3)(B) Absolute Assignment of Leases and Rents from Koger Equity, Inc.
to The Northwestern Mutual Life Insurance Company, dated December
16, 1996, for Duval, Leon, Orange, and Pinellas Counties,
Florida, Greenville County, South Carolina, Shelby County,
Tennessee and Bexar, El Paso and Travis Counties, Texas.
Incorporated by reference to Exhibit 10(j)(3)(B) on Form 8-K,
dated December 16, 1996, filed by the Registrant on March 10,
1997 (File No. 1-9997).
10(h)(3)(C) Master Lien Instrument from Koger Equity, Inc. to The
Northwestern Mutual Life Insurance Company, dated September 2,
1999, for Duval, Leon, Orange and Pinellas Counties, Florida,
Greenville County, South Carolina, Shelby County, Tennessee, and
Bexar, El Paso and Travis Counties, Texas. Incorporated by
reference to Exhibit 10(j)(8) on Form 8-K, dated September 2,
1999, filed by the Registrant on November 17, 1999 (File No.
1-9997).
10(h)(3)(D) Leasehold Deed of Trust and Security Agreement, dated September
2, 1999, between Koger Equity, Inc., and John S. Shoaf, Jr.
("Trustee"), and The Northwestern Mutual Life Insurance Company
for Shelby County, Tennessee. Incorporated by reference to
Exhibit 10(j)(9) on Form 8-K, dated September 2, 1999, filed by
the Registrant on November 17, 1999 (File No. 1-9997).
10(h)(3)(E) IDB Deed of Trust and Security Agreement, dated September 2,
1999, between the Industrial Development Board of the City of
Memphis and County of Shelby, Koger Equity, Inc., and Trustee and
The Northwestern Mutual Life Insurance Company for Shelby County,
Tennessee. Incorporated by reference to Exhibit 10(j)(10) on Form
8-K, dated September 2, 1999, filed by the Registrant on November
17, 1999 (File No. 1-9997).
10(h)(3)(F) Absolute Assignment of Leases and Rents from Koger Equity, Inc.
to The Northwestern Mutual Life Insurance Company, dated
September 2, 1999, for Duval, Leon, Orange and Pinellas Counties,
Florida, Greenville County, South Carolina, Shelby County,
Tennessee, and Bexar, El Paso and Travis Counties, Texas.
Incorporated by reference to Exhibit 10(j)(11) on Form 8-K, dated
September 2, 1999, filed by the Registrant on November 17, 1999
(File No. 1-9997).
10(h)(4)(A) Environmental Indemnity Agreement, dated December 16, 1996,
between Koger Equity, Inc. and The Northwestern Mutual Life
Insurance Company and others. Incorporated by reference to
Exhibit 10(j)(4) on Form 8-K, dated December 16, 1996, filed by
the Registrant on March 10, 1997 (File No. 1-9997).
52
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EXHIBIT
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10(h)(4)(B) Environmental Indemnity Agreement, dated September 2, 1999,
between Koger Equity, Inc. and The Northwestern Mutual Life
Insurance Company and others. Incorporated by reference to
Exhibit 10(j)(12) on Form 8-K, dated September 2, 1999, filed by
the Registrant on November 17, 1999 (File No. 1-9997).
10(h)(5)(A) Certificate of Borrower contained in letter, dated December 16,
1996, from Koger Equity, Inc. to The Northwestern Mutual Life
Insurance Company. Incorporated by reference to Exhibit 10(j)(5)
on Form 8-K, dated December 16, 1996, filed by the Registrant on
March 10, 1997 (File No. 1-9997).
10(h)(5)(B) Certificate of Borrower contained in letter, dated September 2,
1999, from Koger Equity, Inc. to The Northwestern Mutual Life
Insurance Company. Incorporated by reference to Exhibit 10(j)(13)
on Form 8-K, dated September 2, 1999, filed by the Registrant on
November 17, 1999 (File No. 1-9997).
10(i)(1) The Second Amended and Restated Revolving Credit Loan Agreement
dated as of December 30, 1998 between and among Koger Equity,
Inc., and First Union National Bank of Florida, AmSouth Bank,
Guaranty Federal Bank F.S.B., Citizens Bank of Rhode Island and
Compass Bank (the "Lenders"). Incorporated by reference to
Exhibit 10(k)(1) on Form 8-K, dated December 30, 1998, filed by
the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(2)(A) The Substitution Revolving Promissory Note dated December 30,
1998 issued by Koger Equity, Inc. to First Union National Bank of
Florida in the principal amount of up to $45,000,000.
Incorporated by reference to Exhibit 10(k)(2)(a) on Form 8-K,
dated December 30, 1998, filed by the Registrant on February 16,
1999 (File No. 1-9997).
10(i)(2)(B) The Substitution Revolving Promissory Note dated December 30,
1998 issued by Koger Equity, Inc. to AmSouth Bank in the
principal amount of up to $35,000,000. Incorporated by reference
to Exhibit 10(k)(2)(b) on Form 8-K, dated December 30, 1998,
filed by the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(2)(C) The Substitution Revolving Promissory Note dated December 30,
1998 issued by Koger Equity, Inc. to Guaranty Federal Bank F.S.B.
in the principal amount of up to $35,000,000. Incorporated by
reference to Exhibit 10(k)(2)(c) on Form 8-K, dated December 30,
1998, filed by the Registrant on February 16, 1999 (File No.
1-9997).
10(i)(2)(D) The Revolving Promissory Note, dated December 30, 1998, issued by
Koger Equity, Inc. to Citizens Bank of Rhode Island in the
principal amount of up to $20,000,000. Incorporated by reference
to Exhibit 10(k)(2)(d) on Form 8-K, dated December 30, 1998,
filed by the Registrant on February 16, 1999 (File No. 1-9997).
(10(i)(2)(E) The Revolving Promissory Note, dated December 30, 1998, issued by
Koger Equity, Inc. to Compass Bank in the principal amount of up
to $15,000,000. Incorporated by reference to Exhibit 10(k)(2)(e)
on Form 8-K, dated December 30, 1998, filed by the Registrant on
February 16, 1999 (File No. 1-9997).
10(i)(3)(A) The Mortgage, Assignment of Leases and Rents, and Security
Agreement, dated as of December 30, 1998, relating to that
portion of the Collateral located in the State of Alabama.
Incorporated by reference to Exhibit 10(k)(3)(a) on Form 8-K,
dated December 30, 1998, filed by the Registrant on February 16,
1999 (File No. 1-9997).
10(i)(3)(B) The Assignment of Leases and Rents, dated as of December 30,
1998, relating to that portion of the Collateral located in the
State of Alabama. Incorporated by reference to Exhibit
10(k)(3)(b) on Form 8-K, dated December 30, 1998, filed by the
Registrant on February 16, 1999 (File No. 1-9997).
10(i)(3)(C) The Assignment of Contracts, Licenses and Permits, dated as of
December 30, 1998, relating to that portion of the Collateral
located in the State of Alabama. Incorporated by reference to
Exhibit 10(k)(3)(c) on Form 8-K, dated December 30, 1998, filed
by the Registrant on February 16, 1999 (File No. 1-9997).
53
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EXHIBIT
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10(i)(3)(D) The Environmental Indemnification Agreement, dated as of
December 30, 1998, relating to that portion of the Collateral
located in the State of Alabama. Incorporated by reference to
Exhibit 10(k)(3)(d) on Form 8-K, dated December 30, 1998, filed
by the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(4)(A)(i) The Second Amended and Restated Deed to Secure Debt, Assignment
of Leases and Rents, and Security Agreement dated as of
December 30, 1998 relating to that portion of the Collateral
located in Dekalb County, State of Georgia granted by Koger
Equity, Inc. to, and in favor of, the Lenders. Incorporated by
reference to Exhibit 10(k)(4)(a)(i) on Form 8-K, dated December
30, 1998, filed by the Registrant on February 16, 1999 (File
No. 1-9997).
10(i)(4)(A)(ii) The Amendment to Assignment of Leases and Rents dated as of
December 30, 1998 relating to that portion of the Collateral
located in Dekalb County, State of Georgia granted by Koger
Equity, Inc. to, and in favor of, the Lenders. Incorporated by
reference to Exhibit 10(k)(4)(a)(ii) on Form 8-K, dated
December 30, 1998, filed by the Registrant on February 16, 1999
(File No. 1-9997).
10(i)(4)(A)(iii) The Amendment to Environmental Indemnification Agreement dated
as of December 30, 1998 relating to that portion of the
Collateral located in Dekalb County, State of Georgia between
and among Koger Equity, Inc. and the Lenders. Incorporated by
reference to Exhibit 10(k)(4)(a)(iii) on Form 8-K, dated
December 30, 1998, filed by the Registrant on February 16, 1999
(File No. 1-9997).
10(i)(4)(A)(iv) The Amendment to Assignment of Contracts, Licenses and Permits
dated as of December 30, 1998 relating to that portion of the
Collateral located in Dekalb County, State of Georgia from
Koger Equity, Inc. to, and in favor of, the Lenders.
Incorporated by reference to Exhibit 10(k)(4)(a)(iv) on Form
8-K, dated December 30, 1998, filed by the Registrant on
February 16, 1999 (File No. 1-9997).
10(i)(4)(B)(i) The Deed to Secure Debt, Assignment of Leases and Rents, and
Security Agreement, dated as of December 30, 1998, relating to
that portion of the Collateral located in Gwinnett County,
State of Georgia. Incorporated by reference to Exhibit
10(k)(4)(b)(i) on Form 8-K, dated December 30, 1998, filed by
the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(4)(B)(ii) The Assignment of Leases and Rents, dated as of December 30,
1998, relating to that portion of the Collateral located in
Gwinnett County, State of Georgia. Incorporated by reference to
Exhibit 10(k)(4)(b)(ii) on Form 8-K, dated December 30, 1998,
filed by the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(4)(B)(iii) The Environmental Indemnification Agreement, dated as of
December 30, 1998, relating to that portion of the Collateral
located in Gwinnett County, State of Georgia. Incorporated by
reference to Exhibit 10(k)(4)(b)(iii) on Form 8-K, dated
December 30, 1998, filed by the Registrant on February 16, 1999
(File No. 1-9997).
10(i)(4)(B)(iv) The Amendment to Assignment of Contracts, Licenses and Permits,
dated as of December 30, 1998, relating to that portion of the
Collateral located in Gwinnett County, State of Georgia.
Incorporated by reference to Exhibit 10(k)(4)(b)(iv) on Form
8-K, dated December 30, 1998, filed by the Registrant on
February 16, 1999 (File No. 1-9997).
10(i)(5)(A)(i) The Second Amended and Restated Deed of Trust, Assignment of
Leases and Rents and Security Agreement, dated as of December
30, 1998, relating to that portion of the Collateral located in
Guilford County, State of North Carolina granted by Koger
Equity, Inc. to, and in favor of, the Lenders. Incorporated by
reference to Exhibit 10(k)(5)(a)(i) on Form 8-K, dated December
30, 1998, filed by the Registrant on February 16, 1999 (File
No. 1-9997).
10(i)(5)(A)(ii) The Amended and Restated Assignment of Leases and Rents, dated
as of December 30, 1998, relating to that portion of the
Collateral located in Guilford County, State of North Carolina
from Koger Equity, Inc. to, and in favor of, the Lenders.
Incorporated by reference to Exhibit 10(k)(5)(a)(ii) on Form
8-K, dated December 30, 1998, filed by the Registrant on
February 16, 1999 (File No. 1-9997).
54
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EXHIBIT
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10(i)(5)(A)(iii) The Amendment to Environmental Indemnification Agreement, dated
as of December 30, 1998, relating to that portion of the
Collateral located in both Guilford and Mecklenburg Counties,
State of North Carolina between and among Koger Equity, Inc.
and the Lenders. Incorporated by reference to Exhibit
10(k)(5)(a)(iii) on Form 8-K, dated December 30, 1998, filed by
the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(5)(A)(iv) The Amendment to Assignment of Contracts, Licenses and Permits,
dated as of December 30, 1998, relating to that portion of the
Collateral located in both Guilford and Mecklenburg Counties,
State of North Carolina from Koger Equity, Inc. to, and in
favor of, the Lenders. Incorporated by reference to Exhibit
10(k)(5)(a)(iv) on Form 8-K, dated December 30, 1998, filed by
the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(5)(B)(i) The Amended and Restated Deed of Trust, Assignment of Leases
and Rents and Security Agreement, dated as of December 30,
1998, relating to that portion of the Collateral located in
Mecklenburg County, State of North Carolina granted by Koger
Equity, Inc. to, and in favor of, the Lenders. Incorporated by
reference to Exhibit 10(k)(5)(b)(i) on Form 8-K, dated December
30, 1998, filed by the Registrant on February 16, 1999 (File No
1-9997).
10(i)(5)(B)(ii) The Amended and Restated Assignment of Leases and Rents, dated
as of December 30, 1998, relating to that portion of the
collateral located in Mecklenburg County, State of North
Carolina. Incorporated by reference to Exhibit 10(k)(5)(b)(ii)
on Form 8-K, dated December 30, 1998, filed by the Registrant
on February 16, 1999 (File No. 1-9997).
10(i)(5)(B)(iii) The Amended and Restated Mortgage, Assignment of Leases and
Rents and Security Agreement, dated as of December 30, 1998,
relating to that portion of the Collateral located in the State
of South Carolina granted by Koger Equity, Inc. to, and in
favor of, the Lenders. Incorporated by reference to Exhibit
10(k)(5)(b)(iii) on Form 8-K, dated December 30, 1998, filed by
the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(6)(A) The Amendment to Assignment of Leases and Rents, dated as of
December 30, 1998, relating to that portion of the Collateral
located in the State of South Carolina from Koger Equity, Inc.
to, and in favor of, the Lenders. Incorporated by reference to
Exhibit 10(k)(6)(a) on Form 8-K, dated December 30, 1998, filed
by the Registrant on February 16, 1999 (File No. 1-9997).
10(i)(6)(B) The Amendment to Environmental Indemnification Agreement, dated
as of December 30, 1998, relating to that portion of the
Collateral located in the State of South Carolina among and
between Koger Equity, Inc. and the Lenders. Incorporated by
reference to Exhibit 10(k)(6)(b) on Form 8-K, dated December
30, 1998, filed by the Registrant on February 16, 1999 (File
No. 1-9997).
10(i)(6)(C) The Amendment to Assignment of Contracts, Licenses and Permits,
dated as of December 30, 1998, relating to that portion of the
Collateral located in the State of South Carolina among and
between Koger Equity, Inc. and the Lenders. Incorporated by
reference to Exhibit 10(k)(6)(c) on Form 8-K, dated December
30, 1998, filed by the Registrant on February 16, 1999 (File
No. 1-9997).
10(i)(7)(A) The Deed of Trust, Assignment of Leases and Rents, and Security
Agreement, dated as of December 30, 1998, relating to that
portion of the Collateral located in the State of Texas.
Incorporated by reference to Exhibit 10(k)(7)(a) on Form 8-K,
dated December 30, 1998, filed by the Registrant on February
16, 1999 (File No. 1-9997).
10(i)(7)(B) The Assignment of Leases and Rents dated as of December 30,
1998, relating to that portion of the Collateral located in the
State of Texas. Incorporated by reference to Exhibit
10(k)(7)(b) on Form 8-K, dated December 30, 1998, filed by the
Registrant on February 16, 1999 (File No. 1-9997).
10(i)(7)(C) The Environmental Indemnification Agreement dated as of
December 30, 1998, relating to that portion of the Collateral
in the State of Texas. Incorporated by reference to Exhibit
10(k)(7)(c) on Form 8-K, dated December 30, 1998, filed by the
Registrant on February 16, 1999 (File No. 1-9997).
55
56
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------
10(i)(7)(D) The Assignment of Contracts, Licenses and Permits, dated as of
December 30, 1998, relating to that portion of the Collateral
in the State of Texas. Incorporated by reference to Exhibit
10(k)(7)(d) on Form 8-K, dated December 30, 1998, filed by the
Registrant on February 16, 1999 (File No. 1-9997).
10(i)(8) Unconditional Guaranty dated December 30, 1998, of Koger Real
Estate Services, Inc. and Southeast Properties Holding
Corporation, Inc. both wholly owned of Koger Equity, Inc. to
perform and make payments pursuant to the Second Amended and
Restated Revolving Credit Loan Agreement. Incorporated by
reference to Exhibit 10(k)(8) on Form 8-K, dated December 30,
1998, filed by the Registrant on February 16, 1999 (File No.
1-9997).
10(j) Management Agreement, dated June 16, 2000, between Koger
Equity, Inc. and Crocker Realty Trust, L.P., a Delaware limited
partnership.*
11 Earnings Per Share Computations.*
12 Amended and Restated Agreement of Limited Partnership of
Koger-Vanguard Partners, L.P., dated as of October 22, 1998,
between Koger Equity, Inc. as General Partner and certain
persons as Limited Partners of Koger-Vanguard Partners, L.P.
Incorporated by reference to Exhibit 12 on Form 8-K, dated
October 22, 1998, filed by the Registrant on December 31, 1998
(File No. 1-9997).
21 Subsidiaries of the Registrant.*
23 Independent Auditors' Consent.*
* Filed with this Report.
56
57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant, Koger Equity, Inc., has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KOGER EQUITY, INC.
By: /s/ Victor A. Hughes, Jr.
---------------------------
Victor A. Hughes, Jr.
Chairman of the Board
Date: March 26, 2001
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Victor A. Hughes, Jr. Chairman of the Board March 26, 2001
------------------------------------------------
(VICTOR A. HUGHES, JR.)
/s/ Thomas J. Crocker Chief Executive Officer March 26, 2001
------------------------------------------------ and Director
(THOMAS J. CROCKER)
/s/ Robert E. Onisko Chief Financial Officer March 26, 2001
------------------------------------------------
(ROBERT E. ONISKO)
/s/ James L. Stephens Vice President and Chief March 26, 2001
------------------------------------------------ Accounting Officer
(JAMES L. STEPHENS)
/s/ D. Pike Aloian Director March 26, 2001
------------------------------------------------
(D. PIKE ALOIAN)
/s/ Benjamin C. Bishop Director March 26, 2001
------------------------------------------------
(BENJAMIN C. BISHOP)
/s/ David B. Hiley Director March 26, 2001
------------------------------------------------
(DAVID B. HILEY)
/s/ John R. S. Jacobsson Director March 26, 2001
------------------------------------------------
(JOHN R. S. JACOBSSON)
/s/ Lee S. Neibart Director March 26, 2001
------------------------------------------------
(LEE S. NEIBART)
/s/ George F. Staudter Director March 26, 2001
------------------------------------------------
(GEORGE F. STAUDTER)
/s/ James C. Teagle Director March 26, 2001
------------------------------------------------
(JAMES C. TEAGLE)
57