MAA.6.30.2013 10Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013
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: 001-12762

MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
62-1543819
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
6584 POPLAR AVENUE
 
MEMPHIS, TENNESSEE
38138
(Address of principal executive offices)
(Zip Code)
(901) 682-6600
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
þ Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes  þ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
 
Number of Shares Outstanding at
Class
July 29, 2013
Common Stock, $0.01 par value
42,735,722




MID-AMERICA APARTMENT COMMUNITIES, INC. (MAA)

TABLE OF CONTENTS

 
 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements.
 

 
Condensed Consolidated Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012 (Unaudited).
2

 
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 (Unaudited) and 2012 (Unaudited).
3

 
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 (Unaudited) and 2012 (Unaudited).
4

 
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 (Unaudited) and 2012 (Unaudited).
5

 
Notes to Condensed Consolidated Financial Statements (Unaudited).
6

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
24

Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
35

Item 4.
Controls and Procedures.
35

 
 
 
 
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings.
36

Item 1A.
Risk Factors.
36

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
46

Item 3.
Defaults Upon Senior Securities.
46

Item 4.
Mine Safety Disclosures.
46

Item 5.
Other Information.
46

Item 6.
Exhibits.
47

 
Signatures.
48


1



MAA
Condensed Consolidated Balance Sheets
June 30, 2013 and December 31, 2012
(Unaudited)
(Dollars in thousands, except share data)
 
June 30, 2013
 
December 31, 2012
Assets:
 
 
 
Real estate assets:
 
 
 
Land
$
396,734

 
$
386,670

Buildings and improvements
3,237,281

 
3,170,413

Furniture, fixtures and equipment
100,513

 
98,044

Development and capital improvements in progress
47,662

 
52,455

 
3,782,190

 
3,707,582

Less accumulated depreciation
(1,051,801
)
 
(1,027,618
)
 
2,730,389

 
2,679,964

 
 
 
 
Land held for future development
5,450

 
1,205

Commercial properties, net
7,880

 
8,065

Investments in real estate joint ventures
3,178

 
4,837

Real estate assets, net
2,746,897

 
2,694,071

 
 
 
 
Cash and cash equivalents
8,792

 
9,075

Restricted cash
12,989

 
808

Deferred financing costs, net
12,492

 
13,842

Other assets
43,060

 
29,166

Goodwill
4,106

 
4,106

Assets held for sale
5,881

 

Total assets
$
2,834,217

 
$
2,751,068

 
 
 
 
Liabilities and Shareholders' Equity:
 

 
 

Liabilities:
 

 
 

Secured notes payable
$
1,106,541

 
$
1,190,848

Unsecured notes payable
585,000

 
483,000

Accounts payable
10,085

 
4,586

Fair market value of interest rate swaps
11,907

 
21,423

Accrued expenses and other liabilities
96,284

 
94,719

Security deposits
6,934

 
6,669

Liabilities associated with assets held for sale
148

 

Total liabilities
1,816,899

 
1,801,245

 
 
 
 
Redeemable stock
5,521

 
4,713

 
 
 
 
Shareholders' equity:
 

 
 

Common stock, $0.01 par value per share, 100,000,000 shares authorized; 42,736,134 and 42,316,398 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively (1)
427

 
422

Additional paid-in capital
1,569,090

 
1,542,999

Accumulated distributions in excess of net income
(582,884
)
 
(603,315
)
Accumulated other comprehensive losses
(6,336
)
 
(26,054
)
Total MAA shareholders' equity
980,297

 
914,052

Noncontrolling interest
31,500

 
31,058

Total equity
1,011,797

 
945,110

Total liabilities and equity
$
2,834,217

 
$
2,751,068

(1) 
Number of shares issued and outstanding represent total shares of common stock regardless of classification on the consolidated balance sheet. The number of shares classified as redeemable stock on the consolidated balance sheet for June 30, 2013 and December 31, 2012 are 78,154 and 72,786, respectively.
See accompanying notes to consolidated financial statements.

2



MAA
Condensed Consolidated Statements of Operations
Three and six months ended June 30, 2013 and 2012
(Unaudited)
(Dollars in thousands, except per share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
Operating revenues:
 
 
 
 
 
 
 
Rental revenues
$
123,204

 
$
108,959

 
$
243,008

 
$
212,518

Other property revenues
10,766

 
9,840

 
21,029

 
19,319

Total property revenues
133,970

 
118,799

 
264,037

 
231,837

Management fee income
142

 
209

 
319

 
478

Total operating revenues
134,112

 
119,008

 
264,356

 
232,315

Property operating expenses:
 

 
 

 
 

 
 

Personnel
14,735

 
13,603

 
29,027

 
27,151

Building repairs and maintenance
3,953

 
3,743

 
7,147

 
7,333

Real estate taxes and insurance
16,094

 
13,862

 
31,720

 
27,054

Utilities
6,974

 
6,553

 
13,677

 
12,445

Landscaping
2,898

 
2,593

 
5,819

 
5,295

Other operating
9,098

 
8,370

 
17,759

 
16,424

Depreciation and amortization
32,730

 
30,246

 
65,406

 
59,228

Total property operating expenses
86,482

 
78,970

 
170,555

 
154,930

Acquisition expense
489

 
865

 
499

 
231

Property management expenses
5,446

 
5,570

 
10,777

 
11,024

General and administrative expenses
3,389

 
3,462

 
6,628

 
6,909

Merger related expenses
5,737

 

 
5,737

 

Income from continuing operations before non-operating items
32,569

 
30,141

 
70,160

 
59,221

Interest and other non-property income
23

 
112

 
70

 
254

Interest expense
(15,271
)
 
(14,073
)
 
(30,906
)
 
(28,058
)
(Loss) gain on debt extinguishment/modification

 
(15
)
 
(169
)
 
5

Amortization of deferred financing costs
(803
)
 
(869
)
 
(1,607
)
 
(1,640
)
Net casualty gain (loss) after insurance and other settlement proceeds
439

 
2

 
455

 
(2
)
Loss on sale of non-depreciable assets

 
(3
)
 

 
(3
)
Income from continuing operations before gain (loss) from real estate joint ventures
16,957

 
15,295

 
38,003

 
29,777

Gain (loss) from real estate joint ventures
47

 
(67
)
 
101

 
(98
)
Income from continuing operations
17,004

 
15,228

 
38,104

 
29,679

Discontinued operations:
 

 
 

 
 

 
 

Income from discontinued operations before gain on sale
907

 
1,293

 
1,812

 
2,535

Net casualty loss after insurance and other settlement proceeds on discontinued operations
(4
)
 
(2
)
 
(4
)
 
(56
)
Gain on sale of discontinued operations
43,121

 
12,953

 
43,121

 
22,382

Consolidated net income
61,028

 
29,472

 
83,033

 
54,540

Net income attributable to noncontrolling interests
1,939

 
1,312

 
2,764

 
2,490

Net income available for MAA common shareholders
$
59,089

 
$
28,160

 
$
80,269

 
$
52,050

 
 
 
 
 
 
 
 
Earnings per common share - basic:
 

 
 

 
 

 
 

Income from continuing operations available for common shareholders
$
0.38

 
$
0.36

 
$
0.86

 
$
0.70

Discontinued property operations
1.00

 
0.33

 
1.02

 
0.59

Net income available for common shareholders
$
1.38

 
$
0.69

 
$
1.88

 
$
1.29

 
 
 
 
 
 
 
 
Earnings per share - diluted:
 

 
 

 
 

 
 

Income from continuing operations available for common shareholders
$
0.38

 
$
0.36

 
$
0.86

 
$
0.70

Discontinued property operations
0.99

 
0.33

 
1.01

 
0.59

Net income available for common shareholders
$
1.37

 
$
0.69

 
$
1.87

 
$
1.29

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.6950

 
$
0.6600

 
$
1.3900

 
$
1.3200

See accompanying notes to consolidated financial statements.

3




MAA
Condensed Consolidated Statements of Comprehensive Income
Three and six months ended June 30, 2013 and 2012
(Unaudited)
(Dollars in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
Consolidated net income
$
61,028

 
$
29,472

 
$
83,033

 
$
54,540

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gains(losses) from the effective portion of derivative instruments
12,101

 
(3,991
)
 
11,922

 
(5,293
)
Reclassification adjustment for losses included in net income for the effective portion of derivative instruments
3,932

 
4,944

 
8,477

 
10,492

Total comprehensive income
77,061

 
30,425

 
103,432

 
59,739

Less: comprehensive income attributable to noncontrolling interests
(2,442
)
 
(1,354
)
 
(3,445
)
 
(2,732
)
Comprehensive income attributable to MAA
$
74,619

 
$
29,071

 
$
99,987

 
$
57,007

 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.



4




MAA
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2013 and 2012
(Unaudited)
(Dollars in thousands)
 
Six months ended June 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Consolidated net income
$
83,033

 
$
54,540

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Retail revenue accretion
(20
)
 

Depreciation and amortization
68,236

 
64,341

Stock compensation expense
1,171

 
1,231

Redeemable stock issued
377

 
285

Amortization of debt premium
(505
)
 
(316
)
(Gain) loss from investments in real estate joint ventures
(101
)
 
98

Loss (gain) on debt extinguishment
169

 
(5
)
Derivative interest expense
484

 
358

Loss on sale of non-depreciable assets

 
3

Gain on sale of discontinued operations
(43,121
)
 
(22,453
)
Net casualty (gain) loss and other settlement proceeds
(451
)
 
58

Changes in assets and liabilities:
 

 
 

Restricted cash
(279
)
 
102

Other assets
(3,176
)
 
(63
)
Accounts payable
5,527

 
3,498

Accrued expenses and other
(2,239
)
 
(1,118
)
Security deposits
277

 
305

Net cash provided by operating activities
109,382

 
100,864

Cash flows from investing activities:
 

 
 

Purchases of real estate and other assets
(89,871
)
 
(96,906
)
Normal capital improvements
(22,494
)
 
(26,380
)
Construction capital and other improvements
(2,137
)

(2,304
)
Renovations to existing real estate assets
(5,112
)
 
(6,896
)
Development
(20,816
)
 
(42,592
)
Distributions from real estate joint ventures
8,197

 
10,779

Contributions to real estate joint ventures
(183
)
 
(73
)
Proceeds from disposition of real estate assets
73,089

 
51,133

Funding of escrow for exchange acquisitions
(11,902
)
 

Net cash used in investing activities
(71,229
)
 
(113,239
)
Cash flows from financing activities:
 

 
 

Net change in credit lines
2,000

 
(232,064
)
Proceeds from notes payable

 
150,000

Principal payments on notes payable
(2,799
)
 
(1,757
)
Payment of deferred financing costs
(426
)
 
(1,997
)
Repurchase of common stock
(673
)
 
(1,640
)
Proceeds from issuances of common shares
24,968

 
120,148

Distributions to noncontrolling interests
(2,391
)
 
(2,559
)
Dividends paid on common shares
(59,115
)
 
(52,732
)
Net cash used in financing activities
(38,436
)
 
(22,601
)
Net decrease in cash and cash equivalents
(283
)
 
(34,976
)
Cash and cash equivalents, beginning of period
9,075

 
57,317

Cash and cash equivalents, end of period
$
8,792

 
$
22,341

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Interest paid
$
33,610

 
$
30,441

Supplemental disclosure of noncash investing and financing activities:
 

 
 

Conversion of units to shares of common stock
$
444

 
$
2,516

Accrued construction in progress
$
7,126

 
$
6,818

Interest capitalized
$
872

 
$
1,289

Marked-to-market adjustment on derivative instruments
$
19,916

 
$
4,841

Fair value adjustment on debt assumed
$
704

 
$
2,578

Debt assumed
$
18,293

 
$
30,290

See accompanying notes to consolidated financial statements.

5



MAA
Notes to Condensed Consolidated Financial Statements
June 30, 2013 and 2012
(Unaudited)


1.           Consolidation and Basis of Presentation and Significant Accounting Policies

Consolidation and Basis of Presentation

Mid-America Apartment Communities, Inc., or we, or our, or MAA, is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops and manages apartment communities in the Sunbelt region of the United States. As of June 30, 2013, we owned or owned interests in a total of 164 multifamily apartment communities comprising 49,113 apartments located in 13 states including four communities comprising 1,156 apartments owned through our joint venture, Mid-America Multifamily Fund II, LLC. We also had two development communities under construction totaling 564 units as of June 30, 2013. A total of 96 units for the development projects were completed as of June 30, 2013, and therefore have been included in the totals above. Total expected costs for the development projects are $73.8 million, of which $37.8 million has been incurred through June 30, 2013. We expect to complete construction on one of the projects by the fourth quarter of 2013 and the other by the fourth quarter of 2014. Four of our properties include retail components with approximately 107,000 square feet of gross leasable area.

On June 3, 2013, we entered into an agreement and plan of merger with Colonial Properties Trust, or Colonial, a Birmingham, Alabama-based REIT operating primarily in the multifamily apartment sector, in which we will merge with Colonial in a stock-for-stock transaction. We expect the merger to be completed during the third quarter of 2013. The combined company will operate under the name "MAA" and will be run by our existing management team.

The accompanying unaudited condensed consolidated financial statements have been prepared by our management in accordance with United States generally accepted accounting principles, or GAAP, for interim financial information and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, and our accounting policies as set forth in our December 31, 2012 annual consolidated financial statements. The consolidated financial statements presented herein include the accounts of MAA, Mid-America Apartments, L.P, or the Operating Partnership, and all other subsidiaries in which MAA has a controlling financial interest. MAA owns approximately 96% to 100% of all consolidated subsidiaries. In our opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included, and all such adjustments were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three- and six-month periods ended June 30, 2013 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 22, 2013. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.

MAA invests in entities which may qualify as variable interest entities, or VIE. A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns. MAA consolidates all VIEs for which it is the primary beneficiary and uses the equity method to account for investments that qualify as VIEs but for which we are not the primary beneficiary. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including but not limited to, those activities that most significantly impact the VIE's economic
performance and which party controls such activities.

MAA uses the equity method of accounting for its investments in entities for which we exercise significant influence, but do not have the ability to exercise control. These entities are not variable interest entities. The factors considered in determining that MAA does not have the ability to exercise control include ownership of voting interests and participatory rights of investors.





6



Earnings per Common Share

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods.  Operating partnership units are included in dilutive earnings per share calculations when they are dilutive to earnings per share. For the three- and six-month periods ended June 30, 2013 and 2012, our basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

7



(dollars and shares in thousands, except per share amounts)
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
Shares Outstanding
 
 
 
 
 
 
 
Weighted average common shares - basic
42,690

 
40,983

 
42,523

 
40,243

Weighted average partnership units outstanding

(1) 

(1) 
1,711

 
1,898

Effect of unvested shares assumed

(1) 
45

 
60

 
84

Weighted average common shares - diluted
42,690

 
41,028

 
44,294

 
42,225

 
 
 
 
 
 
 
 
Calculation of Earnings per Share - basic
 

 
 

 
 

 
 

Income from continuing operations
$
17,004

 
$
15,228

 
$
38,104

 
$
29,679

Income from continuing operations attributable to noncontrolling interests
(613
)
 
(665
)
 
(1,409
)
 
(1,327
)
Income from continuing operations allocated to unvested restricted shares
(15
)
 
(13
)
 
(34
)
 
(28
)
Income from continuing operations available for common shareholders, adjusted
$
16,376

 
$
14,550

 
$
36,661

 
$
28,324

 
 
 
 
 
 
 
 
Income from discontinued operations
$
44,024

 
$
14,244

 
$
44,929

 
$
24,861

Income from discontinued operations attributable to noncontrolling interest
(1,326
)
 
(647
)
 
(1,355
)
 
(1,163
)
Income from discontinued operations allocated to unvested restricted shares
(39
)
 
(12
)
 
(40
)
 
(23
)
Income from discontinued operations available for common shareholders, adjusted
$
42,659

 
$
13,585

 
$
43,534

 
$
23,675

 
 
 
 
 
 
 
 
Weighted average common shares - basic
42,690

 
40,983

 
42,523

 
40,243

Earnings per share - basic
$
1.38

 
$
0.69

 
$
1.88

 
$
1.29

 
 
 
 
 
 
 
 
Calculation of Earnings per Share - diluted
 

 
 

 
 

 
 

Income from continuing operations
$
17,004

 
$
15,228

 
$
38,104

 
$
29,679

Income from continuing operations attributable to noncontrolling interests
(653
)
(1) 
(665
)
(1) 

 

Income from continuing operations allocated to unvested restricted shares
(15
)
(1) 

 

 

Income from continuing operations available for common shareholders, adjusted
$
16,336

 
$
14,563

 
$
38,104

 
$
29,679

 
 
 
 
 
 
 
 
Income from discontinued operations
$
44,024

 
$
14,244

 
$
44,929

 
$
24,861

Income from discontinued operations attributable to noncontrolling interest
(1,692
)
(1) 
(647
)
(1) 

 

Income from discontinued operations allocated to unvested restricted shares
(38
)
(1) 

 

 

Income from discontinued operations available for common shareholders, adjusted
$
42,294

 
$
13,597

 
$
44,929

 
$
24,861

 
 
 
 
 
 
 
 
Weighted average common shares - diluted
42,690

 
41,028

 
44,294

 
42,225

Earnings per share - diluted
$
1.37

 
$
0.69

 
$
1.87

 
$
1.29


(1) Operating partnership units, unvested shares assumed, and the related income with each are not included in dilutive earnings per share calculations as they were not dilutive.




8



2.           Segment Information
As of June 30, 2013, we owned or had an ownership interest in 164 multifamily apartment communities in 13 different states from which we derived all significant sources of earnings and operating cash flows. Senior management evaluates performance and determines resource allocations by reviewing apartment communities individually and in the following reportable operating segments:

Large market same store communities are generally communities:
in markets with a population of at least one million and at least 1% of the total public multifamily REIT units; and
that we have owned and have been stabilized for at least a full 12 months and have not been classified as held for sale.
Secondary market same store communities are generally communities:
in markets with populations of more than one million but less than 1% of the total public multifamily REIT units or in markets with a population of less than one million; and
that we have owned and have been stabilized for at least a full 12 months and have not been classified as held for sale.
Non same store communities and other includes recent acquisitions, communities in development or lease-up and communities that have been identified for disposition. Also included in non same store communities are non multifamily activities, which represent less than 1% of our portfolio.
On the first day of each calendar year, we determine the composition of our same store operating segments for that year as well as adjusting the previous year, which allows us to evaluate full period-over-period operating comparisons. Properties in development or lease-up will be added to the same store portfolio on the first day of the calendar year after they have been owned and stabilized for at least a full 12 months. Communities are considered stabilized after achieving 90% occupancy for 90 days. Communities that have been identified for disposition are excluded from our same store portfolio. We utilize net operating income, or NOI, in evaluating the performance of the segments.  Total NOI represents total property revenues less total property operating expenses, excluding depreciation and amortization, for all properties held during the period regardless of their status as held for sale. We believe NOI is a helpful tool in evaluating the operating performance of our segments because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

9



Revenues and NOI for each reportable segment for the three- and six-month periods ended June 30, 2013 and 2012 were as follows (dollars in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Large Market Same Store
$
63,720

 
$
60,485

 
$
126,423

 
$
119,739

Secondary Market Same Store
51,964

 
50,318

 
103,306

 
99,965

Non-Same Store and Other
18,286

 
7,996

 
34,308

 
12,133

Total property revenues
133,970

 
118,799

 
264,037

 
231,837

Management fee income
142

 
209

 
319

 
478

Total operating revenues
$
134,112

 
$
119,008

 
$
264,356

 
$
232,315

 
 
 
 
 
 
 
 
NOI
 

 
 

 
 

 
 

Large Market Same Store
$
37,793

 
$
35,376

 
$
75,548

 
$
69,975

Secondary Market Same Store
31,149

 
29,981

 
62,198

 
59,293

Non-Same Store and Other
12,722

 
8,037

 
24,331

 
13,642

Total NOI
81,664

 
73,394

 
162,077

 
142,910

Discontinued operations NOI included above
(1,446
)
 
(3,319
)
 
(3,189
)
 
(6,775
)
Management fee income
142

 
209

 
319

 
478

Depreciation and amortization
(32,730
)
 
(30,246
)
 
(65,406
)
 
(59,228
)
Acquisition expense
(489
)
 
(865
)
 
(499
)
 
(231
)
Property management expense
(5,446
)
 
(5,570
)
 
(10,777
)
 
(11,024
)
General and administrative expense
(3,389
)
 
(3,462
)
 
(6,628
)
 
(6,909
)
Merger related expenses
(5,737
)
 

 
(5,737
)
 

Interest and other non-property income
23

 
112

 
70

 
254

Interest expense
(15,271
)
 
(14,073
)
 
(30,906
)
 
(28,058
)
(Loss) gain on debt extinguishment

 
(15
)
 
(169
)
 
5

Amortization of deferred financing costs
(803
)
 
(869
)
 
(1,607
)
 
(1,640
)
Net casualty gain (loss) after insurance and other settlement proceeds
439

 
2

 
455

 
(2
)
Loss on sale of non-depreciable assets

 
(3
)
 

 
(3
)
Gain (loss) from real estate joint ventures
47

 
(67
)
 
101

 
(98
)
Discontinued operations
44,024

 
14,244

 
44,929

 
24,861

Net income attributable to noncontrolling interests
(1,939
)
 
(1,312
)
 
(2,764
)
 
(2,490
)
Net income attributable to MAA
$
59,089

 
$
28,160

 
$
80,269

 
$
52,050


Assets for each reportable segment as of June 30, 2013 and December 31, 2012, were as follows (dollars in thousands):
 
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Large Market Same Store
$
1,272,055

 
$
1,108,827

Secondary Market Same Store
809,478

 
654,315

Non-Same Store and Other
692,655

 
949,398

Corporate assets
60,029

 
38,528

Total assets
$
2,834,217

 
$
2,751,068








10



3.          Equity

Total equity and its components for the six-month periods ended June 30, 2013, and 2012 were as follows (dollars in thousands, except per share and per unit data):
  
Mid-America Apartment Communities, Inc. Shareholders
 
 
 
 
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2012
$
422

 
$
1,542,999

 
$
(603,315
)
 
$
(26,054
)
 
$
31,058

 
$
945,110

Net income
 
 
 
 
80,269

 
 
 
2,764

 
83,033

Other comprehensive income - derivative instruments (cash flow hedges)
 
 
 
 
 
 
19,718

 
681

 
20,399

Issuance and registration of common shares
4

 
24,965

 
 
 
 
 
 
 
24,969

Shares repurchased and retired

 
(673
)
 
 
 
 
 
 
 
(673
)
Shares issued in exchange for units
1

 
442

 
 
 
 
 
(443
)
 

Redeemable stock fair market value
 
 
 
 
(431
)
 
 
 
 
 
(431
)
Adjustment for noncontrolling interest ownership in operating partnership
 
 
186

 
 
 
 
 
(186
)
 

Amortization of unearned compensation
 
 
1,171

 
 
 
 
 
 
 
1,171

Dividends on common stock ($1.3900 per share)
 
 
 
 
(59,407
)
 
 
 

 
(59,407
)
Dividends on noncontrolling interest units ($1.3900 per unit)
 
 
 
 
 
 
 
 
(2,374
)
 
(2,374
)
EQUITY BALANCE JUNE 30, 2013
$
427

 
$
1,569,090

 
$
(582,884
)
 
$
(6,336
)
 
$
31,500

 
$
1,011,797



  
Mid-America Apartment Communities, Inc. Shareholders
 
 
 
 
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2011
$
389

 
$
1,375,623

 
$
(621,833
)
 
$
(35,848
)
 
$
25,131

 
$
743,462

Net income


 


 
52,050

 


 
2,490

 
54,540

Other comprehensive income - derivative instruments (cash flow hedges)


 


 


 
4,957

 
242

 
5,199

Issuance and registration of common shares
20

 
120,130

 


 


 


 
120,150

Shares repurchased and retired

 
(1,640
)
 


 


 


 
(1,640
)
Shares issued in exchange for units
1

 
2,515

 


 


 
(2,516
)
 

Redeemable stock fair market value


 


 
(375
)
 


 


 
(375
)
Adjustment for noncontrolling interest ownership in operating partnership


 
(3,687
)
 


 


 
3,687

 

Amortization of unearned compensation


 
1,231

 


 


 


 
1,231

Dividends on common stock ($1.3200 per share)


 


 
(54,146
)
 


 

 
(54,146
)
Dividends on noncontrolling interest units ($1.3200 per unit)


 


 


 


 
(2,458
)
 
(2,458
)
EQUITY BALANCE JUNE 30, 2012
$
410

 
$
1,494,172

 
$
(624,304
)
 
$
(30,891
)
 
$
26,576

 
$
865,963


4.           Real Estate Acquisitions

On May 1, 2013, we purchased Greenwood Forest, a 316-unit apartment community located in Greenwood Forest (Houston), Texas. This property was previously a part of Mid-America Multifamily Fund I, LLC.

On May 21, 2013, we purchased Station Square at Cosner's Corner, a 260-unit apartment community located in Fredericksburg, Virginia. As part of this purchase, we also acquired land for future development.




11



5.           Discontinued Operations

The four properties that we sold during the six months ended June 30, 2013 as well as the nine properties sold by us during 2012 have been classified as discontinued operations in the Consolidated Statement of Operations. Two additional properties that were classified as held for sale during the second quarter of 2013 are included in discontinued operations as well.

The following table lists the communities classified as discontinued operations for the six months ended June 30, 2013:

Community
Number of Units
Date Sold
Location
Operating Segment
Woodbridge at the Lake
188
May 15, 2013
Jacksonville, Florida
Large market same store
Savannahs at James Landing
256
June 13, 2013
Melbourne, Florida
Secondary market same store
High Ridge
160
June 13, 2013
Athens, Georgia
Secondary market same store
TPC Jacksonville
440
June 20, 2013
Jacksonville, Florida
Large market same store
Marsh Oaks
120
Held for sale
Jacksonville, Florida
Large market same store
Fountain Lake
113
Held for sale
Brunswick, Georgia
Secondary market same store

The following is a summary of continuing and discontinued operations attributable to MAA and noncontrolling interest for the three- and six-month periods ended June 30, 2013 and 2012 (dollars in thousands):

 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
Income from continuing operations:
 
 
 
 
 
 
 
Attributable to MAA
$
16,391

 
$
14,563

 
$
36,695

 
$
28,352

Attributable to noncontrolling interest
613

 
665

 
1,409

 
1,327

Income from continuing operations
$
17,004

 
$
15,228

 
$
38,104

 
$
29,679

 
 
 
 
 
 
 
 
Income from discontinued operations:
 

 
 

 
 

 
 

Attributable to MAA
$
42,698

 
$
13,597

 
$
43,574

 
$
23,698

Attributable to noncontrolling interest
1,326

 
647

 
1,355

 
1,163

Income from discontinued operations
$
44,024

 
$
14,244

 
$
44,929

 
$
24,861






















12



The following is a summary of discontinued operations for the three- and six-month periods ended June 30, 2013 and 2012 (dollars in thousands):


Three months ended June 30,

Six months ended June 30,
 
2013

2012

2013

2012
Revenues
 

 

 

 
Rental revenues
$
2,452


$
5,893


$
5,359


$
12,241

Other revenues
170


566


385


1,184

Total revenues
2,622


6,459


5,744


13,425

Expenses
 


 


 


 

Property operating expenses
1,176


3,157


2,555


6,702

Depreciation and amortization
466


1,679


1,223


3,474

Interest expense
73


330


154


714

Total expense
1,715


5,166


3,932


10,890

Gain from discontinued operations before gain on sale
907


1,293


1,812


2,535

Net loss on insurance and other settlement proceeds on discontinued operations
(4
)

(2
)

(4
)

(56
)
Gain on sale of discontinued operations
43,121


12,953


43,121


22,382

Income from discontinued operations
$
44,024


$
14,244


$
44,929


$
24,861


6.           Share and Unit Information

On June 30, 2013, 42,736,134 shares of common stock of MAA and 1,707,660 partnership units in the Operating Partnership were issued and outstanding, representing a total of 44,443,794 shares and units. At June 30, 2012, 41,101,427 shares of common stock of MAA and 1,784,208 partnership units in the Operating Partnership were outstanding, representing a total of 42,885,635 shares and units. There were no outstanding options as of June 30, 2013 or June 30, 2012.

On August 26, 2010, we and our Operating Partnership entered into distribution agreements with Cantor Fitzgerald & Co., Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated pursuant to our at-the-market offerings or negotiated transactions through a controlled equity offering program, or ATM, for a combined total of 6,000,000 shares of our common stock. We terminated this ATM program and on February 25, 2013, we and our Operating Partnership entered into distribution agreements with J.P. Morgan Securities LLC, BMO Capital Markets Corp., KeyBanc Capital Markets Inc. and UBS Securities LLC to sell up to 4,500,000 shares of our common stock with materially the same terms as our previous distribution agreements.

During the three- and six-month periods ended June 30, 2013, we issued 39,845 shares and 365,011 shares, respectively, through our ATM programs for net proceeds of $2.7 million and $24.8 million, respectively. The gross proceeds for these issuances were $2.8 million and $25.1 million. During the three- and six-month periods ended June 30, 2012, we did not issue any shares through our ATM programs. We have 4,134,989 shares remaining under our ATM program as of June 30, 2013.

On March 2, 2012, we closed on an underwritten public offering of 1,955,000 shares of common stock. UBS Investment Bank and Jefferies & Company, Inc. acted as joint bookrunning managers. We received net proceeds of approximately $120 million after underwriter discounts. The gross proceeds for this offering were approximately $124.1 million. We had no such offerings during the three- and six-month periods ended June 30, 2013.

During the three- and six-month periods ended June 30, 2013, we issued 188 shares and 329 shares of common stock through the optional cash purchase feature of our Dividend and Distribution Reinvestment and Share Purchase Program, or DRSPP. The issuances resulted in gross proceeds of approximately $13,000 and $22,000. During the three- and six-month periods ended June 30, 2012, we issued 209 shares and 329 shares of common stock through the optional cash purchase feature of our DRSPP resulting in gross proceeds of approximately $14,000 and $22,000.

During the six months ended June 30, 2013, 4,582 shares of our common stock were acquired from employees to satisfy minimum tax withholding obligations that arose upon vesting of restricted stock granted pursuant to approved plans. During the six months ended June 30, 2012, 15,565 shares were acquired for these purposes.


13



7.           Notes Payable

On June 30, 2013 and December 31, 2012, we had total indebtedness of approximately $1.69 billion and $1.67 billion, respectively. Our indebtedness as of June 30, 2013 consisted of both conventional and tax exempt debt. Borrowings were made through individual property mortgages as well as company-wide credit facilities. We utilize both secured and unsecured debt.

On March 1, 2012, we entered into a $150 million unsecured term loan agreement with a syndicate of banks led by KeyBank and J.P. Morgan with a variable rate resetting monthly at LIBOR plus a spread of 1.40% to 2.15% based on a leveraged-based pricing grid and a maturity date of March 1, 2017. As of June 30, 2013, the full amount was outstanding under this agreement. In July 2012, we received an investment grade rating (Baa2) from Moody's rating service, which caused the variable rate to reset monthly at LIBOR plus a spread of 1.10% to 2.05% based on an investment grade ratings grid.

On August 31, 2012, our Operating Partnership issued $175 million of Senior Unsecured Notes to be funded at three separate times. The notes were offered in a private placement with four tranches: $18 million at 3.15% maturing on November 30, 2017; $20 million at 3.61% maturing on November 30, 2019; $117 million at 4.17% maturing on November 30, 2022; and $20 million at 4.33% maturing on November 30, 2024. As of June 30, 2013, the full amount of the notes has been funded and is included in our balance sheet.

On June 14, 2013, we entered into a $250 million term loan agreement with JPMorgan at a rate of LIBOR plus a spread of 1.30% on any outstanding borrowings. This agreement matures on June 14, 2014, although borrowings are only allowed to be drawn upon up until 60 days subsequent to the closing of the merger with Colonial. We had no borrowings under this agreement at June 30, 2013.

As of June 30, 2013, approximately 42% of our outstanding debt was borrowed through secured credit facility relationships with Prudential Mortgage Capital, which are credit enhanced by the Federal National Mortgage Association, or FNMA, and Financial Federal, which are credit enhanced by Freddie Mac.

We utilize interest rate swaps and interest rate caps to help manage our current and future interest rate risk and entered into 19 interest rate swaps and 12 interest rate caps as of June 30, 2013, representing notional amounts totaling $584.0 million and $224.6 million, respectively. We also held 11 non-designated interest rate caps with notional amounts totaling $63.8 million as of June 30, 2013.





























14



The following table summarizes our outstanding debt structure as of June 30, 2013 (dollars in thousands):

 
Borrowed
Balance
 
Effective
Rate
 
Contract
Maturity
Fixed Rate Secured Debt
 
 
 
 
 
Individual property mortgages
$
388,759

 
4.7
%
 
6/2/2019
FNMA conventional credit facilities
50,000

 
4.7
%
 
3/31/2017
Credit facility balances with:
 

 
 

 
 
LIBOR-based interest rate swaps
284,000

 
5.3
%
 
6/22/2014
Total fixed rate secured debt
$
722,759

 
4.9
%
 
4/28/2017
Variable Rate Secured Debt (1)
 

 
 

 
 
FNMA conventional credit facilities
$
214,720

 
0.7
%
 
9/6/2016
FNMA tax-free credit facilities
89,615

 
0.9
%
 
7/23/2031
Freddie Mac credit facilities
64,247

 
0.7
%
 
7/1/2014
Freddie Mac mortgage
15,200

 
3.5
%
 
1/1/2016
Total variable rate secured debt
$
383,782

 
0.9
%
 
10/6/2019
Total Secured Debt
$
1,106,541

 
3.5
%
 
3/3/2018
 
 
 
 
 
 
Unsecured Debt
 

 
 

 
 
Variable rate credit facility
$
125,000

 
1.4
%
 
11/1/2015
Term loan fixed with swaps
150,000

 
2.4
%
 
3/1/2017
Fixed rate senior private placement bonds
310,000

 
4.5
%
 
7/27/2021
Total Unsecured Debt
$
585,000

 
3.3
%
 
3/20/2019
 
 
 
 
 
 
Total Outstanding Debt
$
1,691,541

 
3.5
%
 
7/13/2018

(1) Includes capped balances.

8.           Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risk arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future contractual and forecasted cash amounts, principally related to our borrowings, the value of which are determined by changing interest rates, related cash flows and other factors.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and interest rate caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and six months ended June 30, 2013 and 2012, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of fixed-rate

15



debt.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended June 30, 2013 and 2012, we recorded ineffectiveness of $23,000 (increase to interest expense) and $23,000 (decrease to interest expense), respectively, and during the six months ended June 30, 2013 and 2012, we recorded ineffectiveness of $26,000 (increase to interest expense) and $33,000 (decrease to interest expense), respectively, mainly attributable to a mismatch in the underlying indices of the derivatives and the hedged interest payments made on our variable-rate debt.

Amounts reported in accumulated other comprehensive income related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate or fixed-rate debt. During the next 12 months, we estimate that an additional $10.9 million will be reclassified to earnings as an increase to interest expense, which primarily represents the difference between our fixed interest rate swap payments and the projected variable interest rate swap payments.

As of June 30, 2013, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative
 
Number of Instruments
 
Notional
Interest Rate Caps
 
12
 
$
224,631,000

  Interest Rate Swaps (1)
 
19
 
$
584,000,000


(1) Includes three forward rate swaps totaling $150 million where the debt has not yet been issued. These swaps are not included in our debt discussion in MD&A or footnote 7.

Non-Designated Hedges

Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of FASB ASC 815, Derivatives and Hedging. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in a gain of $10,000 for the three months ended June 30, 2013 and a loss of $3,000 for the six months ended June 30, 2013. We recorded a loss of $9,000 and $33,000 for the three and six months ended June 30, 2012.

As of June 30, 2013, we had the following outstanding interest rate derivatives that were not designated as hedges:
Interest Rate Derivative
 
Number of Instruments
 
Notional
Interest rate caps
 
11
 
$
63,820,000






















16



Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of June 30, 2013 and December 31, 2012, respectively.

Fair Values of Derivative Instruments on the Consolidated Balance Sheet as of June 30, 2013 and December 31, 2012 (dollars in thousands)

 
 
Asset Derivatives
 
Liability Derivatives
 
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
June 30, 2013
 
December 31, 2012
Derivatives designated as hedging instruments
 
Balance Sheet Location
 
Fair Value
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
Fair Value
Interest rate contracts
 
Other assets
 
$
10,626

 
$
245

 
Fair market value of interest rate swaps
 
$
11,907

 
$
21,423

 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives designated as hedging instruments
 
 
 
$
10,626

 
$
245

 
 
 
$
11,907

 
$
21,423

 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
Other assets
 
$
62

 
$
43

 
 
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives not designated as hedging instruments
 
 
 
$
62

 
$
43

 
 
 
$

 
$


























17



Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Operations

The table below presents the effect of our derivative financial instruments on the Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012, respectively.

Effect of Derivative Instruments on the Consolidated Statements of Operations for the
Three and six months ended June 30, 2013 and 2012 (dollars in thousands)

Derivatives in Cash Flow
Hedging Relationships
 
Amount of 
Gain or (Loss)
Recognized in 
OCI on Derivative 
(Effective Portion)
 
Location of Gain or
(Loss) Reclassified 
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of  
Gain or (Loss)
Reclassified from
Accumulated 
OCI into Income 
(Effective Portion)
 
Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
Amount of Gain or (Loss) Recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)
Three months ended June 30,
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
12,101

 
$
(3,991
)
 
Interest expense
 
$
(3,932
)
 
$
(4,944
)
 
Interest expense
 
$
23

 
$
(23
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives in cash flow hedging relationships
 
$
12,101

 
$
(3,991
)
 
 
 
$
(3,932
)
 
$
(4,944
)
 
 
 
$
23

 
$
(23
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30,
 
 

 
 

 
 
 
 

 
 

 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
$
11,922

 
$
(5,293
)
 
Interest expense
 
$
(8,477
)
 
$
(10,492
)
 
Interest expense
 
$
26

 
$
(33
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives in cash flow hedging relationships
 
$
11,922

 
$
(5,293
)
 
 
 
$
(8,477
)
 
$
(10,492
)
 
 
 
$
26

 
$
(33
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
Location of Gain or (Loss) Recognized in Income
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
10

 
$
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
$
10

 
$
(9
)