form 8-k - sec.gov | home gross margins, excluding brokerage activities, improved to 31.2% in the...
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0001193125-04-191111.txt : 200411090001193125-04-191111.hdr.sgml : 2004110920041109150743ACCESSION NUMBER:0001193125-04-191111CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:24CONFORMED PERIOD OF REPORT:20041103ITEM INFORMATION:Results of Operations and Financial ConditionITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20041109DATE AS OF CHANGE:20041109
FILER:
COMPANY DATA:COMPANY CONFORMED NAME:AMERICAN LAND LEASE INCCENTRAL INDEX KEY:0000804138STANDARD INDUSTRIAL CLASSIFICATION:REAL ESTATE INVESTMENT TRUSTS [6798]IRS NUMBER:841038736STATE OF INCORPORATION:DEFISCAL YEAR END:1231
FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-09360FILM NUMBER:041129166
BUSINESS ADDRESS:STREET 1:29399 U.S. HWY 19, NORTHSTREET 2:SUITE 320CITY:CLEARWATERSTATE:FLZIP:33761BUSINESS PHONE:727-726-8868
MAIL ADDRESS:STREET 1:29399 U.S. HWY 19, NORTHSTREET 2:SUITE 320CITY:CLEARWATERSTATE:FLZIP:33761
FORMER COMPANY:FORMER CONFORMED NAME:ASSET INVESTORS CORPDATE OF NAME CHANGE:19920703
FORMER COMPANY:FORMER CONFORMED NAME:MDC ASSET INVESTORS INCDATE OF NAME CHANGE:19890406
FORMER COMPANY:FORMER CONFORMED NAME:MDC MORTGAGE ASSET INVESTORS INCDATE OF NAME CHANGE:19861204
8-K1d8k.htmFORM 8-K
Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 3, 2004
AMERICAN LAND LEASE, INC.
(Exact name of registrant as specified in its charter)
Delaware1-0936084-1038736
(State or other jurisdiction of
Incorporation or organization)
(Commission File Number)
(IRS Employer
Identification No.)
29399 US HWY 19NORTH, SUITE 320, CLEARWATER, FL 33761
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (727) 726-8868
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Check theappropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The press release and supplemental operating and financial data of American Land Lease,Inc., dated November 3, 2004, attached hereto as Exhibit 99.1 is furnished herewith. This press release and supplemental operating and financial data shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
American Land Lease held its third quarter earnings conference call on November 3, 2004 at 4:00 p.m. eastern standard time. It may be accessed by replay by dialing 800-642-1687 and requesting information fromconference ID 1921174. The replay will be available for playback from 5:30 p.m. eastern standard time, November 3, 2004 until midnight on November 10, 2004. Please note that the full text of the release and supplemental schedules are availablethrough American Land Leases website at www.americanlandlease.com. The information contained on American Land Leases website is not incorporated by reference herein.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
The following exhibit is filed with this report:
EXHIBITNO.
DESCRIPTION
99.1Third Quarter 2004 Earnings Press Release and Supplemental Financial Data American Land Lease dated November 3, 2004.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereuntoduly authorized.
AMERICAN LAND LEASE INC.
(Registrant)
By
/s/ Shannon E. Smith
Shannon E. Smith
Chief Financial Officer
Date: November 3, 2004
EXHIBIT INDEX
EXHIBITNO.
DESCRIPTION
99.1Third Quarter 2004 Earnings Press Release and Supplemental Financial Data American Land Lease dated November 3, 2004.
EX-99.12dex991.htmPRESS RELEASE
Press Release
AMERICAN LAND LEASE, INC.
SUPPLEMENTAL INFORMATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
Page
Press Release
2
2004 Hurricane Season
9
Glossary
10
Selected Property Photographs
12
Financial Statements
Balance Sheet
21
Consolidated Statements of Income
22
Debt Analysis
23
Gross Margins on Operating and Home Sales
24
Statement of Operations Per Share
25
FFO/AFFO Per Common Share/OP Unit
26
Reconciliation of Net Income to FFO and AFFO
27
Selected Financial Information
Same Site Comparison Quarter over Quarter, 2004 vs. 2003
28
Same Site Comparison Year over Year, 2004 vs. 2003
29
Number of Home Sites and Average Rent by Community
30
Two Year Same Store Trend by Quarter
31
Occupancy Roll Forward and Portfolio Summary
32
Return on Investment for Home Sales
33
Key Home Sales Statistics
34
Other Information
Development Summary
36
Outlook and Forward Looking Statement
37
1
American Land LeaseAnnounces Third Quarter 2004 Financial Results
21% Decrease in Funds From Operations per share over 2003 as Hurricanes Impact Home
Closings in the Quarter
CLEARWATER, Fla., November 3, 2004 /PRNewswire/ American Land Lease, Inc. (NYSE: ANL - news) today released results for third quarter 2004.
Please refer to the Supplemental Information which the Company also releasedtoday for definitions of measures of performance not determined in accordance with generally accepted accounting principles (non-GAAP) and reconciliation of non-GAAP measures to measures determined in accordance with generally acceptedaccounting principles (GAAP).
Summary Financial Results
Third Quarter
Diluted Earnings Per Share (Diluted EPS) were $0.23 for the three-month period ended September 30, 2004 as compared to $0.44 from the same period one year ago, adecrease of 47.0% on a per share basis.
Funds from Operations (FFO; a non-GAAP financial measure defined in the Supplemental Information) were $2.6 million, or $0.32 per diluted common share, for the quartercompared to $3.3 million, or $0.40 per diluted common share from the same period one year ago, a decrease of 21.0% on a per share basis.
Unit volume in home sales was 77 new home closings, including 74 new homes sold on expansion home sites. This compares with 125 new home closings in second quarter 2003, including123 new homes sold on expansion sites.
Same Store results provided a revenue increase of 10.6%, an expense increase of 9.2% and an increase of 11.3% in Net Operating Income (NOI).
Same Site results provided a revenue increase of 3.3%, an expense increase of 4.8% and an increase of 2.6% in NOI.
Supplemental Information
The full text of this press release and Supplemental Information are available upon requestor through the Companys web site at www.americanlandlease.com.
Management Comments
Bob Blatz, President of AmericanLand Lease, commented, Our results for third quarter 2004 reflect the significant impact of the three hurricanes on our ability to close homes under contract. We expect to close the majority of these homes in fourth quarter of this year and infirst quarter 2005 as we address the damage and complete the building process that was delayed by the storm. We continue to be encouraged by the increase in the average price of each home sold this quarter exceeding $108,000. Ourbacklog is up 74% over the prior year to 175 homes representing increased sales throughout the year combined with the deferral of many closings from September due to the hurricanes. In the period immediately following the hurricanes we saw a dropoff in traffic and a corresponding drop in contracts so we expect that the current backlog will enable us to maintain our expected sales levels throughout fourth
2
quarter and into 2005. We have already seen increases in traffic through October and we expect the effects of the hurricanes on our sales activity to betemporary and are projecting a return to normalized sales levels by first quarter next year.
Our property operations before depreciation performed well in light of the challenges for the quarter as operating margins increased 1.9% over the third quarter of 2003.
As we have reported in previous press releases, the qualitative improvements in the homesthat are constructed in our communities minimized the damage suffered through three hurricanes. The continued growing demand has increased lead times for our product and we continue to monitor that part of our business. The combination of a shortageof building supplies and contractors for home building has increased the overall cycle time for our home completion process. This will have an impact on our inventory levels and home delivery timeline in 2005. We have had a number of homes that havebeen identified for removal in our communities mainly as a result of water damage from the storms. We view this as an opportunity to bring new, high quality homes into our communities. The better quality homes are a welcome addition to ourcommunities as they increase the overall community value.
DividendDeclaration
On October 27, 2004, the Board of Directors declared aregular third quarter dividend of $0.25 per share, payable on November 24, 2004, to stockholders of record on November 10, 2004. The Company continues to suspend its dividend reinvestment plan until further notice.
The Board of Directors reviews the dividend policy quarterly. The Companys dividend isset quarterly and is subject to change or elimination at any time. The Companys primary financial objective is to maximize long term, risk adjusted returns on investment for stockholders. While the dividend policy is considered within thecontext of this objective, maintenance of past dividend levels is not a primary investment objective of the Company and the dividend policy is subject to numerous factors including, the Companys profitability, capital expenditure plans,obligations related to principal payments and capitalized interest, and the availability of debt and equity capital at terms deemed attractive by the Company to finance these expenditures. The Companys net operating loss carryforward may beused to offset all or a portion of its real estate investment trust (REIT) taxable income, which may allow the Company to reduce or eliminate its dividends and still maintain its REIT status.
Operational Results
Third Quarter Property Operations
Third quarter revenue from property operations was $7,260,000 as compared to $6,480,000 inthe same period one year ago, a 12.0% increase. Third quarter property operating expenses totaled $2,746,000 as compared to $2,571,000 in the same period one year ago, a 6.8% increase. The Company realized significant increases in rental incomedriven by annual rental rate increases, the absorption of new home sites as a result of its home sales efforts and the acquisition of one community during fourth quarter 2003. Property operating expenses increased in the third quarter 2004 ascompared to the same period in the prior year driven primarily by increases in utility costs, property taxes, casualty losses and the acquisition of one community during the fourth quarter 2003, offset by decreases in offsite management costs.
3
The combination of increased revenue and expenses resulted in an overall improvement in property operating margins beforedepreciation expense from 60.3% in the prior years third quarter to 62.2% in the third quarter 2004.
Third Quarter Same Store Results
Third quarter same store results reflect the results of operations for properties and golf courses owned for both the thirdquarter of 2004 and the same period in the prior year. The same store properties account for 94% of the property operating revenues for the third quarter of 2004. We believe that same store information provides insight as to the changes inprofitability for properties owned during both reporting periods that could not be obtained from a review of the consolidated income statement in periods where properties are acquired. A reconciliation of same store operating resultsreported below to total property revenues and property expenses, as determined under GAAP, can be found in the Supplemental Information, page 28.
The same store increases are as follows:
3Q04
Revenue
10.6%
Expense
9.2%
Net Operating Income
11.3%
We derive our increase in propertyrevenue (i) from increases in rental rates and other charges at our properties and (ii) through the origination of leases on expansion home sites (absorption). Same site results reflect the results of operations excludingthose sites leased subsequent to the beginning of the prior year period. We believe that same site information provides the ability to understand the changes in profitability without the growth related to the newly leased sites. Ourpresentation of same site results is a non-GAAP measure and should not be considered in isolation from, and is not intended to represent an alternative measure to, operating income or cash flow or any other measure of performance as determined inaccordance with GAAP.
We calculate absorption revenues as the rental revenuerecognized on sites leased subsequent to the beginning of the prior year period. We estimate that 50% of the increase in expenses over the prior year period is attributable to newly leased sites in our calculation of same site results. We believethat the allocation of expenses between same site and absorption is an appropriate allocation between fixed and variable costs of operating our properties.
4
Our same site, absorption, same site golf operations and total same store results for third quarter 2004 are as follows:
SameSiteRental
Absorption
SameSiteGolf
SameStore
Revenue
3.3%7.4%(0.1%)10.6%
Expense
4.8%4.8%(0.4%)9.2%
NOI
2.6%8.6%0.1%11.3%
A reconciliation of same site and samestore operating results used in the above calculations to total property revenues and property expenses, as determined under GAAP, for the three months ended September 30, 2004 and 2003 can be found in the Supplemental Information, page 28.
Third Quarter Home Sales Operations
Third quarter 2004 new home sales unit volume was 77 closings, a 38.4%decrease from the 125 closings in the same period in the prior year. Average selling price per home was $108,000 as compared to $96,000 in the same period in the prior year, a 12.5% increase. The decrease in closings compared to the same period inthe prior year was balanced across the Companys expansion communities, with increases in seven communities and decreases in nine communities. Brokerage profits were down 33.6% as compared with the same period in the prior year driven by a 9.4%decrease in the number of transactions. Selling gross margins, excluding brokerage activities, improved to 31.2% in the quarter as compared to 27.8% in the same period in the prior year. This increase was driven by increased selling prices,increased manufacturer rebates associated with higher purchasing volumes, and sales of upgrades to base home models. The increases in revenue and cost savings were offset by increases in the cost of homes purchased. Selling costs as a percentage ofsales revenue increased from 16.8% in the prior years period to 26.3% in the third quarter of 2004, reflecting additional investments in personnel and advertising/marketing in support of a higher operating level for the business and a lowervolume of home closings. The backlog of contracts for closing stood at 175 home sales, an increase of 74 contracts from the same period in the prior year.
The Company remains committed to its program of generating revenue growth through new lease originations in its existing portfolio. The home sales business continues toprovide the Company with additional earning home sites that have a greater return on investment than is currently available through the purchase of occupied communities.
Summary of home sales activity:
Quarterended
September30,2004
Quarterended
September30,2003
New home closings
77125
New home contracts
6986
Home resales
39
Brokered home sales
4853
New home contract backlog
175101
Dispositions
On July 30, 2004, the Company closed the sale of its ministorage property in Arizona fora sales price of $2,050,000 and recorded a gain on the sale of $23,000. The Company no longer has an interest in ministorage properties.
5
Outlook for 2004
The table below summarizes the Companys projected financial outlook for 2004 as of the date of this release and is based on the estimates and assumptionsdisclosed in this and previous press releases:
FullYear2004
Projected
FFO
$1.45to$1.55
AFFO
$1.32 to $1.40
Diluted EPS
$1.03 to $1.24
Same Store Sales
Revenue Growth
5.0% to 9.0%
Expense Growth
4.5% to 7.5%
NOI Growth
6.0% to 9.5%
Home Sales Operating Income
$
$2,000,000 to
3,250,000
General and Administrative Expenses
$
$3,200,000 to
3,700,000
Other Income
$
$210,000 to
280,000
Capital Replacements (per site)
$115 to $135
Depreciation
$
$2,900,000 to
3,200,000
A portion of the Companysearnings is from the sale of new homes on expansion home sites in its developing communities. The earnings from the new home sales are subject to greater volatility than the earnings from rental property activities. The Companys earningsestimates would be impacted positively by increases in the unit volume of new home sales or increases in the gross margins from new home sales. Conversely, decreases in the unit volume of new home sales or decreases in the gross margins from newhome sales would negatively impact the Companys earnings estimates. Home sales volume is dependent upon a number of factors, including consumer confidence and consumer access to financing sources for home purchases and the sale of theircurrent home.
The Companys projected results for 2004 include increasedcorporate governance costs based upon current estimates of the cost of compliance. These costs have exceeded our original forecasts, as implementation of Section 404 of Sarbanes Oxley has required the engagement of additional consultants to enablethe company to meet the initial implementation requirements. These costs totaled approximately $0.015 per share in the third quarter. Non-employee director compensation continues to be paid in stock and all stock based compensation is expensedwithin the 2004 projections. The Companys earnings estimates would be adversely impacted by the increased cost of compliance with regulations and laws applicable to public companies and financial reporting.
6
The financial and operating projections provided in this release are the result of managements consideration ofpast operating performance, current and anticipated market conditions and other factors that management considers relevant from its past experience.
Development Activity
The Company neared completion of its development activity at Savanna Club and began selling into its Eagles Retreat subdivision throughout the third quarter.This subdivision represents Phase VII of VIII. While development activities were delayed by hurricane activities, sales into the last phase are projected to begin in mid 2005 with final close out of the phase to happen in 2006.
At Riverside Club, The Bluffs closed out home sales, with one home site not undercontract at the end of the quarter. The next Phase The Fairways- began pre-selling into that phase as of August 1st. In its current pre-sale phase, only 48 of the 148 home sites are available to be placed under contract for a home and future lease. As that phase sells out the company will open another section of the subdivision, whichoriginally was expected in Q105 and is now projected for late Q205 as a result of a temporary drop in traffic resulting from the hurricane activity. The company has already seen a pick up in traffic in late October, and expects by first quarter 2005that traffic will return to projected levels and sales activity will return to projected levels.
Construction was completed for the subdivisions at the Royal Palm and Brentwood communities that provide an additional 162 home sites for new homeowners. Delays from hurricanes have delayed home completion and nooccupancy is expected in these subdivisions until first quarter 2005. Planning and permitting a subdivision at an additional community continued during the quarter.
Financing Activity
During the third quarter of 2004, the Company closed a $9.9 million mortgage on a property in Florida at an interest rate of 5.96% for a term of 10 years.
American Land Lease, Inc. is a REIT that holds interests in 29 manufactured home communitieswith 6,815 operational home sites, 950 developed expansion sites, 1,219 undeveloped expansion sites and 129 recreational vehicle sites.
Some of the statements in this press release, as well as oral statements made by the Companys officials to analysts and stockholders in the course of presentationsabout the Company and conference calls following quarterly earnings releases, constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include projections ofthe Companys cash flow, dividends and anticipated returns on real estate investments. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievementsof the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include: general economic and business conditions; interest rate changes, financingand refinancing risks; risks inherent in owning real estate; future development rate of home sites; competition; the
7
availability of real estate assets at prices which meet the Companys investment criteria; the Companys ability to reduce expense levels,implement rent increases, use leverage and other risks set forth in the Companys Securities and Exchange Commission filings.
Management will hold a teleconference call, Wednesday, November 3, 2004 at 4:00 p.m. Eastern Standard Time to discuss third quarter 2004 results. You can participate inthe conference call by dialing, toll-free, (800) 374-5458 approximately five minutes before the conference call is scheduled to begin and indicating that you wish to join the American Land Lease third quarter 2004 results conference call. If you areunable to participate at the scheduled time, this information will be available for recorded playback from 5:30 p.m. EST, November 3, 2004 until midnight on November 10, 2004. To access the replay, dial toll free, (800) 642-1687 and requestinformation from conference ID 1921174.
Contact:Robert G. Blatz, President (727) 726-8868
Shannon E. Smith, Chief Financial Officer (727) 726-8868
SOURCE: American Land Lease, Inc.
8
The 2004 HurricaneSeason
9
GLOSSARY
GLOSSARY OF NON-GAAP FINANCIAL AND OPERATING MEASUREMENTS Financial and operational measurements found in the Earnings Release and Supplemental Information includecertain non-GAAP financial measurements standardly used by American Land Lease management. Measurements include Funds from Operations (FFO), which is an industry-accepted measurement as based on the definition of the National Associationof Real Estate Investment Trusts (NAREIT). These terms are defined below and, where appropriate, reconciled to the most comparable Generally Accepted Accounting Principles (GAAP) measurements on the accompanying supplement schedules.
FUNDS FROM OPERATIONS (FFO): is a commonly used term defined by NAREIT asnet income (loss), computed in accordance with GAAP, excluding gains and losses from extraordinary items, dispositions of depreciable real estate property, disposals of discontinued operations, net of related income taxes, plus real estate relateddepreciation and amortization (excluding amortization of financing costs), including depreciation for unconsolidated real estate partnerships, joint ventures and discontinued operations. American Land Lease calculates FFO based on the NAREITdefinition, as further adjusted for the minority interest in the American Land Leasess operating partnership (Asset Investors Operating Partnership). This supplemental measure captures real estate performance by recognizing that real estategenerally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. There can be no assurance that American Land Leases method forcomputing FFO is comparable with that of other real estate investments trusts.
ADJUSTED FUNDS FROM OPERATIONS (AFFO): is FFO less both Capital Replacement expenditures and Capital Enhancement expenditures. Similar to FFO, AFFO captures real estate performance by recognizing that real estategenerally appreciates over time or maintains residual value to a much greater extent than do other depreciating assets such as machinery, computers or other personal property, and AFFO also reflects that Capital Replacements are necessary tomaintain the associated real estate assets.
SAME STORE RESULTS:represent an operating measure that is used commonly to describe properties that have been in the portfolio for a period of time and therefore serve as a good basis upon which to review comparative performance data. American Land Leasesdefinition of Same Store communities are communities that are owned during both the current and comparable prior year period.
SAME SITE RESULTS: represent an operating measure that is used to describe homesites that have been in the portfolio for a period of time and therefore serve as agood basis upon which to review comparative performance data. American Land Leases definition of Same Site is individual homesites that were operational during both the current and comparable prior year period. Absorbed incremental homesitesare not included in this calculation.
OPERATIONAL HOME SITE: representsthose sites within our portfolio that are/or have been leased to a tenant. Operational Home Sites and their relative occupancy provide a measure of stabilized portfolio status.
DEVELOPED HOME SITE: represents those sites within our portfolio that have not been occupied, but for which a majority of theinfrastructure has been completed.
UNDEVELOPED HOME SITE: representthose sites within our portfolio that have not been fully developed and require construction of substantial lateral improvements such as roads.
CAPITAL REPLACEMENT: represents capitalized spending which maintains a property. American Land Lease generally capitalizes spending for items that cost more than$250 and have a useful life of more than one year. A common example is street repaving. This spending is better considered a recurring cost of preserving an asset rather than as an additional investment. It is a cash proxy for depreciation.
CAPITAL ENHANCEMENT: represents capitalized spending which adds amaterial feature increases overall community value or revenue source. An example is the addition of a marina facility to an existing community.
10
USED HOME SALE: represents the sale of a home previously owned by a third party and where American Land Lease hasacquired title through an eviction proceeding or through purchase from a third party.
GROSS DISTRIBUTION PAYOUT RATIO: This is calculated as the dividend per share divided by FFO and AFFO per share, respectively.
DISTRIBUTION PAYOUT RATIO NET OF DRIP: this is calculated as dividend per share less amounts reinvested pursuant to the dividend reinvestment plan divided by FFOand AFFO per share, respectively.
11
AmericanLand Lease Selected Properties
Riverside Club Ruskin,Florida
12
Riverside Home
Riverside Home
13
Savanna Club Port St. Lucie,Florida
Savanna Clubhouse
Savanna Streetcape
14
SavannaClub Home
Savanna Club Home
Savanna Club Home
15
Desert Harbor - Apache Junction, Arizona
Desert Harbor -Entrance
Desert Harbor - Home
16
Desert Harbor - Home
17
Forest View Estates Homosassa,Florida
Forest View Clubhouse
Forest View Home
18
Royal Palm Haines City, Florida
Royal Palm Clubhouse
Royal Palm Home
19
Lost Dutchman Apache Junction,Arizona
Lost DutchmanRecreation Area
Lost Dutchman Home
20
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
As of
September30,
2004
June 30,
2004
March31,
2004
December31,
2003
September30,
2003
(unaudited)(unaudited)(unaudited)(unaudited)
ASSETS
Real Estate
$217,310$215,155$209,849$204,777$198,806
Less accumulated depreciation
(22,116)(21,474)(20,779)(20,112)(19,453)
Real estate under development
47,66244,63642,22341,41336,669
Total Real Estate
242,856238,317231,293226,078216,022
Cash and cash equivalents
9871,2077762,0643,077
Inventory
14,98713,07311,33010,40310,335
Other Assets
10,4259,7298,5668,1628,774
Assets held for sale
313361389418
Total Assets
$269,255$262,639$252,326$247,096$238,626
LIABILITIES AND EQUITY
Liabilities
Secured long-term notes payable
$128,130$119,876$118,478$119,194$111,236
Secured short-term financing
18,62220,14213,49510,6598,921
Accounts payable and accrued liabilities
9,52310,9829,8838,42310,310
Liabilities related to assets held for sale
86457
Total Liabilities
156,283151,006141,860138,281130,474
Minority Interest in Operating Partnership
14,55214,49714,31914,01413,849
STOCKHOLDERS EQUITY
Preferred Stock, par value $.01 per share; 1,000 shares authorized, no shares issues or outstanding
Common Stock, par value $.01 per share; 12,000 shares authorized
9190908888
Additional paid-in-capital
286,611285,517285,207282,818282,719
Notes receivable from officers re common stock purchases
(766)(775)(785)(799)(814)
Deferred compensation re restricted stock
(2,472)(2,719)(3,049)(1,354)(1,487)
Dividends in excess of accumulated earnings
(158,432)(158,365)(158,704)(159,340)(159,591)
Treasury stock at cost
(26,612)(26,612)(26,612)(26,612)(26,612)
Total Stockholders Equity
98,42097,13696,14794,80194,303
Total Liabilities and Stockholders Equity
$269,255$262,639$252,326$247,096$238,626
21
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
September30,
2004
June 30,
2004
March31,
2004
December31,
2003
September30,
2003
RENTAL PROPERTY OPERATIONS
Rental and other property revenues
$7,146$7,071$7,033$6,698$6,360
Golf course operating revenues
114176403196120
Total property operating revenues
7,2607,2477,4366,8946,480
Property operating expenses
(2,463)(2,459)(2,549)(2,414)(2,278)
Golf course operating expenses
(283)(305)(308)(307)(293)
Total property operating expenses
(2,746)(2,764)(2,857)(2,721)(2,571)
Depreciation
(746)(741)(709)(699)(658)
Income from rental property operations
3,7683,7423,8703,4743,251
SALES OPERATIONS
Home sales revenue
8,4959,7149,2809,91412,354
Cost of home sales
(5,843)(6,474)(6,204)(6,968)(8,920)
Gross profit on home sales
2,6523,2403,0762,9463,434
Commissions earned on brokered sales
115227185142151
Commissions paid on brokered sales
(64)(122)(100)(73)(74)
Gross profit on brokered sales
51105856977
Selling and marketing expenses
(2,236)(2,455)(2,343)(2,163)(2,071)
Income (loss) from sales operations
4678908188521,440
General and administrative expenses
(959)(904)(911)(754)(687)
Interest and other income
51282723147
Gain (loss) on sale of real estate
971
Interest expense
(1,426)(1,392)(1,360)(1,382)(1,326)
Income before minority interest in Operating Partnership
1,9012,3642,6892,2213,696
Minority interest in Operating Partnership
(223)(285)(323)(265)(443)
Income from continuing operations
1,6782,0792,3661,9563,253
DISCONTINUED OPERATIONS:
(Loss) Income from discontinued operations
268821(114)
NET INCOME
$1,704$2,087$2,374$1,977$3,139
Basic earnings from continuing operations
$0.24$0.30$0.34$0.28$0.47
Basic (loss) earnings from discontinued operations
Basic earnings per share
$0.24$0.30$0.34$0.28$0.47
Diluted earnings from continuing operations
$0.23$0.29$0.32$0.27$0.46
Diluted (loss) earnings from discontinued operations
(0.02)
Diluted earnings per share
$0.23$0.29$0.32$0.27$0.44
Weighted average common shares outstanding
7,0506,9716,9386,9146,890
Weighted average common shares and common share equivalents outstanding
7,2977,2367,3017,2027,131
Dividends paid per share
$0.25$0.25$0.25$0.25$0.25
22
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
DEBT ANALYSIS
(in thousands)
(unaudited)
As of
September30,
2004
June 30,
2004
March 31,
2004
December31,
2003
September30,
2003
DEBT OUTSTANDING
Mortgage Loans Payable - Fixed
$102,502$93,377$94,107$94,819$87,139
Mortgage Loans Payable - Floating
25,62826,49924,37124,37524,097
Floor Plan Facility
12,90710,7629,0778,2698,921
Line of Credit
5,7159,3804,4182,390
Total Debt
$146,752$140,018$131,973$129,853$120,157
% FIXED/FLOATING
Fixed
69.8%66.7%71.3%73.0%72.5%
Floating
30.2%33.3%28.7%27.0%27.5%
Total
100.00%100.00%100.00%100.00%100.00%
AVERAGE INTEREST RATES
Mortgage Loans Payable - Fixed
7.0%7.1%7.1%7.1%7.2%
Mortgage Loans Payable - Floating
4.7%4.9%4.8%4.8%4.7%
Floor Plan Facility
5.9%6.5%6.1%7.1%7.5%
Line of Credit
3.6%3.2%3.1%3.1%3.1%
Total Weighted Average
6.4%6.4%6.5%6.6%6.7%
DEBT RATIOS
Debt/Total Market Cap(1)
47.4%47.5%45.2%48.4%44.8%
Debt/Gross Assets
54.5%53.3%52.3%52.6%50.4%
MATURITIESDecember31,
2004
December31,
2005
December31,
2006
December 31,
2007
December 31,
2008
Mortgage Loans Maturities - Scheduled
7923,3083,5523,8094,042
Mortgage Loans Maturities - Balloon
13,278
Floor Plan Facility(2)
Total
$792$3,308$3,552$17,087$6,050
(1)Computed based upon closing price as reported on NYSE as of the period ended.
(2)Discretionary, non-committed facility whose individual advances mature at different datesbetween 360 and 540 days from advance date.
23
24
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PER DILUTIVE SHARE
(unaudited)
Three Months Ended
September30,
2004
June30,
2004
March31,
2004
December31,
2003
September30,
2003
RENTAL PROPERTY OPERATIONS
Rental and other property revenues
$ 0.98$ 0.96$ 0.93$ 0.90$ 0.90
Golf course operating revenues
0.020.050.030.020.03
Total property operating revenues
1.001.010.960.920.93
Property operating expenses
(0.34)(0.35)(0.34)(0.33)(0.33)
Golf course operating expenses
(0.04)(0.04)(0.04)(0.04)(0.04)
Total property operating expenses
(0.38)(0.39)(0.38)(0.37)(0.37)
Depreciation
(0.10)(0.10)(0.10)(0.09)(0.10)
Income from rental property operations
0.520.520.480.460.46
SALES OPERATIONS
Home sales revenue
1.161.271.381.731.10
Cost of home sales
(0.80)(0.85)(0.97)(1.25)(0.78)
Gross profit on home sales
0.360.420.410.480.32
Commissions earned on brokered sales
0.020.020.020.020.02
Commissions paid on brokered sales
(0.01)(0.01)(0.01)(0.01)(0.01)
Gross profit on brokered sales
0.010.010.010.010.01
Selling and marketing expenses
(0.31)(0.32)(0.30)(0.29)(0.23)
Income (loss) from sales operations
0.060.110.120.200.10
General and administrative expenses
(0.13)(0.12)(0.10)(0.10)(0.09)
Interest and other income
0.010.040.010.02
Gain (loss) on sale of real estate
0.14
Interest expense
(0.20)(0.19)(0.19)(0-19)(0.19)
Income before minority interest in Operating Partnership
0.260.360.310.520.30
Minority interest in Operating Partnership
(0.03)(0.04)(0.04)(0.06)(0.04)
Income from continuing operations
0.230.320.270.460.26
DISCONTINUED OPERATIONS:
(Loss) Income from discontinued operations
(0.02)
NET INCOME
$0.23$0.32$0.27$0.44$0.26
25
26
FFO/AFFO and Payout Ratios
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO FFO AND AFFO
(Amounts in thousands, except per share/OP unit amounts) (Unaudited)
ThreeMonthsEnded
September 30,
2004
2003
Net Income
$1,704$3,139
Adjustments:
Minority interest in operating partnership
223443
(Gain) loss on sale of real estate
(43)(971)
Real estate depreciation
746658
Discontinued Operations
Real estate depreciation
14
Minority interest in operating partnership attributed to discontinued operations
6(17)
Funds From Operations (FFO)
2,6373,256
Capital Replacements
(288)(180)
Adjusted Funds from Operations (AFFO)
$2,349$3,076
Weighted Average Common Shares/OP Units Outstanding:
8,2568,059
Per Common Share and OP Unit:
FFO:
$0.32$0.40
AFFO:
$0.28$0.38
Payout Ratio Per Common Share and OP Unit:
Gross Distribution Payout
FFO:
78.1%62.5%
AFFO:
89.3%65.8%
27
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
RECONCILIATION OF SAME SITE AND SAME STORE OPERATING RESULTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
(in thousands)
ThreeMonthsEnded
September30,2004
ThreeMonthsEnded
September 30, 2003
Change
%Change
Contributionto
Same Store
% Change(1)
Same site rental revenues
$6,198$5,991$2073.5%3.3%
Absorption rental revenues
54588457519.3%7.4%
Same site golf revenues
114120(6)-5.0%-0.1%
Same store revenues
A6,8576,19965810.6%10.6%
Properties not in same store
40027412646.0%
Other Income
37(4)-57.1%
Total property revenues
C$7,260$6,48078012.0%
Same site rental expenses
$1,866$1,7679956%4.8%
Absorption rental expenses
9999100.0%4.8%
Same site golf expenses
283293(10)-3.4%-0.5%
Same store expenses
B2,2482,0601889.1%9.1%
Properties not in same store expenses
1259035100.0%
Expenses related to offsite management2
373421(48)-11.4%
Total property operating expenses
D$2,746$2,571$1756.8%
Same Store net operating income
A-B$4,609$4,139$47011.3%
Total net operating income
C-D$4,514$3,909$60515.5%
(1)Contribution to Same Store % change is computed as the change in the individual component of same store revenue or expense divided by the total applicable same storebase (revenue or expense) for the 2003 period. For example, same site rental revenue of $207 as compared to the total same store revenues in 2003 of $6,199 is a 3.3% increase ($207/$6,199=3.3%).
(2)Expenses related to offsite management reflect portfolio property management costs not attributable to a specific property.
28
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
RECONCILIATION OF SAME SITE AND SAME STORE OPERATING RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(in thousands)
Nine Months
Ended
September30,2004
Nine Months
Ended
September30,2003
Change
%Change
Contribution
to Same
Store
%Change(1)
Same site rental revenues
$18,523$17,823$7003.9%3.7%
Absorption rental revenues
1,3662591,107427.4%5.9%
Same site golf revenues
6936286510.4%0.4%
Same store revenues
A20,58218,7101,87210.0%10.0%
Properties not in same store
1,20885135742.0%
Other Income
1832(14)-43.8%
Total property revenues
C$21,808$19,5932,21511.3%
Same site rental expenses
$5,543$5,3721713.2%2.7%
Absorption rental expenses
2262263.6%
Same site golf expenses
896915(19)-2.1%-0.3%
Same store expenses
B6,6656,2873786.0%6.0%
Properties not in same store expenses
46826320577.9%
Expenses related to offsite management2
1,1581,208(50)-4.1%
Total property operating expenses
D$8,291$7,758$5336.9%
Same Store net operating income
A-B$13,917$12,423$1,49412.0%
Total net operating income
C-D$13,517$11,835$1,68214.2%
(1)Contribution to Same Store% change is computed as the change in the individual component of same store revenue or expense divided by the total applicable same storebase (revenue or expense) for the 2003 period. For example, same site rental revenue of $700 as compared to the total same store revenues in 2003 of $18,710 is a 3.9% increase ($700/$18,710=3.9%).
(2)Expenses related to offsite management reflect portfolio property management costs not attributable to a specific property.
29
AMERICAN LAND LEASE, INC.AND SUBSIDIARIES
NUMBER OF HOMESITES AND AVERAGE RENT BY COMMUNITY
AS OF SEPTEMBER 30, 2004
Community
Location
Operational
Home Sites
Occupancy
Average
Monthly
Rent
RV
Sites
Undeveloped
Home Sites
Developed
HomeSites
Year(s)
First Developed
Owned Communities
Blue Heron Pines
PuntaGorda,FL286100%$36765401983/1999
Brentwood
Hudson, FL11297%2750791984
Serendipity
Ft. Myers, FL33896%3181971/1974
Stonebrook
Homosassa, FL159100%288521987/1997
Sun Lake
Grand Island, FL322100%331721980
Sun Valley
Tarpon Springs, FL26199%3581972
Caribbean Cove
Orlando, FL27283%370131984
Forest View
Homosassa, FL248100%287561987/1997
Gulfstream Harbor
Orlando, FL38298%385501980
Gulfstream Harbor II
Orlando, FL306100%3813711988
Lakeshore Villas
Tampa, FL281100%3901972
Park Royale
Pinellas Park, FL28395%405261971
Pleasant Living
Riverview, FL24596%3351979
Riverside GCC
Ruskin, FL359100%488568101981
Royal Palm
Haines City, FL26098%302114111971
Cypress Greens
Lakeland, FL149100%2341091986
Savanna Club
Port St. Lucie, FL703100%2621921591999
Woodlands
Groveland, FL13199%241161
Sub-totalFlorida5,0971,026789
Blue Star
ApacheJunction,AZ2277%2811291955
Brentwood West
Mesa, AZ35094%4121972/1987
Casa Encanta
Mesa, AZ0%1931970
Desert Harbor
Apache Junction, AZ13498%353721997
Fiesta Village
Mesa, AZ17473%3521962
La Casa Blanca
Apache Junction, AZ19889%3611993
Lost Dutchman
Apache Junction, AZ17090%308891971/1979/1999
Rancho Mirage
Apache Junction, AZ31290%3831994
Sun Valley
Apache Junction, AZ26893%3171984
Sub-total Arizona1,628193161
Mullica Woods
Egg Harbor City, NJ901004621985
Total Communities
296,81596%$3431291,219950
(1)We define operational home sites as those sites within our portfolio that have been leased to a tenant during our ownership of the community. Since our portfoliocontains a large inventory of developed home sites that have not been occupied during our ownership, we have expressed occupancy as the number of occupied sites as a percentage of operational home sites. We believe this measure most accuratelydescribes the performance of an individual property relative to prior periods and other properties within our portfolio. The occupancy of all developed sites was 82.9% across the entire portfolio. Including sites not yet developed, occupancy was72.9% September 30, 2004.
30
31
Portfolio Summary
Operational
Home sites
Developed
Homesites
Undeveloped
Home sites
RV
Sites
Total
As of December 31, 2003
6,5799791,4371299,124
Properties developed
264(264)
New lots purchased
88
Lots sold
(17)(17)
New leases originated
251(251)
Adjust for site plan changes
2(50)48
As of September 30, 2004
6,815(1)9501,2211299,115
(1)As of September 30, 2004, 6,548 of these operational home sites were occupied.
Occupancy Roll Forward
Occupied
Homesites
Operational
Home sites
Occupancy
As of December 31, 2003
6,3496,57896.5%
New home sales
271251
Used home sales
19
Used homes acquired
(32)
Lots Sold
(13)(17)
Homes constructed by others
2
Site plan changes
3
Homes removed from previously leased sites
(48)
As of September 30, 2004
6,5486,81596.1%
32
AMERICAN LAND LEASE, INC.AND SUBSIDIARIES
RETURN ON INVESTMENT FROM HOME SALES
(unaudited)
ThreeMonthsEnded
September 30, 2004
ThreeMonthsEnded
September 30, 2003
Expansion sites leased during the year
74123
Estimated first year annualized profit on leases originated during the year
A$295,000$460,000
Costs, including development costs of sites leased
$3,708,000$4,989,000
Home sales income (loss) attributable to sites leased
416,0001,363,000
Total costs incurred to originate ground leases
B$3,292,000$3,626,000
Estimated first year annualized return on investment for leases originated during the year
A/B9.0%12.7%
For the three months ended September30, 2004 and 2003, we estimate our profit or loss attributable to the sale of homes situated on expansion home sites as follows (in thousands):
ThreeMonthsEnded
September 30, 2004
ThreeMonthsEnded
September 30, 2003
Reported income (loss) from sales operations
$467,000$1,440,000
Used home sales and brokerage business income
(51,000)(77,000)
Adjusted income (loss) for pro forma analysis
$416,000$1,363,000
The reconciliation of our estimatedfirst year return on investment in expansion home sites, a non-GAAP financial measure, to our return on investment in operational home sites in accordance with GAAP is shown below (in thousands):
TotalPortfoliofor
YearEnded
December31,2003
Property income before depreciation1
A$16,105
Total investment in operating home sites1
B$201,660
Return on investment from earning home sites1
A/B8.0%
33
AMERICAN LAND LEASE INC.AND SUBSIDIARIES
KEY HOME SALES STATISTICS
June 30,
2003
September30,
2003
December31,
2003
March 31,
2004
June 30,
2004
September30,
2004
QtroverQtr
Increase/
Decrease
QtroverQtr
% Change
New home closings
881251039110377(26)-25.2%
New home contracts
105867616814469(75)-98.7%
Home resales
11971253(2)-28.6%
Brokered home sales
445351798348(35)-68.6%
New home contract backlog
16510289164189175(14)-15.7%
Average Selling Price
$85,000$96,000$95,000$100,000$92,000$108,000$16,00016.8%
Average Gross Margin Percentage
28.8%27.8%29.7%33.2%33.7%33.1%
34
35
AMERICAN LAND LEASE, INC.AND SUBSIDIARIES
DEVELOPMENT SUMMARY
Summary of 2004 Program
Community
Sites to be
Developed
Projected
Completion
Savanna Club:
Phase 7
216Completed
Phase 8
19211/04
Riverside Club:
Phase 2
14811/04
Phase 4 & 5
2127/05
Phase 6
2088/06
Royal Palm
114Completed
Blue Heron Pines:
653/05
Brentwood
48Completed
Gulfstream
Phase 1
376/05
Phase 2
509/05
36
Outlook and Forward Looking Statement
2004
(unaudited)
The Outlook information provided on this Supplemental Schedule contains information that isforward-looking, including, statements concerning projected 2004 results. These forward-looking statements are based on current expectations, estimates, and projections about the markets and the industry in which American Land Lease operates as wellas managements beliefs and assumptions. These forward-looking statements are also based on certain risks and uncertainties, including but not limited to general economic and business conditions; interest rate changes; financing and refinancingrisks; risks inherent in owning real estate or debt secured by real estate; future development rate of home sites; competition; the availability of real estate assets at prices which meet our investment criteria; our ability to reduce expenselevels, implement rent increases, use leverage and other risks set forth in our SEC filings. Readers should carefully review American Land Leases Annual Report on Form 10-K for the year ended December 31, 2003 and the other documents AmericanLand Lease files from time to time with the Securities and Exchange Commission.
Full Year 2004
Projected
FFO
$1.45to$1.55
AFFO
$1.32 to $1.40
Diluted EPS
$1.03 to $1.24
Same Store Sales
Revenue Growth
5.0% to 9.0%
Expense Growth
4.5% to 7.5%
NOI Growth
6.0% to 9.5%
Home Sales Operating Income
$2,000,000 to $3,250,000
General and Administrative Expenses
$3,200,000 to $3,700,000
Other Income
$210,000to $280,000
Capital Replacements (per site)
$115 to $135
Depreciation
$2,900,000 to $3,200,000
37
GRAPHIC3g5191710.jpgGRAPHIC
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