UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JuneSeptember 30, 2002
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 1-12928
AGREE REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
MARYLAND 38-3148187
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
31850 NORTHWESTERN HIGHWAY, FARMINGTON HILLS, MICHIGAN 48334
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, included area code: (248) 737-4190
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No
[X] [ ]
4,446,0314,448,531 Shares of Common Stock, $.0001 par value, were outstanding as of
August 9,November 14, 2002
AGREE REALTY CORPORATION
FORM 10-Q
INDEX
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PART I: FINANCIAL INFORMATION PAGE
Item 1. Interim Consolidated Financial Statements 3
Consolidated Balance Sheets as of JuneSeptember 30, 2002 and December 31, 2001 4-5
Consolidated Statements of Operations for the sixnine months ended JuneSeptember 30, 2002 6
and
2001 6
Consolidated Statements of Operations for the three months ended JuneSeptember 30, 7 2002 and
2001 7
Consolidated Statement of Stockholders' Equity for the sixnine months ended June 8September 30,
2002 8
Consolidated Statements of Cash Flows for the sixnine months ended JuneSeptember 30, 2002 9
and
2001 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial Condition and
11-18
Results of Operations 11-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 20
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 2021
Item 2. Changes in Securities 2021
Item 3. Defaults Upon Senior Securities 2021
Item 4. Submission of Matters to a Vote of Security Holders 2021
Item 5 Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
2
AGREE REALTY CORPORATION
PART I: FINANCIAL INFORMATION
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ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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JUNESEPTEMBER 30, December 31,
2002 2001
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ASSETS
REAL ESTATE INVESTMENTS
Land $ 46,838,53049,103,915 $ 46,838,530
Buildings 150,144,528150,098,338 148,283,359
Property under development 492,284813,123 1,363,939
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197,475,342----------------------------------------------------------------------------------------
200,015,376 196,485,828
Less accumulated depreciation (35,536,107)(36,486,416) (33,634,461)
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NET REAL ESTATE INVESTMENTS 161,939,235163,528,960 162,851,367
CASH AND CASH EQUIVALENTS 761,470192,536 1,101,861
ACCOUNTS RECEIVABLE - TENANTS, net of allowance of
$146,000$175,000 and $50,000 for possible losses 180,114139,834 666,749
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED ENTITIES 271,179246,768 255,203
UNAMORTIZED DEFERRED EXPENSES
Financing 1,253,5151,161,767 1,355,864
Leasing costs 341,903324,819 352,441
OTHER ASSETS 898,166714,858 927,861
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$165,645,582 $167,511,346
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$ 166,309,542 $ 167,511,346
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See accompanying notes to consolidated financial statements.
4
AGREE REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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JUNESEPTEMBER 30, December 31,
2002 2001
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LIABILITIES AND STOCKHOLDERS' EQUITY
MORTGAGE PAYABLE $ 71,371,46870,833,904 $ 69,209,337
CONSTRUCTION LOANS 13,351,63213,338,182 16,560,202
NOTES PAYABLE 19,758,23220,758,232 19,958,232
DIVIDENDS AND DISTRIBUTIONS PAYABLE 2,355,0062,356,156 2,341,591
ACCRUED INTEREST PAYABLE 231,090249,714 218,598
ACCOUNTS PAYABLE
Operating 807,781650,213 1,244,950
Capital expenditures 148,326301,820 598,362
TENANT DEPOSITS 81,00396,258 50,020
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TOTAL LIABILITIES 108,104,538108,584,479 110,181,292
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MINORITY INTEREST 5,694,1805,707,392 5,698,101
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STOCKHOLDERS' EQUITY
Common stock, $.0001 par value; 20,000,000 shares authorized, 4,446,031445 442
4,448,531 and 4,416,869 shares issued and outstanding
445 442
Additional paid-in capital 64,457,52264,506,772 63,937,682
Deficit (11,752,114)(11,661,307) (11,724,832)
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52,705,853----------------------------------------------------------------------------------------------------------------
52,845,910 52,213,292
Less: unearned compensation - restricted stock (858,989)(828,239) (581,339)
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TOTAL STOCKHOLDERS' EQUITY 51,846,86452,017,671 51,631,953
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$ 165,645,582 $167,511,346
=================================================================================================166,309,542 $ 167,511,346
================================================================================================================
See accompanying notes to consolidated financial statements.
5
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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SIXNINE MONTHS ENDED SixNine Months Ended
JUNESEPTEMBER 30, 2002 JuneSeptember 30, 2001
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REVENUES
Minimum rents $ 11,041,70616,757,133 $ 10,838,85516,266,919
Percentage rents 43,597 131,36077,996 265,456
Operating cost reimbursements 1,278,492 1,308,9771,855,840 1,832,947
Management fees and other 4,565 21,8354,897 32,859
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TOTAL REVENUES 12,368,360 12,301,02718,695,866 18,398,181
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OPERATING EXPENSES
Real estate taxes 895,235 863,8271,344,221 1,282,484
Property operating expenses 826,167 750,5941,194,401 1,021,823
Land lease payments 369,480 369,480554,175 554,220
General and administrative 963,441 859,2251,465,993 1,319,502
Depreciation and amortization 1,959,262 1,906,9822,938,804 2,876,944
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TOTAL OPERATING EXPENSES 5,013,585 4,750,1087,497,594 7,054,973
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INCOME FROM OPERATIONS 7,354,775 7,550,91911,198,272 11,343,208
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OTHER INCOME (EXPENSE)
Interest expense, net (3,023,125) (3,597,288)(4,580,025) (5,185,504)
Equity in net income of unconsolidated entities 347,159 347,160520,738 520,739
Gain on sale of assets - 138,543218,543
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TOTAL OTHER EXPENSE (2,675,966) (3,111,585)(4,059,287) (4,446,222)
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INCOME BEFORE MINORITY INTEREST 4,678,809 4,439,3347,138,985 6,896,986
MINORITY INTEREST (615,743) (587,340)(938,787) (912,492)
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NET INCOME $ 4,063,0666,200,198 $ 3,851,994
==================================================================================================5,984,494
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EARNINGS PER SHARE $ .911.39 $ .87
==================================================================================================1.35
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,446,0314,446,205 4,416,869
===============================================================================================================================================================================================
See accompanying notes to consolidated financial statements.
6
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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THREE MONTHS ENDED Three Months Ended
JUNESEPTEMBER 30, 2002 JuneSeptember 30, 2001
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REVENUES
Minimum rents $ 5,565,1765,715,427 $ 5,458,8585,428,064
Percentage rents 8,401 6,83134,399 134,096
Operating cost reimbursements 624,681 642,749577,348 523,970
Management fees and other 658 10,422332 11,024
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TOTAL REVENUES 6,198,916 6,118,8606,327,506 6,097,154
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OPERATING EXPENSES
Real estate taxes 454,223 432,231448,986 418,657
Property operating expenses 277,513 313,791368,234 271,229
Land lease payments 184,740184,695 184,740
General and administrative 488,436 477,170502,552 460,277
Depreciation and amortization 980,102 954,807979,542 969,962
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TOTAL OPERATING EXPENSES 2,385,014 2,362,7392,484,009 2,304,865
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INCOME FROM OPERATIONS 3,813,902 3,756,1213,843,497 3,792,289
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OTHER INCOME (EXPENSE)
Interest expense, net (1,545,430) (1,747,326)(1,556,900) (1,588,216)
Equity in net income of unconsolidated entities 173,579 173,580173,579
Gain on sale of assets - 138,54380,000
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TOTAL OTHER EXPENSE (1,371,851) (1,435,203)(1,383,321) (1,334,637)
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INCOME BEFORE MINORITY INTEREST 2,442,051 2,320,9182,460,176 2,457,652
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MINORITY INTEREST (321,378) (307,066)
- ----------------------------------------------------------------------------------------------------(323,044) (325,152)
NET INCOME $ 2,120,6732,137,132 $ 2,013,852
====================================================================================================2,132,500
===============================================================================================================
EARNINGS PER SHARE $ .48 $ .46
====================================================================================================.48
===============================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,446,0314,446,547 4,416,869
===================================================================================================================================================================================================================
See accompanying notes to consolidated financial statements.
7
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
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Unearned
Common Stock Additional Compensation -
------------------------------------------------ Paid-In Restricted
Shares Amount Capital Deficit Stock
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BALANCE, January 1, 2002 4,416,869 $ 442 $63,937,682 $ (11,724,832)63,937,682 $(11,724,832) $ (581,339)
Issuance of shares under
Stock Incentive Plan 35,16237,662 3 630,780680,030 - (433,650)(482,900)
Shares redeemed under the
stock Incentive Plan (6,000) - (110,940) - -
Vesting of restricted stock - - - - 156,000236,000
Dividends declared for the period
January 1, 2002 to JuneSeptember 30, 2002 - - - (4,090,348)(6,136,673) -
Net income for the period
January 1, 2002 to JuneSeptember 30, 2002 - - - 4,063,0666,200,198 -
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BALANCE, JuneSeptember 30, 2002 4,446,0314,448,531 $ 445 $64,457,522 $ (11,752,114)64,506,772 $(11,661,307) $ (858,989)
===========================================================================================================(828,239)
==============================================================================================================================
See accompanying notes to consolidated financial statements.
8
AGREE REALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
==============================================================================
SIXNINE MONTHS ENDED SixNine Months Ended
JUNESEPTEMBER 30, 2002 JuneSeptember 30, 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,063,066 $3,851,9946,200,198 $ 5,984,494
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation 1,921,318 1,869,1902,881,888 2,819,093
Amortization 178,244 226,290
Stock based-compensation 156,000 134,000267,366 340,850
Stock-based compensation 236,000 201,000
Gain on sale of assets - (138,543)(218,543)
Equity in net income of unconsolidated entities (347,159) (347,160)(520,738) (520,739)
Minority interests 615,743 587,340938,787 912,492
Decrease in accounts receivable 486,635 393,999526,915 571,950
Decrease (increase) in other assets (9,729) 168,545185,840 126,599
Decrease in accounts payable (437,169) (351,513)(594,737) (509,929)
Increase (decrease) in accrued interest 12,492 (55,980)31,116 (43,562)
Increase (decrease) in tenant deposits 30,98346,238 (1,220)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 6,670,424 6,336,94210,198,873 9,662,485
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate investments (including capitalized interest of $59,000(3,227,728) (2,995,966)
$76,000 in 2002 and $100,000$137,800 in 2001) (841,188) (2,101,217)
Distributions from unconsolidated entities 347,159 347,160520,738 520,739
Proceeds from sale of assets - 200,000280,000
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NET CASH USED IN INVESTING ACTIVITIES (494,029) (1,554,057)(2,706,990) (2,195,227)
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CASH FLOWS FROM FINANCING ACTIVITIES
Dividends and limited partners' distributions paid (4,696,597) (4,672,970)(7,051,603) (7,014,561)
Payments of mortgages payable (1,019,539) (693,107)
Repayment(1,557,103) (1,048,690)
Line-of-credit net borrowings 800,000 800,000
Repayments of capital expenditure payables (401,229) (1,040,673)
Line-of-credit net borrowings (payments) (200,000) 800,000
Redemption of restricted stock (110,940) (70,000)
Payment for financing costs (37,951) (500)
Payments on construction loan (26,900) (26,900)(40,350) (40,350)
Payment of leasing costs (23,630) (45,186)(70,677)
Payments for financing costs (16,353) (500)
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NET CASH USED IN FINANCING ACTIVITIES (6,516,786) (5,749,336)(8,401,208) (8,485,451)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (340,391) (966,451)(909,325) (1,018,193)
CASH AND CASH EQUIVALENTS, beginning of period 1,101,861 1,119,072
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CASH AND CASH EQUIVALENTS, end of period $ 761,470192,536 $ 152,621
=======================================================================================================100,879
================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest (net of amounts capitalized) $ 2,875,402 $3,468,845
=======================================================================================================4,344,074 $ 4,950,278
================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Construction loan paid with mortgage $ 3,181,670 $ -
Dividends and limited partners' distributions declared and unpaid $ 2,355,006 $2,341,5912,356,156 $ 2,341,591
Shares issued under Stock Incentive Plan $ 680,033 $ 375,251
Real estate investments financed with accounts payable $ 148,326 $1,077,427
Shares issued under Stock Incentive Plan301,820 $ 630,783 $ 375,251
=======================================================================================================1,225,029
================================================================================================================================
See accompanying notes to consolidated financial statements.
9
AGREE REALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
1. BASIS OF The accompanying unaudited 2002 consolidated
PRESENTATION financial statements have been prepared in
accordance with generally accepted accounting
principles for interim financial information and
with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not
include all of the information and footnotes
required by generally accepted accounting
principles for complete financial statements. In
the opinion of management, all adjustments
(consisting of normal recurring accruals)
considered necessary for a fair presentation have
been included. The consolidated balance sheet at
December 31, 2001 has been derived from the
audited consolidated financial statements at that
date. Operating results for the sixnine months ended
JuneSeptember 30, 2002 are not necessarily indicative
of the results that may be expected for the year
ending December 31, 2002, or for any other
interim period. For further information, refer to
the consolidated financial statements and
footnotes thereto included in the Company's
Annual Report for the year ended December 31,
2001.
2. EARNINGS PER Earnings per share hashave been computed by dividing
SHARE the
SHARE income by the weighted average number of
common shares outstanding. The per share amounts
reflected in the consolidated statements of
income are presented in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128
"Earnings per Share"; the amounts of the
Company's "basic" and "diluted" earnings per
share (as defined in SFAS No. 128) are the same.
3. RECENT ACCOUNTING In October 2001, the Financial Accounting
PRONOUNCEMENTS Standards Board issued Statement of Financial
Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS
144).
SFAS 144 establishes a single accounting model
for the impairment or disposal of long-lived
assets, including discontinued operations. SFAS
144 superceded Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of (SFAS 121), and APB Opinion No.
30, Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions.
The provisions of SFAS 144 are effective in
fiscal years beginning after December 15, 2001,
with early adoption permitted, and in general are
to be applied prospectively.
The Company adopted this standard on January 1,
2002. The adoption had no impact on its results
of operations and financial position.
10
AGREE REALTY CORPORATION
PART I
==============================================================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OEPRATIONSOPERATIONS
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OVERVIEW
The Company was established to continue to operate and expand the retail
property business of its Predecessors.predecessors. The Company commenced its operations on
April 22, 1994. The assets of the Company are held by, and all operations are
conducted through, Agree Limited Partnership (the "Operating Partnership"), of
which the Company is the sole general partner and held an 86.84%86.85% interest as of
JuneSeptember 30, 2002. The Company is operating so as to qualify as a real estate
investment trust ("REIT") for federal income tax purposes.
The Company has entered into sixteen (16) leases with Kmart Corporation.
Thirteen (13) of the Kmart stores are anchors in the Company's Community
Shopping Centers and three (3) Kmart stores are free-standing properties. Kmart
Corporation and 37 of its U.S. subsidiaries have filed voluntary petitions for
reorganization under chapter 11 of the U.S. Bankruptcy Code. Kmart has outlined
certain strategic operational and financial initiatives that it intends to
continue or implement during the reorganization process. One of its initiatives
is to evaluate the performance of every store and the terms of every lease in
its portfolio, with the objective of closing unprofitable or under performing
stores.
The Kmart stores in the Company's Portfolio provided 24% of the Company's Annual
Base Rent as of December 31, 2001. Seven of the Kmart stores pay percentage rent
in addition to their minimum rent. All Kmart stores in the Company's Portfolio
are open and operating as Kmart discount stores.
On March 8, 2002, Kmart announced that it intends to close 284 under-performing
stores as part of its initial Chapter 11 financial objectives review. None of
the Company's Kmart stores were included in this initial list of stores to be
closed. However, there can be no assurance that Kmart won't announce additional
store closing in the future which may include some of the Company's stores.
The following should be read in conjunction with the Consolidated Financial
Statements of Agree Realty Corporation, including the respective notes thereto,
which are included in this Form 10-Q.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144).
11
AGREE REALTY CORPORATION
PART I
SFAS 144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. SFAS 144 superceded
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of
(SFAS 121), and APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001, with early adoption permitted, and in general are to be applied
prospectively.
The Company adopted this standard on January 1, 2002. The adoption had no impact
on its results of operations and financial position.
CRITICAL ACCOUNTING POLICIES
In the course of developing and evaluating accounting policies and procedures,
the Company used estimates, assumptions and judgements to determine the most
appropriate methods to be applied. Such processes are used in determining
capitalization of costs related to real estate investments, potential impairment
of real estate investments, operating cost reimbursements, and taxable income.
Real estate assets are stated at cost less accumulated depreciation. All costs
related to planning, development and construction of buildings prior to the date
they become operational, including interest and real estate taxes during the
construction period, are capitalized for financial reporting purposes and
recorded as "Property under development" until construction has been completed.
Subsequent to completion of construction, expenditures for property maintenance
are charged to operations as incurred, while significant renovations are
capitalized. Depreciation of the buildings is recorded on the straight-line
method using an estimated useful life of forty years.
In determining the fair value of real estate investments, we consider future
cash flow projections on a property by property basis, current interest rates
and current market conditions of the geographical location of each property.
Substantially all of the Company's leases contain provisions requiring tenants
to pay as additional rent a proportionate share of operating expenses (Operating
Cost Reimbursements) such as real estate taxes, repairs and maintenance,
insurance, etc. The related revenue from tenant billings is recognized in the
same period the expense is recorded.
The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), commencing with the Company's 1994 tax year. As a
result, the Company is not subject to federal income taxes to the extent that it
distributes annually at least 90% of its taxable income to its shareholders and
satisfies certain other requirements defined in the Code. Accordingly, no
provision was made for federal income taxes in the accompanying consolidated
financial statements
12
AGREE REALTY CORPORATION
PART I
COMPARISON OF SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2002 TO SIXNINE MONTHS ENDED
JUNESEPTEMBER 30, 2001
Minimum rental income increased $203,000,$490,000, or 2%3%, to $11,042,000$16,757,000 in 2002,
compared to $10,839,000$16,267,000 in 2001. The increase wasis primarily the result of the
development of one propertytwo properties in 2001 and one property in 2002.
Percentage rental income decreased $87,000,$187,000, or 67%71%, to $44,000$78,000 in 2002,
compared to $131,000$265,000 in 2001. The decrease was primarily the result of an
agreement withthe elimination of
a tenant to increase basetenant's percentage rent provision in exchange for the elimination
ofan increase in their base
rental income ($128,000); a decrease in percentage rent provision.
11
AGREE REALTY CORPORATION
PART I
==============================================================================received from Kmart
($66,000) and an increase in percentage rent received from other tenants -
$7,000.
Operating cost reimbursements, which represent additional rent required by
substantially all of the Company's leases to cover the tenants' proportionate
share of the property's operating expenses, increased $23,000, or 1%, to
$1,856,000 in 2002, compared to $1,833,000 in 2001. The increase in operating
cost reimbursements is a result of increased real estate taxes and property
operating expenses decreased $31,000,
or 2%, to $1,278,000 in 2002, compared to $1,309,000 in 2001. Operating cost
reimbursements decreased due toas explained below, reduced by a $96,000$125,000 charge in 2002 for
a possible collection loss related to Kmart offset by the increase in real estate taxes
and property operating expenses.Kmart.
Management fees and other income decreased $17,000,$28,000, or 79%,85% to $5,000 in 2002,
compared to $22,000$33,000 in 2001. The decrease was the result of the termination of
the management agreement between the Company and two properties it previously
managed.managed but did not own.
Real estate taxes increased $31,000,$62,000, or 4%5%, to $895,000$1,344,000 in 2002, compared to
$864,000$1,282,000 in 2001. The increase is the result of general assessment changes.
Property operating expenses (shopping(snow removal, shopping center maintenance,
insurance and utilities) increased $75,000,$172,000, or 10%17%, to $826,000$1,194,000 in 2002
compared to $751,000$1,022,000 in 2001. The increase was the result of increased snow
removal costs of $117,000; a decrease$116,000; an increase in shopping center maintenance costs of
$21,000; a decrease in utility costs of ($58,000)5,000); and an increase in insurance
costs of $23,000 and a decrease in utilities of ($7,000)$40,000 in 2002 versus 2001.
Land lease payments remained constant at $369,000$554,000 for 2002 and 2001.
General and administrative expenses increased $104,000,by $146,000, or 11%, to $1,466,000
in 2002, compared to $1,320,000 in 2001. The increase was primarily the result
of an increase in compensation related expenses. General and administrative
expenses as a percentage of total rental income increased from 8.0% in 2001 to
8.7% in 2002.
Depreciation and amortization increased $62,000, or 2%, to $2,939,000 in 2002,
compared to $2,877,000 in 2001. This increase was the result of the development
of two properties in 2001 and one property in 2002.
Interest expense decreased $606,000, or 12%, to $963,000$4,580,000 in 2002, from
$5,186,000 in 2001. The decrease in interest expense was the result of decreased
interest rates on variable rate notes payable.
13
AGREE REALTY CORPORATION
PART I
Equity in net income of unconsolidated entities remained constant at $521,000
for 2002 and 2001, since rental rates remained constant over the periods.
The Company recognized a gain on the sale of an asset of $219,000 in 2001. There
was no such gain in 2002.
The Company's income before minority interest increased $242,000, or 4% to
$7,139,000 in 2002 from $6,897,000 in 2001 as a result of the foregoing factors.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2002 TO THREE MONTHS ENDED
SEPTEMBER 30, 2001
Rental income increased $287,000, or 5%, to $5,715,000 in 2002, compared to
$859,000$5,428,000 in 2001. The increase is primarily the result of the development of
one property in 2001, one property in 2002 and the increased occupancy in two of
the Company's properties.
Percentage rental income decreased $100,000, or 74%, to $34,000 in 2002,
compared to $134,000 in 2001. The decrease was the result of the elimination of
a tenant's percentage rent provision in exchange for an increase in their base
rental income ($29,000) and a decrease in percentage rent received from Kmart
($66,000); and other tenants ($5,000).
Operating cost reimbursements increased $53,000, or 10%, to $577,000 in 2002,
compared to $524,000 in 2001. The increase in operating cost reimbursements is a
result of increased real estate taxes and property operating expenses as
explained below, reduced by a $29,000 charge in 2002 for a possible collection
loss related to Kmart.
The Company received management fees and other income of $11,000 in 2001. There
was no such income in 2002 as a result of the termination of the management
agreements between the Company and two properties it previously managed.
Real estate taxes increased $30,000, or 7%, to $449,000 in 2002 to $419,000 in
2001. The increase is the result of general assessment changes.
Property operating expenses (snow removal, shopping center maintenance,
insurance and utilities) increased $97,000, or 36%, to $368,000 in 2002,
compared to $271,000 in 2001. The increase was the result of an increase in
shopping center maintenance costs of $79,000; an increase in insurance costs of
$16,000 and an increase in utilities of $2,000 in 2002 versus 2001.
Land lease payments remained constant at $185,000 for 2002 and 2001.
General and administrative expenses increased $43,000, or 9%, to $503,000 in
2002, compared to $460,000 in 2001. The increase was primarily the result of
increased compensation related expenses. General and administrative expenses as
a percentage of total rental income increased from 7.8% for8.3% in 2001 to 8.7% forin 2002.
14
AGREE REALTY CORPORATION
PART I
Depreciation and amortization increased $52,000,$10,000, or 3%1%, to $1,959,000$980,000 in 2002,
compared to $1,907,000$970,000 in 2001. The increase was the result of the development of
one property in 2001 and one property in 2002.
Interest expense decreased $574,000,$31,000, or 16%2%, to $3,023,000$1,557,000 in 2002, from
$3,597,000 in 2001. The decrease in interest expense was the result of
decreased interest rates on variable rate notes payable.
Equity in net income of unconsolidated entities remained constant at $347,000
for 2002 and 2001.
The Company recognized a gain on the sale of an asset of $139,000 in 2001.
There was no such gain in 2002.
The Company's income before minority interest increased $239,000, or 5% to
$4,679,000 in 2002 from $4,439,000 in 2001 as a result of the foregoing
factors.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 TO THREE MONTHS ENDED JUNE 30,
2001
Rental income increased $106,000, or 2%, to $5,565,000 in 2002, compared to
$5,459,000 in 2001. The increase was the result of the development of one
property in 2001 and one property in 2002.
Percentage rental income increased $1,000, or 23%, to $8,000 in 2002, compared
to $7,000 in 2001. The increase was the result of increased tenant sales.
12
AGREE REALTY CORPORATION
PART I
==============================================================================
Operating cost reimbursements decreased $18,000, or 3%, to $625,000 in 2002,
compared to $643,000 in 2001. Operating cost reimbursements decreased due to a
$39,000 charge in 2002 for a possible collection loss related to Kmart offset
by the increase in real estate taxes and the decrease in property operating
expenses.
Management fees and other income decreased $9,000, or 94%, to $1,000 in 2002,
compared to $10,000 in 2001. The decrease was the result of the termination of
the management agreements between the Company and two properties it previously
managed.
Real estate taxes increased $22,000, or 5%, to $454,000 in 2002 compared to
$432,000 in 2001. The increase is the result of general assessment increases.
Property operating expenses (shopping center maintenance, insurance and
utilities) decreased $36,000, or 12%, to $278,000 in 2002 compared $314,000 in
2001. The decrease was the result of increased snow removal costs of $19,000;
a decrease in shopping center maintenance of ($69,000); an increase in utility
costs of $2,000 and an increase in insurance cost of $12,000.
Land lease payments remained constant at $185,000 for 2002 and 2001.
General and administrative expenses increased $11,000, or 2%, to $488,000 in
2002 compared to $477,000 in 2001. The increase was primarily the result of an
increase in property management expenses. General and administrative expenses
as a percentage of rental income remained constant at 8.7% in 2001 and 2002.
Depreciation and amortization increased $25,000, or 3%, to $980,000 in 2002
compared to $955,000 in 2001. The increase was the result of the development
and acquisition of one property in 2001 and one development in 2002.
Interest expense decreased $202,000, or 12%, to $1,545,000 in 2002, from
$1,747,000$1,588,000 in 2001. The decrease in interest expense was the result of decreased
interest rates on variable rate notes payable.
Equity in net income of unconsolidated entities remained constant at $174,000 in
2002 and 2001.2001, since rental rates remained constant over the periods.
The Company recognized a gain on the sale of an asset of $139,000$80,000 in 2001. There
was no such gain in 2002.
The Company's income before minority interest increased $121,000, or 5%,$2,000, to $2,442,000$2,460,000 in
2002 from $2,321,000compared to $2,458,000 in 2001 as a result of the foregoing factors.
13
AGREE REALTY CORPORATION
PART I
==============================================================================
FUNDS FROM OPERATIONS
Management considers Funds from Operations ("FFO") to be a supplemental measure
of the Company's operating performance. FFO is defined by the National
Association of Real Estate Investments Trusts, Inc. ("NAREIT") to mean net
income computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring and sales of property, plus real estate
related depreciation and amortization, and after
adjustments for unconsolidated entities in which the REIT holds an interest.amortization. FFO does not represent cash generated
from operating activities in accordance with GAAP and is not necessarily
indicative of cash available to fund cash needs. FFO should not be considered as
an alternative to net income as the primary indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity. 14In
addition, our method of calculating FFO may not be comparable to the methods
used by other REITs and, accordingly, may be different from similarly titled
measures reported by other companies.
15
AGREE REALTY CORPORATION
PART I
==============================================================================
The following tables illustrate the calculation of FFO for the sixnine months and
three months ended JuneSeptember 30, 2002 and 2001:
SixNine Months Ended JuneSeptember 30, 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income before minority interest $ 4,678,8097,138,985 $ 4,439,3346,896,986
Depreciation of real estate assets 1,911,045 1,862,2852,866,054 2,804,286
Amortization of leasing costs 34,168 33,270
Amortization of stock awards 156,000 134,00051,252 51,070
Gain on sale of assets - (138,543)(218,543)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS $ 6,780,02210,056,291 $ 6,330,346
=================================================================================================9,533,799
============================================================================================
WEIGHTED AVERAGE SHARES AND OP UNITS OUTSTANDING 5,119,5785,119,752 5,090,416
=============================================================================================================================================================================================
Three Months Ended JuneSeptember 30, 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income before minority interest $ 2,442,0512,460,176 $ 2,320,9182,457,652
Depreciation of real estate assets 955,973 931,229955,009 942,001
Amortization of leasing costs 17,084 17,839
Amortization of stock awards 78,000 67,00017,800
Gain ofon sale of assets - (138,543)(80,000)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS $ 3,493,1083,432,269 $ 3,198,443
=================================================================================================3,337,453
============================================================================================
WEIGHTED AVERAGE SHARES AND OP UNITS OUTSTANDING 5,119,5785,120,094 5,090,416
=============================================================================================================================================================================================
1516
AGREE REALTY CORPORATION
PART I
==============================================================================
FORWARD-LOOKING STATEMENTS
Management has included herein certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended. When used,
statements which are not historical in nature including the words
"anticipate," "estimate," "should," "expect," "believe," "intend" and similar
expressions are intended to identify forward-looking statements. Such
statements are, by their nature, subject to certain risks and uncertainties.
Risks and other factors that might cause such a difference include, but are
not limited to, the effect of economic and market conditions; risks that the
Company's acquisition and development projects will fail to perform as
expected; financing risks, such as the inability to obtain debt or equity
financing on favorable terms; the level and volatility of interest rates; loss
or bankruptcy of one or more of the Company's major retail tenants; and
failure of the Company's properties to generate additional income to offset
increases in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal demands for liquidity are distributions to its
stockholders, debt repayment, development of new properties and future
property acquisitions.
During the quarter ended JuneSeptember 30, 2002, the Company declared a quarterly
dividend of $.46 per share. The dividend was paid on July 11,October 10, 2002, to
holders of record on June 28,September 27, 2002.
As of JuneSeptember 30, 2002, the Company had total mortgage indebtedness of
$71,371,468$70,833,904 with a weighted average interest rate of 6.94%. Future scheduled
annual maturities of mortgages payable for the years ending JuneSeptember 30 are
as follows: 2003 - $2,135,035;$2,172,138; 2004 - $2,359,295;$2,400,301; 2005 - $2,527,648;$2,571,583; 2006 -
$30,322,835;$30,102,239; and 2007 - $1,802,005.$1,833,089. This mortgage debt is all fixed rate debt.
In addition, the Operating Partnership has in place a $50 million line of
Credit Facility (the "Credit Facility") which is guaranteed by the Company.
The loan matures in August 2003 and can be extended by the Company for an
additional three years. Advances under the Credit Facility bear interest
within a range of one-month to six-month LIBOR plus 150 basis points to 213
basis points or the bank's prime rate, at the option of the Company, based on
certain factors such as debt to property value and debt service coverage. The
Credit Facility is used to fund property acquisitions and development
activities and is secured by most of the Company's Properties which are not
otherwise encumbered and properties to be acquired or developed. As of
JuneSeptember 30, 2002, $19,758,232 was outstanding under the Credit Facility
bearing a weighted average interest rate of 3.60%3.55%.
1617
AGREE REALTY CORPORATION
PART I
==============================================================================
The Company also has in place a $5 million line of credit (the "Line of
Credit"), which matures on April 30, 2003, and which the Company expects to
renew for an additional 12-month period. The Line of Credit bears interest at
the bank's prime rate less 50 basis points or 175 basis points in excess of
the one-month LIBOR rate, at the option of the Company. The purpose of the
Line of Credit is to provide working capital to the Company and fund land
options and start-up costs associated with new projects. As of JuneSeptember 30,
2002, no amounts were$1,000,000 was outstanding under the Line of Credit.Credit at a rate of 4.25%.
The Company's wholly owned subsidiaries have obtained construction financing
of approximately $12,900,000 to fund the development of three retail
properties. The notes require quarterly interest payments, based on a weighted
average interest rate based on LIBOR, computed by the lender. The notes mature
on June 20, 2004 and are secured by the underlying land and buildings. As of
JuneSeptember 30, 2002, $11,715,292 was outstanding under these notes.notes, bearing a
weighted average interest rate of 3.20%.
The Company has received funding from an unaffiliated third party for the
construction of certain of its Properties. Advances under this agreement bear
no interest and are secured by the specific land and buildings being
developed. As of JuneSeptember 30, 2002, $1,636,340$1,622,890 was outstanding under this
arrangement.
During the second quarter 2002 the Company's lease with A & P on its
Wholly-Owned Free Standing Property located in Roseville, Michigan expired and
was not renewed by the Tenant. The Company has leasedone development project under construction that will add an
additional 13,560 square feet of retail space to the landCompany's portfolio. The
project is expected to Sam's Real
Estate Business Trust (guaranteed by Wal-Mart Stores, Inc.). The Lessee at its
sole costbe completed during the first quarter of 2003.
Additional Company funding required for this project is estimated to be
$2,400,000 and expense will construct a Sam's Club store oncome from the Roseville site.
The transaction is expectedCredit Facility. Management expects the
development of this project to have a positive effect on the Company'scash generated by
operating activities and Funds from Operations.
The Company intends to meet its short-term liquidity requirements, including
capital expenditures related to the leasing and improvement of the Properties
and the 2003 maturities of debt, through its cash flow provided by operations
and the Line of Credit. Management believes that adequate cash flow will be
available to fund the Company's operations and pay dividends in accordance
with REIT requirements. The Company may obtain additional funds for future
development or acquisitions through other borrowings or the issuance of
additional shares of capital stock. The Company intends to incur additional
debt in a manner consistent with its policy of maintaining a ratio of total
debt (including construction and acquisition financing) to total market
capitalization of 65% or less.
17
AGREE REALTY CORPORATION
PART I
==============================================================================
The Company plans to begin construction of additional pre-leased developments
and may acquire additional properties, which will initially be financed by the
Credit Facility and Line of Credit. Management intends to periodically
refinance short-term construction and acquisition financing with long-term
debt and/or equity. Upon completion of refinancing, the Company intends to
lower the ratio of total debt to market capitalization to 50% or less.
Nevertheless, the Company may operate with debt levels or ratios, which are in
excess of 50% for extended periods of time prior to such refinancing.
18
AGREE REALTY CORPORATION
PART I
INFLATION
The Company's leases generally contain provisions designed to mitigate the
adverse impact of inflation on net income. These provisions include clauses
enabling the Company to pass through to tenants certain operating costs,
including real estate taxes, common area maintenance, utilities and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. Certain of the Company's leases contain
clauses enabling the Company to receive percentage rents based on tenants'
gross sales, which generally increase as prices rise, and, in certain cases,
escalation clauses, which generally increase rental rates during the terms of
the leases. In addition, expiring tenant leases permit the Company to seek
increased rents upon re-lease at market rates if rents are below the then
existing market rates.
18
AGREE REALTY CORPORATION
PART I
==============================================================================
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Company's future financing requirements.
Mortgages payable - As of JuneSeptember 30, 2002 the Company had five mortgages
outstanding. The first mortgage in the amount of $31,319,114$31,116,650 bears interest at
7.00%. The mortgage matures on November 15, 2005. The second mortgage in the
amount of $6,956,571$6,892,092 bears interest at 7.00%. The mortgage matures on April 1,
2013 and is subject to a rate review after the 7th year (April 1, 2006). The
third mortgage in the amount of $11,191,260$11,077,334 bears interest at 6.63%. The
mortgage matures on February 5, 2017. The fourth mortgage in the amount of
$18,728,600$18,589,358 bears interest at 6.90%. The mortgage matures January 1, 2020. The
fifth mortgage in the amount of $3,175,923$3,158,470 bears interest at 7.50%. The mortgage
matures May 15, 2022.
Construction loans - As of JuneSeptember 30, 2002 the Company had Construction loans
outstanding of $13,351,632.$13,338,182. Under the terms of the construction loans the
Company bears no interest rate risk.risk, since any change in interest rate results
in a corresponding increase or decrease in rental income.
Notes Payable - As of JuneSeptember 30, 2002 the Company had $19,758,232$20,758,232 outstanding
on its Lines-of-Credit which was subject to interest at a variable interest rate
based on LIBOR.
The carrying amounts of the Company's borrowings are equal to their fair values
as of September 30, 2002.
The Company does not enter into financial instrument transactions for trading or
other speculative purposes or to manage interest rate exposure.
A 10% adverse change in interest rates on the portion of the Company's debt
bearing interest at variable rates would result in an annual increase in
interest expense of approximately $75,000.
19
AGREE REALTY CORPORATION
PART I
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer and Vice-President-Finance have reviewed and
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of a date within
90 days before the filing date of this quarterly report. Based on that
evaluation, the Chief Executive Officer and Vice-President-Finance have
concluded that our current disclosure controls and procedures are effective and
timely, providing them with material information relating to us required to be
disclosed in the reports we file or submit under the Exchange Act.
CHANGES IN INTERNAL CONTROLS
There have not been any significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation. We are not aware of any significant deficiencies or
material weaknesses, therefore no corrective actions were taken.
20
AGREE REALTY CORPORATION
PART II
==============================================================================
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On May 13, 2002, the Company held its Annual Meeting of Stockholders.
The following were the results of the meeting:
The stockholders elected Richard Agree and Michael Rotchford as
Directors until the annual meeting of stockholders in 2005 or until a
successor is elected and qualified.
The vote was as follows: Richard Agree Michael Rotchford
-------------- -----------------
Votes cast for 4,080,989 4,144,637
Votes withheld 94,972 31,324
Not voting 270,070 270,070
20
AGREE REALTY CORPORATION
PART II
==============================================================================None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation and Articles of Amendment of
the Company (incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-11
(Registration Statement No. 33-73858, as amended ("Agree
S-11"))
3.2 Bylaws of the Company (incorporated by reference to
Exhibit 3.3 to Agree S-11)
10.1 Fifth amendment to amended and restated $5 million
business Loan Agreement dated April 30, 2002 between
Agree Limited Partnership and Standard Federal Bank
10.2 Project Loan Agreement dated as of April 30, 2002
between Royal Indemnity Company (together with its
successors and assigns) and Lawrence Store No. 203
L.L.C. (together with its permitted successors and
assigns)
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, Richard Agree, Chief Executive Officer
99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, Kenneth R. Howe, Chief Financial Officer
(b) Reports on Form 8-K
None
21
AGREE REALTY CORPORATION
SIGNATURES
==============================================================================
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGREE REALTY CORPORATION
/s/ RICHARD AGREE
- ----------------------------------------------------------------------------------------------
Richard Agree
President and Chief Executive Officer
/s/ KENNETH R. HOWE
- ------------------------------------------------------------------------------------------------
Kenneth R. Howe
Vice-President --- Finance and Secretary
(Principal Financial Officer)
Date: August 9,November 14, 2002
- ------------------------------------------------------------------------------------------------
22
Exhibit Index
10.1 Fifth amendmentCERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Agree, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Agree Realty
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to amendedstate a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and restated $5 million
business Loan Agreement dated April 30, 2002 between
Agree Limited Partnershipother financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
Standard Federal Bank
10.2 Project Loan Agreement datedcash flows of the registrant as of, April 30,and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002 between Royal Indemnity Company (together/s/ Richard Agree
- ----------------------- -----------------
Name: Richard Agree
Title: President and Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth R. Howe, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Agree Realty
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its successorsconsolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and assigns)procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
Lawrence Store No. 203
L.L.C. (togetherc) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with its permitted successorsregard to significant
deficiencies and assigns)material weaknesses.
Date: November 14, 2002 /s/ Kenneth R. Howe
- ----------------------- -------------------
Name: Kenneth R. Howe
Title: Vice President, Finance
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
Richard Agree, Chief Executive Officer
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
Kenneth R. Howe, Chief Financial Officer