TSE SYMBOL: BEI NYSE SYMBOL: BEI May 13, 2003
May 13, 2003 Conference Call Web Page
Q1 2003 Webcast and Conference Call Information
Boardwalk Announces Record First Quarter Results; Affirms Guidance
DOWNLOAD MAY 13, 2003 PRESS RELEASE (Printer Friendly 61Kb PDF File)
CALGARY, May 13 /CNW/ - Boardwalk Equities Inc. ("BEI" - TSX, NYSE) today
announced record financial results for the first quarter of 2003. For the
three-month period ended March 31, 2003, the Company reported Funds From
Operations ("FFO"), a key performance measurement for real estate companies,
of $15.5 million compared to $14.3 million in the same period last year. On a
per share basis, the Company reported FFO of $0.31 on a diluted basis in the
first quarter of 2003, compared to $0.29 for the same period last year.
Property sales contributed $1 million, or $0.02 per share to FFO in the first
quarter of 2003 compared to nil in the same period last year. During the first
quarter of 2002, Boardwalk received a $3.2 million non-recurring utility
rebate, resulting from the sale of assets of the incumbent gas provider, which
contributed $0.07 to FFO per share last year. Excluding this non-recurring
rebate, as well as gains on property sales, the FFO per share comparison would
be $0.29 compared to $0.22 last year, representing a 32% increase.
Funds From Operations ("FFO") is a generally accepted measure of
operating performance of real estate companies, however, it is a non-GAAP
measurement. The Company calculates FFO by taking Net Earnings after
discontinued operations and adding non-cash items including Future Income
Taxes and Amortization. The amount is currently referenced on Boardwalk's
Consolidated Statement of Cash Flows. The determination of this amount may
differ from that of other real estate companies.
Highlights of the Company's first quarter 2003 financial results include:
- Rental revenues of $65.7 million, an increase of 20.2% compared to
$54.7 million for the three-month period ended March 31, 2002.
- Net operating income of $40.7 million, representing a 10.3% increase
from $36.9 million in the same period last year.
- FFO of $15.5 million, an increase of 8.6% compared to $14.3 million
for the three-month period ended March 31, 2002. FFO from continuing
operations, which excludes gains on property dispositions, of
$14.4 million, an increase of 1.3% compared to $14.2 million for the
three-month period ended March 31, 2002.
- FFO per share of $0.31 on a diluted basis, an increase of 6.9%
compared to $0.29 for the three-month period ended March 31, 2002.
FFO per share from continuing operations, which excludes gains on
property sales, was $0.29 on a diluted basis, compared to $0.29 for
the three-month period ended March 31, 2002.
- Net income of $1.5 million, a 21.5% decrease compared to $1.9 million
in the same period last year. EPS of $0.03 compared to $0.04 in the
first quarter of last year.
Sam Kolias, President and Chief Executive Officer, said, "The year is off
to a good start and we are encouraged by the trends that we are seeing in our
rental operations. The pace of activity in the housing sector has begun to
taper off and we have experienced a reduction in the amount of residents who
are moving out to go into home ownership. We continue to focus on driving
occupancies higher and have seen an improvement in our occupancy rate every
month so far this year. This is particularly encouraging as the winter and
early spring are traditionally seasonally weak periods. We expect that our
performance will continue to improve for the balance of this year as a result
of a lower level of turnovers and improved occupancy rates."
"During the quarter, we continued to make progress in executing key
elements of our strategic plan," said Mike Hough, Boardwalk's Senior Vice
President. "We expanded the Company's base of operations in Montreal and
entered the Gatineau/Ottawa market area, establishing an initial presence in
an attractive new major market area. We have continued to broaden and
strengthen our geographic platform which we believe enhances our long-term
growth potential."
Financial Statement Changes
Effective January 1, 2003, the Corporation adopted the new Canadian
accounting recommendations with respect to the disposal of long-lived assets
on or after that date. As a result, the Corporation now presents FFO per share
from continuing operations and FFO per share from discontinued operations, as
well as total FFO per share. Previously, the Corporation distinguished between
FFO per share from rental operations, FFO per share from property sales and
total FFO per share. With the new recommendations, the results of operations
and cash flows associated with the disposal of long-lived assets on or after
January 1, 2003 is now a component of discontinued operations rather than a
component of continuing rental operations.
Operational Highlights
The average vacancy rate across the Company's portfolio for the first
quarter of 2003 was 4.9%, unchanged from the fourth quarter of 2002, and up
from 4.8% in the first quarter of last year. On a sequential month-to-month
basis, vacancy has trended downwards every month since January of this year.
The average monthly rent realized in the first quarter of 2003 was
$725 per unit, up $29, or 4.2%, from $696 per unit for the 3-months ended
March 31, 2002. Management estimates that market rents for its properties at
the end of March 2003 averaged $788 per unit per month which compares to an
average in-place monthly rent per occupied unit of $754 for the three months
ended March 31, 2003. This translates into an estimated "loss-to-lease" of
approximately $12.5 million, maintaining existing occupancy rate levels.
Same-Property Results
The "same-property" results for the Company's stabilized properties
(defined as properties owned for a period of over 24 months) for the three-
month period ended March 31, 2003 showed rental growth of 1.7%, an increase in
operating expenses of 17.5% and a decline in NOI of 5.7% compared to the same
period last year. The year-to-year comparison is affected by the impact of a
non-recurring gas utility rebate received in the first quarter of 2002 for a
significant portion of the Company's Alberta properties.
Excluding the non-recurring rebate, the Company's stabilized properties
in the first quarter of 2003 would have showed rental growth of 1.7%, a
decrease in operating expenses of 0.6% and NOI growth of 3.1% compared to the
same period last year.
A total of 25,064 units, representing approximately 82% of Boardwalk's
total portfolio, were classified as stabilized as at March 31, 2003. None of
the Company's Quebec properties are currently classified as stabilized.
Same-Property Results - Stabilized Portfolio
Three Months Ended March 31, 2003 vs. Three Months Ended March 31, 2002
-----------------------------------------------------------------------
------------------------------
Rental Expenses
------------------------------ % of
Rental Utili- Utility Stab
Revenues ties Rebate Other Total NOI NOI
-------------------------------------------------------------------------
Calgary -2.6% -23.3% -100.0% 19.1% 1.3% -4.1% 24.7%
Edmonton 3.3% -20.8% -100.0% 21.5% 47.3% -11.3% 42.8%
Other Alberta -0.9% -19.7% -100.0% 14.1% 35.2% -12.1% 6.5%
Ontario 4.7% 13.1% - 5.1% 8.6% 1.1% 11.6%
Saskatchewan 2.1% -22.5% - 6.9% -5.8% 8.7% 14.4%
-------------------------------------------------------------------------
Total 1.7% -15.9% -100.0% 14.3% 17.5% -5.7% 100.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total - Excluding
non-recurring
rebate 1.7% -15.9% - 14.3% -0.6% 3.1%
-------------------------------------------------------------------------
Acquisition/Disposition Activity
In the first quarter of 2003, the Company completed the acquisition of a
total of 1,129 units at an acquisition price of $54.0 million. These
acquisitions include additional properties in the Montreal market and an
apartment complex in Gatineau, Quebec. The acquisition price equates to an
average acquisition price of approximately $47,800 per unit, and less than
$65 per rentable square foot, which is estimated to be less than half of
replacement cost. The properties acquired were:
Parc de la Montagne, Gatineau (Hull) - an apartment complex consisting
of three concrete high-rise buildings with a total of 321 residential
units and total rentable area of 204,000 square feet. The transaction
closed on January 9, 2003. The acquisition price of $13.7 million
equates to approximately $42,700 per unit.
Domaine d'Iberville Apartments, Montreal (Longueuil) - a luxury
apartment complex which consists of four concrete high-rise buildings
with a total of 720 residential units and a total rentable area of
approximately 560,000 square feet. The acquisition was by way of a
leasehold interest and the transaction closed on February 4, 2003. The
acquisition price of $34.5 million equates to approximately $47,900 per
unit.
600 Cote Vertu, Montreal (Saint Laurent) - a six-storey concrete
building located in the Montreal suburb of Saint Laurent. The
transaction closed on February 5, 2003. The property has 88 units and a
total rentable area of approximately 68,000 square feet. The
acquisition price of $5.8 million equates to approximately $65,900 per
unit.
These acquisitions expand Boardwalk's presence in the Montreal market to
over 3,900 units, and its portfolio in the province of Quebec to over
4,500 units.
In the first quarter of 2003, the Company completed the disposition of a
non-core 40-unit property in Edmonton, located in the southern part of the
city. The property was sold for $3.0 million and contributed $1.0 million to
total FFO. There were no dispositions in the first quarter of 2002.
Continued Financial Strength
The Company maintained its solid financial position in the quarter.
Boardwalk's mortgage debt totalled $1.34 billion as at March 31, 2003, up from
$1.31 billion at December 31, 2002. The increase is largely attributable to
the additional debt related to property acquisitions that the Company
completed during the first quarter. As of March 31, 2003, the Company's debt
had an average maturity of 4.5 years with a weighted average interest rate of
5.84%. The Company's debt-to-total-market-capitalization ratio was 65.1% as at
March 31, 2003, which compares to 62.7% at the same time last year.
The Company's interest coverage ratio, excluding gains, for the three-
month period ended March 31, 2003 was 1.84 times compared to 1.92 times in the
same period last year. The comparison is affected by the non-recurring utility
rebate in the first quarter of last year.
Subsequent to the end of the first quarter of 2003, Boardwalk completed
the refinancing of the Domaine d'Iberville Apartments, located in the Montreal
suburb of Longueuil, a property that was acquired by the Company in the first
quarter of the year. The new conventional first mortgage on the Longueuil
property totalled $26.4 million, with a five-year term maturing on May 1, 2008
and a fixed interest rate of 5.76%. The proceeds of the refinancing were used
in part to repay $23.0 million which had been drawn from the company's bank
facility.
Quarterly Dividend Announced
Yesterday, the Board of Directors declared a quarterly cash dividend of
$0.02 (Canadian) per share on the outstanding common shares. The dividend is
payable on June 9th, 2003 to shareholders of record at the close of business
on May 26th, 2003. The dividend equates to an annual cash dividend rate of
$0.08 per common share.
2003 Earnings Guidance
"We are affirming our previous fiscal 2003 guidance for total FFO per
share of $1.40 - $1.44," stated Rob Geremia, Senior Vice President, Finance
and CFO.
Supplementary Information
Boardwalk produces Quarterly Supplemental Information that provides
detailed information regarding the Company's activities during the quarter.
The First Quarter Supplemental Information is available on the INVESTOR
section of our website (www.bwalk.com).
Teleconference on First Quarter, 2003 Financial Results
We invite you to participate in the teleconference that will be held to
discuss the Company's first quarter results this morning at 11:15am EST.
Senior management will speak to the financial results and provide a corporate
update. Presentation materials will be made available on the INVESTOR section
of our website (www.bwalk.com) prior to the call.
Participation & Registration: Please RSVP to Investor Relations at
403-531-9255 or by email to investor@bwalk.com.
Teleconference Dial-In Numbers: The telephone numbers for the conference
are 416-640-4127 (within Toronto) or toll-free 1-800-814-4857 (outside
Toronto).
Webcast: Investors will be able to listen to the call and view our slide
presentation over the Internet by visiting http://investor.bwalk.com 15 min.
prior to the start of the call. An information page will be provided for any
software needed and system requirements. The live audiocast will also be
available at
http://www.newswire.ca/webcast/viewEventCNW.html?eventID=512600.
Replay: An audio recording of the teleconference will be available
approximately one hour after the call until 11:59pm EST on May 20th, 2003. You
can access it by dialing 416-640-1917 and using the passcode
246472#. An audio archive will also be available on our Investor
site (http://investor.bwalk.com) approximately two hours after the conference
call.
Annual Meeting of Shareholders
Boardwalk will hold its Annual Meeting of Shareholders later today at
3:00PM (Calgary time) in the Calgary Petroleum Club, 319 - 5 Avenue SW.
Corporate Profile
Boardwalk Equities Inc. is Canada's largest owner/operator of multi-
family rental communities. Boardwalk currently owns and operates in excess of
250 properties with over 30,400 units totalling approximately 26 million net
rentable square feet. The Company's portfolio is concentrated in the provinces
of Alberta, Saskatchewan, Ontario and Quebec. Boardwalk is headquartered in
Calgary and its shares are listed on both the Toronto Stock Exchange and the
New York Stock Exchange and trade under the symbol BEI. The Company has a
total market capitalization of approximately $2.1 billion.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking
statements are statements that involve risks and uncertainties, including, but
not limited to, changes in the demand for apartment and town home rentals, the
effects of economic conditions, the impact of competition and competitive
pricing, the effects of the Company's accounting policies and other matters
detailed in the Company's filings with Canadian and United States securities
regulators available on SEDAR in Canada and by request through the Securities
and Exchange Commission in the United States, including matters set forth in
the Company's Annual Report to Shareholders under the heading
"Management's Discussion and Analysis". Because of these risks and
uncertainties, the results, expectations, achievements, or performance
described in this release may be different from those currently anticipated by
the Company.
CONSOLIDATED BALANCE SHEETS
(CDN$ THOUSANDS)
AS AT March December
31, 31,
2003 2002
-----------------------
(Unaudited) (Audited)
Assets
Revenue producing properties $1,658,776 $1,604,277
Properties held for development 7,149 7,038
Mortgages and accounts receivable 13,241 14,704
Other assets 13,739 13,723
Deferred financing costs 36,895 37,521
Segregated tenants' security deposits 7,489 7,596
Cash and cash equivalents 2,086 23,631
-------------------------------------------------------------------------
$1,739,375 $1,708,490
------------------------
------------------------
Liabilities
Mortgages payable $1,337,591 $1,307,177
Accounts payable and accrued liabilities 17,628 21,498
Refundable tenants' security deposits and other 10,356 10,496
Capital lease obligations 4,337 4,598
Future income taxes (NOTE 7) 65,127 62,976
-------------------------------------------------------------------------
1,435,039 1,406,745
------------------------
Shareholders' Equity
Share capital (NOTE 5) 268,983 266,516
Retained earnings 35,353 35,229
-------------------------------------------------------------------------
304,336 301,745
-------------------------------------------------------------------------
$1,739,375 $1,708,490
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(CDN$ THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3 months 3 months
ended ended
March 31, March 31,
2003 2002
------------------------
(Unaudited) (Unaudited)
Revenue
Rental income $ 65,707 $ 54,684
Expenses
Revenue producing properties:
Operating expenses $ 8,239 $ 5,519
Utilities 10,233 10,292
Utility rebate (NOTE 8) - (3,235)
Property taxes 6,512 5,201
Administration 5,852 4,727
Financing costs 18,973 16,763
Deferred financing costs amortization 664 527
Amortization 12,175 10,893
-------------------------------------------------------------------------
$ 62,648 $ 50,687
------------------------
Earnings from continuing operations
before income taxes $ 3,059 $ 3,997
Large corporations taxes 822 661
Future income taxes (NOTE 7) 1,470 1,414
-------------------------------------------------------------------------
Earnings from continuing operations 767 1,922
Earnings from discontinued operations,
net of tax (NOTE 4) 751 12
------------------------
Net earnings for the period $ 1,518 $ 1,934
------------------------
------------------------
Basic earnings per share (NOTE 6)
- from continuing operations $ 0.02 $ 0.04
- from discontinued operations $ 0.01 $ 0.00
------------------------
Basic earnings per share $ 0.03 $ 0.04
------------------------
------------------------
Diluted earnings per share (NOTE 6)
- from continuing operations $ 0.02 $ 0.04
- from discontinued operations $ 0.01 $ 0.00
------------------------
Diluted earnings per share $ 0.03 $ 0.04
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(CDN$ THOUSANDS)
3 months 3 months
ended ended
March 31, March 31,
2003 2002
------------------------
(Unaudited) (Unaudited)
Retained earnings, beginning of period $ 35,229 $ 26,782
Net earnings for the period 1,518 1,934
Dividends paid (1,002) (2,477)
Premium on share repurchases (392) (583)
-------------------------------------------------------------------------
Retained earnings, end of period $ 35,353 $ 25,656
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(CDN$ THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3 months 3 months
ended ended
March 31, March 31,
2003 2002
------------------------
(Unaudited) (Unaudited)
Cash obtained from (applied to):
Operating activities
Net earnings for the period $ 1,518 $ 1,934
Earnings from discontinued operations (NOTE 4) (751) (12)
Income taxes 1,470 1,414
Amortization 12,175 10,893
-------------------------------------------------------------------------
Funds from continuing operations $ 14,412 $ 14,229
Funds from discontinued operations 33 32
Net change in operating working capital $ (2,504) $ 3,112
Net change in properties held for development (111) (133)
-------------------------------------------------------------------------
Total cash provided by operating activities $ 11,830 $ 17,240
------------------------
Financing activities
Issue of common shares for cash
(net of issue costs) $ 2,703 $ 1,112
Stock repurchase program (628) (1,045)
Dividends paid (1,002) (2,477)
Financing of revenue producing properties 42,803 85,181
Repayment of debt on revenue producing properties (23,906) (58,202)
Deferred financing costs incurred
(net of deferred financing costs amortization) (273) (1,815)
-------------------------------------------------------------------------
$ 19,697 $ 22,754
------------------------
Investing activities
Purchases of revenue producing
properties (NOTE 3) $ (42,518) $ (2,826)
Project improvements to revenue
producing properties (11,487) (6,536)
Net cash proceeds from sale of property 1,223 -
Technology for real estate operations (290) (554)
-------------------------------------------------------------------------
$ (53,072) $ (9,916)
------------------------
(Decrease) increase in cash and cash equivalents
balance during the period $ (21,545) $ 30,078
Cash and cash equivalents, beginning of period $ 23,631 $ 25,672
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 2,086 $ 55,750
------------------------
------------------------
Taxes paid $ 816 $ 753
------------------------
------------------------
Interest paid $ 18,853 $ 16,797
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the three months ended March 31, 2003
(TABULAR AMOUNTS IN CDN$ THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE
AMOUNTS UNLESS OTHERWISE STATED)
1. BASIS OF PRESENTATION
These unaudited interim consolidated financial statements of
Boardwalk Equities Inc. (the "Corporation") have been prepared in
accordance with the recommendations of the handbook of the Canadian
Institute of Chartered Accountants ("CICA Handbook") and with the
recommendations of the Canadian Institute of Public and Private Real
Estate Companies ("CIPPREC") and are consistent with those used in
the audited consolidated financial statements as at and for the year
ended December 31, 2002, except as described in Note 2 below. These
interim financial statements do not include all of the disclosures
required by Canadian generally accepted accounting principles
("Canadian GAAP") applicable to annual financial statements and,
therefore, they should be read in conjunction with the audited
consolidated financial statements.
The preparation of financial statements in accordance with Canadian
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and to make
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from
those estimates.
Due to seasonality, the operating results for the three months ended
March 31, 2003 are not necessarily indicative of the results that may
be expected for the full year ending December 31, 2003.
2. ACCOUNTING POLICY CHANGES
Stock-based compensation plans
Effective January 1, 2003, the Corporation changed its accounting
policy for stock options granted on or after that date to reflect
early adoption of the CICA exposure draft on section 3870 of the CICA
Handbook. Under the new policy, the Corporation now determines the
fair value of stock options, using an accepted option-pricing model,
on their grant date and recognizes this amount as compensation
expense over the period the stock options vest, with a corresponding
increase to contributed surplus in shareholders' equity. The new
accounting policy has been applied prospectively. If there are any
further changes to the exposure draft, the Corporation will adjust
the policy to reflect section 3870 in its final form.
Previously under the Corporation's intrinsic value method policy, the
Corporation did not record compensation expense for stock options
granted to directors, executives and employees in the financial
statements because there was no intrinsic value at the date of grant.
Note 5 discloses the pro forma amounts to the Corporation's net
earnings and net earnings per share for the three months ended
March 31, 2003 and 2002 had the impact of compensation costs using
the fair value method been applied effective January 1, 2002.
Disposal of long-lived assets
Effective January 1, 2003, the Corporation adopted the new CICA
Handbook Section 3475, Disposal of Long-Lived Assets and Discontinued
Operations. The recommendations of this section requires disposal of
long-lived assets be classified as held for sale, and the results of
operations and cash flows associated with the assets disposed be
reported separately as discontinued operations, less applicable
income taxes. A long-lived asset is classified by the Corporation as
an asset held for sale at the point in time when it is available for
immediate sale, management has committed to a plan to sell the asset
and is actively locating a buyer for the asset at a sales price that
is reasonable in relation to the current fair value of the asset, and
the sale is probable and expected to be completed within a one-year
period. For unsolicited interest in a long-lived asset, the asset is
classified as held for sale only if all the conditions of the
purchase and sale agreement has been met, a sufficient purchaser
deposit has been received and the sale is probable and expected to be
completed shortly after the end of the current period. The impact of
adopting the new recommendations for disposals of long-lived assets
on or after January 1, 2003 is disclosed in Note 4.
Disclosure of guarantees
Effective January 1, 2003, the Corporation adopted Accounting
Guideline 14 (AcG-14), Disclosure of Guarantees. This guideline
provides assistance regarding the identification of guarantees and
requires a guarantor to disclose the significant details of
guarantees that have been given, regardless of whether it will have
to make payments under the guarantees. Please refer to Note 10 for
further disclosure on the Corporation's guarantees.
Comparative figures
Certain comparative figures have been reclassified with the
presentation of the current period, or as a result of accounting
changes.
3. ACQUISITIONS AND DISPOSITIONS OF REVENUE PRODUCING PROPERTIES
Acquisitions
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Cash paid $ 42,518 $ 2,826
Debt assumed 12,303 -
---------------------------------------------------------------------
Total purchase price $ 54,821 $ 2,826
Fair value adjustment to debt 869 -
---------------------------------------------------------------------
Book value $ 55,690 $ 2,826
-------------------------
-------------------------
Units acquired 1,129 60
-------------------------
-------------------------
Dispositions
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Cash received $ 1,385 $ -
Debt assumed by the purchaser 1,655 -
---------------------------------------------------------------------
Total proceeds $ 3,040 $ -
Net book value $ 1,993 $ -
---------------------------------------------------------------------
Gain on sales before income taxes $ 1,047 $ -
-------------------------
-------------------------
Units sold 40 -
-------------------------
-------------------------
4. DISPOSAL OF LONG-LIVED ASSETS AND DISCONTINUED OPERATIONS
During the current period, the Corporation received a $3.0 million
unsolicited offer to purchase a 40-unit property located in Edmonton,
Alberta. The sale was completed by the end of the current period.
Note 3 discloses the carrying amounts of the major assets and
liabilities included in the disposition. The following tables set
forth the results of operations and cash flows associated with the
long-lived asset, separately reported as discontinued operations for
the current and prior periods.
Earnings from Discontinued Operations
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Revenue
Rental income $ 86 $ 78
Expenses
Revenue producing properties:
Operating expenses $ 4 $ 10
Utilities 17 4
Utility rebate (NOTE 8) - (1)
Property taxes 6 5
Administration 2 2
Financing costs 24 25
Deferred financing costs amortization - 1
Amortization - 13
---------------------------------------------------------------------
$ 53 $ 59
-------------------------
Operating earnings from discontinued
operations before income taxes $ 33 $ 19
Future income taxes 12 7
Operating earnings from discontinued
operations $ 21 $ 12
Gain on disposition 1,047 -
Future income taxes (317) -
---------------------------------------------------------------------
Earnings from discontinued operations $ 751 $ 12
-------------------------
-------------------------
5. SHARE CAPITAL
(a) Issued
March 31, 2003 December 31, 2002
---------------------------------------------------
Number Amount Number Amount
Common shares
outstanding 50,320 $ 268,983 50,109 $ 266,516
(b) Stock Options
The Corporation has a stock option plan that provides for the
granting of options to directors, executives and employees. The stock
option plan provides for the granting of options to purchase up to
10,643,636 (December 31, 2002 - 10,643,636) common shares. The
exercise price is equal to the market value of the common shares at
the date of grant. As at March 31, 2003, there was a total of
3,133,172 (December 31, 2002 - 3,480,072) options outstanding to
directors, officers and employees. The exercise prices range from
$9.11 to $22.92 (December 31, 2002 - $9.11 to $22.92). These options
expire up to August 28, 2012.
March 31, 2003 December 31, 2002
---------------------------------------------------
Weighted Weighted
average average
3 months exercise 12 months exercise
options price Options price
---------------------------------------------------------------------
Outstanding,
beginning of
period 3,480,072 $ 12.46 3,647,834 $ 12.60
Granted - - 930,722 $ 12.16
Exercised (254,200) $ 10.63 (801,633) $ 11.02
Forfeited (92,700) $ 18.43 (296,851) $ 17.14
---------------------------------------------------------------------
Outstanding, end
of period 3,133,172 $ 12.43 3,480,072 $ 12.46
---------------------------------------------------
---------------------------------------------------
Options exercisable at period end
The following table summarized information about the options
outstanding at March 31, 2003:
Options outstanding Options exercisable
-------------------------------------------------------------------------
Weighted Weighted
average average
remaining Weighted remaining Weighted
Range of contractual average contractual average
exercise Number life exercise Number life exercise
prices outstanding (years) price exercisable (years) price
-------------------------------------------------------------------------
$9.01 to
$11.00 544,600 6.9 $9.46 502,800 6.9 $9.46
$11.01 to
$13.00 1,830,222 6.3 $11.98 1,110,764 6.7 $11.90
$13.01 to
$15.00 399,450 5.9 $14.02 284,012 5.3 $13.87
$15.01 to
$17.00 274,900 6.1 $16.18 197,520 6.1 $16.27
$17.01 to
$23.00 84,000 0.1 $21.58 84,000 0.1 $21.58
-------------------------------------------------------------------------
3,133,172 6.2 $12.43 2,179,096 6.3 $12.36
--------------------------------------------------------------
--------------------------------------------------------------
The following table illustrates the impact on the Corporation's net
income and earnings per share if compensation expense had been
recorded in the current and prior periods based on the fair value of
all stock options granted on or after January 1, 2002:
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Compensation Costs $ (536) $ (318)
Net Earnings
As reported $ 1,518 $ 1,934
Pro forma $ 982 $ 1,616
Net Earnings per Common Share
Basic
As reported $ 0.03 $ 0.04
Pro forma $ 0.02 $ 0.03
Diluted
As reported $ 0.03 $ 0.04
Pro forma $ 0.02 $ 0.03
The fair value of options granted in the prior year was estimated to
be $6.74 on the date of grant using the Black-Scholes option-pricing
model with weighted average assumptions for grants as follows:
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Risk free interest rate 5.33% 5.83%
Expected lives (years) 7-10 years 7-10 years
Expected volatility 42.56% 42.64%
Dividend per share $ 0.05 $ 0.05
6. PER SHARE CALCULATIONS
The Corporation has adopted a CIPPREC requirement to disclose a funds
from operations ("FFO") calculation versus the traditional cash flow
from operations calculation. The following table sets forth the
computation of basic and diluted earnings per share and FFO per share
with respect to earnings from continuing operations and earnings from
discontinued operations.
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Numerator
Earnings from continuing operations $ 767 $ 1,922
Earnings from discontinued operations $ 751 $ 12
Funds from continuing operations $ 14,412 $ 14,229
Funds from discontinued operations
(includes gain on disposition) $ 1,080 $ 32
---------------------------------------------------------------------
Denominator
Denominator for basic earnings per share -
weighted average shares 50,098 49,370
---------------------------------------------------------------------
Effect of dilutive securities
Stock options 536 305
Denominator for diluted earnings per share
adjusted for weighted average shares
and assumed conversion 50,634 49,675
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted earnings per share from
continuing operations $ 0.02 $ 0.04
---------------------------------------------------------------------
Basic and diluted earnings per share from
discontinued operations $ 0.01 $ 0.00
---------------------------------------------------------------------
Basic and diluted FFO per share from
continuing operations $ 0.29 $ 0.29
---------------------------------------------------------------------
Basic and diluted FFO per share from
discontinued operations $ 0.02 $ 0.00
---------------------------------------------------------------------
7. FUTURE INCOME TAXES
The Corporation's provision for future income taxes is comprised as
follows:
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Continuing operations $ 1,470 $ 1,414
Discontinued operations 329 7
---------------------------------------------------------------------
Total future income taxes $ 1,799 $ 1,421
-------------------------
-------------------------
The future income tax expense is computed as follows:
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Tax expense based on expected rate of 37%
(2002 - 36%) $ 1,530 $ 1,421
Non-taxable portion of capital gain (223) -
Adjustment to future income tax liabilities 536 -
Adjustment for change in effective tax rate (44) -
---------------------------------------------------------------------
Future income tax expense $ 1,799 $ 1,421
-------------------------
-------------------------
The future income tax liability is calculated as follows:
March 31, December 31,
AS AT 2003 2002
-------------------------
Tax assets related to operating losses $ 69,066 $ 63,254
Tax liabilities related to differences in
tax and book basis (134,193) (126,230)
---------------------------------------------------------------------
Future income tax liability $ (65,127) $ (62,976)
-------------------------
-------------------------
8. UTILITY REBATE
As of March 2, 2002, ATCO Gas, the transporter of all natural gas in
Alberta, distributed a non-recurring rebate. The Alberta Energy and
Utility Board instructed ATCO Gas to rebate a portion of the sale
proceeds of the Viking-Kinsella producing assets to ATCO North
customers in the form of a one-time rebate. The rebate was
distributed to all ATCO North customers, based on historical usage,
at a rate of $3.325/GJ.
9. COMMITMENTS AND CONTINGENCIES
The Corporation has long-term supply arrangements with two electrical
utility companies to supply the Corporation with its electrical power
needs for Alberta for the next one to three years at a blended rate
of approximately $0.07/kwh. These agreements provide that the
Corporation purchase its power for all Alberta properties under
contract for the upcoming years.
The Corporation also has two physical settlement fixed-price supply
contracts for Alberta natural gas requirements. These contracts fix
the price of natural gas for 75% of the Corporation's requirements in
Alberta. The two contracts are for physical settlement, and each
represents approximately 37.5% of the Corporation's Alberta
requirements. The first of these contracts runs from January 1, 2003
to September 30, 2003, and the second contract runs from January 1,
2003 to September 30, 2004. In aggregate, these contracts provide the
commodity at a price of $5.43/GJ. The remaining 25% supply will float
at spot prices.
In Saskatchewan, the Corporation has a three-year physical supply
agreement to supply 100% of the Corporation's natural gas
requirements for that province. The agreement extends until October
31, 2005 at a fixed price of $5.20/GJ.
10. GUARANTEES
In connection with the sales of properties by the Corporation, a
mortgage assumed by the purchaser will have an indirect guarantee
provided by Boardwalk to the lender until the mortgage is refinanced
by the purchaser. In the event of default by the purchaser, Boardwalk
would be liable for the outstanding mortgage balance. The
Corporation's maximum exposure as at March 31, 2003 is approximately
$8.2 million. In the event of default, the Corporation's recourse for
recovery includes the sale of the respective building asset. The
Corporation expects that the proceeds from the sale of the building
asset will cover, and in most likelihood exceed, the maximum
potential liability associated with the amount being guaranteed.
Therefore, as at March 31, 2003, no amounts have been recorded in the
consolidated financial statements with respect to the above noted
indirect guarantees.
11. SEGMENTED INFORMATION
The Corporation specializes in multi-family residential housing and
operates primarily within one business segment in four provinces
located in Canada. The following summary presents segmented financial
information for the Corporation's continuing operations by geographic
location:
3 months 3 months
ended ended
March 31, March 31,
2003 2002
-------------------------
Alberta
Revenue $ 37,643 $ 37,775
Expenses
Operating 4,716 3,820
Utilities 5,316 6,836
Utility rebate - (3,225)
Property taxes 2,905 2,659
-------------------------
12,937 10,090
-------------------------
Net operating income from continuing
operations $ 24,706 $ 27,685
-------------------------
Identifiable Assets
Revenue producing properties $ 970,490 $ 981,166
Mortgages and accounts receivable 7,797 14,080
Deferred financing costs 24,962 26,093
Tenants' security deposits 6,445 7,346
-------------------------
$1,009,694 $1,028,685
-------------------------
Saskatchewan
Revenue $ 8,454 $ 8,255
Expenses
Operating 1,157 915
Utilities 1,232 1,623
Property taxes 1,199 1,200
-------------------------
3,588 3,738
-------------------------
Net operating income from continuing
operations $ 4,866 $ 4,517
-------------------------
Identifiable Assets
Revenue producing properties $ 180,326 $ 180,968
Mortgages and accounts receivable 5 -
Deferred financing costs 4,634 5,383
Tenants' security deposits - 1,349
-------------------------
$ 184,965 $ 187,700
-------------------------
Ontario
Revenue $ 8,537 $ 8,189
Expenses
Operating 1,276 1,164
Utilities 1,977 1,775
Property taxes 1,351 1,322
-------------------------
4,604 4,261
-------------------------
Net operating income from continuing
operations $ 3,933 $ 3,928
-------------------------
Identifiable Assets
Revenue producing properties $ 215,408 $ 213,069
Mortgages and accounts receivable 492 1,092
Deferred financing costs 2,898 2,978
-------------------------
$ 218,798 $ 217,139
-------------------------
Quebec
Revenue $ 10,550 $ -
Expenses
Operating 1,121 -
Utilities 1,619 -
Property taxes 1,035 -
-------------------------
3,775 -
-------------------------
Net operating income from continuing
operations $ 6,775 $ -
-------------------------
Identifiable Assets
Revenue producing properties $ 285,105 $ -
Mortgages and accounts receivable 4,648 -
Deferred financing costs 4,369 -
-------------------------
$ 294,122 $ -
-------------------------
Total
Net operating income from continuing
operations $ 40,280 $ 36,130
Unallocated revenue(*) 438 387
Unallocated expenses(xx) (39,951) (34,595)
-------------------------
Net income from continuing operations $ 767 $ 1,922
-------------------------
Assets
Identifiable assets $1,505,451 $1,433,524
Unallocated assets(xxx) 233,924 82,179
-------------------------
$1,739,375 $1,515,703
-------------------------
(*) Unallocated revenue includes interest income and other non-rental
income from continuing operations.
(xx) Unallocated expenses include non-rental operating expenses,
administration, financing costs, amortization, income taxes and
other provisions from continuing operations.
(xxx) Unallocated assets include properties held for development, cash,
short-term investments and other assets.
%SEDAR: 00004201E
For further information: Boardwalk Equities Inc:
Sam Kolias, President and CEO,
(403) 531-9255;
Roberto Geremia, Senior Vice President, Finance
and Chief Financial Officer,
(403) 531-9255;
Mike Hough, Senior Vice President,
(416) 364-0849;
Paul Moon, Director of Corporate Communications,
(403) 531-9255
