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MID-AMERICA APARTMENTS, L.P. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
[October 31, 2014]

MID-AMERICA APARTMENTS, L.P. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.


(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion analyzes the financial condition and results of operations of both MAA and the Operating Partnership, of which MAA is the sole general partner and in which MAA owned a 94.7% limited partner interest as of September 30, 2014. MAA conducts all of its business through the Operating Partnership and the Operating Partnership's various subsidiaries.



The following discussion should be read in conjunction with the condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report. Historical results and trends that might appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

Risk Associated with Forward Looking Statements We consider this and other sections of this Quarterly Report on Form 10-Q to contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to our expectations for future periods. The factors described in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2013, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form 10-Q, in the documents incorporated by reference into this Quarterly Report on Form 10-Q or presented elsewhere by our management from time to time. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, joint venture activity, development and renovation activity as well as other capital expenditures, capital raising activities, rent and expense growth, occupancy, financing activities and interest rate and other economic expectations and statements about the benefits of our merger with 36 -------------------------------------------------------------------------------- Colonial Properties Trust, or Colonial. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Such factors include, among other things, unanticipated adverse business developments affecting us, or our properties, adverse changes in the real estate markets and general and local economies and business conditions. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this report may not prove to be accurate.


In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements: • inability to generate sufficient cash flows due to market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors; • exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry; • difficulty in completing the integration of Colonial's operations, systems and personnel with ours and certain uncertainties associated with our ability to sell our commercial asset portfolio; • adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our primary markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns; • failure of new acquisitions to achieve anticipated results or be efficiently integrated; • failure of development communities to be completed, if at all, within budget and on a timely basis or to lease-up as anticipated; • unexpected capital needs; • changes in operating costs, including real estate taxes, utilities and insurance costs; • losses from catastrophes in excess of our insurance coverage; • ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures; • level and volatility of interest or capitalization rates or capital market conditions; • loss of hedge accounting treatment for interest rate swaps or interest rate caps; • the continuation of the good credit of our interest rate swap and cap providers; • price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing; • the effect of any rating agency actions on the cost and availability of new debt financing; • significant decline in market value of real estate serving as collateral for mortgage obligations; • significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product; • our ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules; • inability to attract and retain qualified personnel; • potential liability for environmental contamination; • adverse legislative or regulatory tax changes; • litigation and compliance costs associated with laws requiring access for disabled persons; and • other risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the Securities and Exchange Commission, or the SEC, or in other documents that we publicly disseminate.

We undertake no obligation to update or revise any forward-looking statements to reflect events, circumstances or changes in expectations after the date on which such statement is made.

Critical Accounting Policies and Estimates Please refer to the 2013 Form 10-K for discussions of our critical accounting policies. During the three months ended September 30, 2014, there were no material changes to these policies.

37 -------------------------------------------------------------------------------- Overview of the Three Months Ended September 30, 2014 As noted earlier, on October 1, 2013, we consummated the merger and acquired all of Colonial's net assets. Our September 30, 2014 and December 31, 2013 balance sheets include the combined assets and liabilities of MAA and Colonial. All properties acquired from Colonial have been placed in our Non-Same Store operating segment, as the properties are recent acquisitions and have not been owned and stabilized for at least 12 months.

We experienced an increase in income from continuing operations for the three months ended September 30, 2014 over the three months ended September 30, 2013 as increases in revenues outpaced increases in expenses. The increases in revenues came from a 4.7% increase in our large market same store segment, a 1.6% increase in our secondary market same store segment and a 886.1% increase in our non-same store and other segment, which was primarily a result of the merger. The increase in expense came from a 0.1% decrease in our large market same store segment and a 0.2% decrease in our secondary market same store segment both being offset by a 931.6% increase in our non-same store and other segment, which was primarily the result of the merger. Our same store portfolio represents those communities that have been held and have been stabilized for at least 12 months. Communities excluded from the same store portfolio would include recent acquisitions, communities being developed or in lease-up, communities undergoing extensive renovations, and communities identified as discontinued operations. The drivers of these increases are discussed below in the results of operations section.

The following table shows our multifamily real estate assets as of September 30, 2014 and 2013: September 30, 2014 September 30, 2013 Properties 265 160 Units 81,137 48,343 Development Units 514 564 Average Effective Monthly Rent/Unit, excluding lease-up and development $937.93 $891.45 Occupancy, excluding lease-up and development 96.4% 96.3% See discussion of same store average rent per unit and occupancy comparisons in the Trends section below.

In addition to the multi-family assets detailed above, we also owned or owned an interest in four commercial properties totaling 317,000 square feet of leasable space.

Average effective monthly rent per unit is equal to the average of gross rent amounts after the effect of leasing concessions for occupied units plus prevalent market rates asked for unoccupied units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. We believe average effective monthly rent is a helpful measurement in evaluating average pricing. It does not represent actual rental revenue collected per unit.

The following is a discussion of our consolidated financial condition and results of operations for the three- and nine-month periods ended September 30, 2014 and 2013. This discussion should be read in conjunction with all of the consolidated financial statements included in this Quarterly Report on Form 10-Q.

38-------------------------------------------------------------------------------- Results of Operations Comparison of the three months ended September 30, 2014, to the three months ended September 30, 2013 Property Revenues The following table shows our property revenues by segment for the three months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Three months ended September 30, 2014 2013 Increase Percentage Increase Large Market Same Store $ 64,017 $ 61,135 $ 2,882 4.7 % Secondary Market Same Store 62,758 61,753 1,005 1.6 % Non-Same Store and Other 121,995 12,372 109,623 886.1 % Total $ 248,770 $ 135,260 $ 113,510 83.9 % The increases in property revenues from our large market same store and secondary market same store groups are primarily a result of increased average rent per unit of 5.2%. The increase in property revenues from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

Property Operating Expenses Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and depreciation and amortization. The following table shows our property operating expenses by segment for the three months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Three months ended September 30, Percentage 2014 2013 Increase/(Decrease) Increase/(Decrease) Large Market Same Store $ 25,461 $ 25,484 $ (23 ) (0.1 )% Secondary Market Same Store 25,333 25,378 (45 ) (0.2 )% Non-Same Store and Other 49,839 4,831 45,008 931.6 % Total $ 100,633 $ 55,693 $ 44,940 80.7 % The decreases in property operating expenses from our large market same store and secondary market same store groups are primarily a result of decreases in insurance and landscaping expenses. The increase in property operating expenses from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

Depreciation and Amortization The following table shows our depreciation and amortization expense by segment for the three months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Three months ended September 30, 2014 2013 Increase Percentage Increase Large Market Same Store $ 14,637 $ 14,282 $ 355 2.5 % Secondary Market Same Store 15,054 14,942 112 0.7 % Non-Same Store and Other 40,531 3,542 36,989 1,044.3 % Total $ 70,222 $ 32,766 $ 37,456 114.3 % The increase in depreciation and amortization expense from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

39-------------------------------------------------------------------------------- Property Management Expense Property management expense for the three months ended September 30, 2014 was approximately $7.4 million, an increase of $2.5 million from the three months ended September 30, 2013. The majority of the increase was related to increases in payroll expenses and software maintenance fees primarily as a result of the merger.

General and Administrative Expense General and Administrative expense for the three months ended September 30, 2014 was approximately $6.5 million, an increase of $2.5 million from the three months ended September 30, 2013. The majority of the increase was related to increases in stock incentives and payroll expenses primarily as a result of the merger.

Merger Related Expense Merger related expenses, primarily severance, legal, and professional costs for the acquisition of Colonial were approximately $0.3 million for the three months ended September 30, 2014, a decrease of $5.2 million from the three months ended September 30, 2013.

Interest Expense Interest expense for the three months ended September 30, 2014 was approximately $28.3 million, an increase of $13.3 million from the three months ended September 30, 2013. The increase was primarily the result of an increase in our average debt outstanding from the three months ended September 30, 2013 to the three months ended September 30, 2014 of approximately $1.70 billion, due primarily to the assumption of Colonial's debt as a result of the merger.

Debt Extinguishment Loss on debt extinguishment for the three months ended September 30, 2014 was approximately $2.6 million, an increase of $2.4 million from the three months ended September 30, 2013. The increase was primarily the result of the difference between the amount to extinguish debt and the principal balance during the three months ended September 30, 2014 being larger than this difference during the three months ended September 30, 2013.

Gain from Real Estate Joint Ventures Gain from real estate joint ventures for the three months ended September 30, 2014 was approximately $3.1 million, an increase of $3.1 million from the three months ended September 30, 2013. The increase was primarily a result of recording a $2.8 million gain for the promote received from our Fund II partner during the three months ended September 30, 2014. The promote was received as a result of MAA achieving certain performance metrics in its management of the Fund II properties over the life of the joint venture. There was no such gain recorded during the three months ended September 30, 2013.

Discontinued Operations Income from discontinued operations before gain on sale for the three months ended September 30, 2014 was approximately $0.5 million, a decrease of $0.5 million from the three months ended September 30, 2013. The decrease is driven by the fact that the properties included in discontinued operations had lower net income during the three months ended September 30, 2014 as compared to the three months ended September 30, 2013.

We recorded a gain on sale of discontinued operations of $28.8 million for the three months ended September 30, 2013. We did not record a material gain on sale of discontinued operations for the three months ended September 30, 2014 because we did not dispose of any properties which were classified as discontinued operations.

Dispositions of Depreciable Real Estate Assets Excluded from Discontinued Operations We recorded a gain on sale of depreciable assets excluded from discontinued operations of $36.0 million for the three months ended September 30, 2014. We did not record a similar gain for the three months ended September 30, 2013 because we did not dispose of any properties which were excluded from discontinued operations.

40-------------------------------------------------------------------------------- Net Income Attributable to MAA Primarily as a result of the foregoing, net income attributable to MAA increased by approximately $22.7 million for the three months ended September 30, 2014 from the three months ended September 30, 2013.

Comparison of the nine months ended September 30, 2014, to the nine months ended September 30, 2013 Property Revenues The following table shows our property revenues by segment for the nine months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Nine months ended September 30, 2014 2013 Increase Percentage Increase Large Market Same Store $ 187,712 $ 180,012 $ 7,700 4.3 % Secondary Market Same Store 186,260 183,450 2,810 1.5 % Non-Same Store and Other 362,681 31,200 331,481 1,062.4 % Total $ 736,653 $ 394,662 $ 341,991 86.7 % The increases in property revenues from our large market same store and secondary market same store groups are primarily a result of increased average rent per unit of 5.2%. The increase in property revenues from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

Property Operating Expenses Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and depreciation and amortization. The following table shows our property operating expenses by segment for the nine months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Nine months ended September 30, 2014 2013 Increase Percentage Increase Large Market Same Store $ 75,802 $ 73,733 $ 2,069 2.8 % Secondary Market Same Store 74,793 72,995 1,798 2.5 % Non-Same Store and Other 145,023 12,307 132,716 1,078.4 % Total $ 295,618 $ 159,035 $ 136,583 85.9 % The increases in property operating expenses from our large market same store and secondary market same store groups are primarily a result of increases in real estate taxes, water and sewer utilities, and mulch landscaping expenses, with real estate taxes being the largest component. The increase in property operating expenses from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

41-------------------------------------------------------------------------------- Depreciation and Amortization The following table shows our depreciation and amortization expense by segment for the nine months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Nine months ended September 30, 2014 2013 Increase Percentage Increase Large Market Same Store $ 43,602 $ 43,208 $ 394 0.9 % Secondary Market Same Store 44,939 44,718 221 0.5 % Non-Same Store and Other 141,325 9,257 132,068 1,426.7 % Total $ 229,866 $ 97,183 $ 132,683 136.5 % The increase in depreciation and amortization expense from our non-same store and other group is primarily due to the addition of the Colonial portfolio as a result of the merger.

Property Management Expense Property management expense for the nine months ended September 30, 2014 was approximately $24.0 million, an increase of $8.7 million from the nine months ended September 30, 2013. The majority of the increase was related to increases in payroll expenses and software maintenance fees primarily as a result of the merger.

General and Administrative Expense General and Administrative expense for the nine months ended September 30, 2014 was approximately $16.1 million, an increase of $5.5 million from the nine months ended September 30, 2013. The majority of the increase was related to increases in payroll expenses and stock incentives primarily as a result of the merger.

Merger and Integration Related Expense Merger related expenses, primarily severance, legal, and professional costs for the acquisition of Colonial were approximately $3.2 million for the nine months ended September 30, 2014, a decrease of $8.1 million from the nine months ended September 30, 2013. We also incurred integration related expenses, primarily related to temporary systems, staffing, and facilities costs of $7.1 million for the nine months ended September 30, 2014. We did not incur any material integration related expenses for the nine months ended September 30, 2013.

Interest Expense Interest expense for the nine months ended September 30, 2014 was approximately $89.1 million, an increase of $43.4 million from the nine months ended September 30, 2013. The increase was primarily the result of an increase in our average debt outstanding from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 of approximately $1.74 billion, due primarily to the assumption of Colonial's debt as a result of the merger.

Debt Extinguishment Loss on debt extinguishment for the nine months ended September 30, 2014 was approximately $2.6 million, an increase of $2.2 million from the nine months ended September 30, 2013. The increase was primarily the result of the difference between the amount to extinguish debt and the principal balance during the nine months ended September 30, 2014 being larger than this difference during the nine months ended September 30, 2013.

Gain from Real Estate Joint Ventures Gain from real estate joint ventures for the nine months ended September 30, 2014 was approximately $6.0 million, an increase of $5.9 million from the nine months ended September 30, 2013. The increase was primarily a result of recording a $2.8 million gain for the promote received from our Fund II partner during the nine months ended September 30, 2014. The promote was received as a result of MAA achieving certain performance metrics in its management of the Fund II properties over the life of the joint venture. We also sold one joint venture property to external parties during the nine months ended 42 -------------------------------------------------------------------------------- September 30, 2014, resulting in a gain. There were no such gains recorded during the nine months ended September 30, 2013.

Discontinued Operations Income from discontinued operations before gain on sale for the nine months ended September 30, 2014 was approximately $1.4 million, a decrease of $3.1 million from the nine months ended September 30, 2013. The decrease is driven by the fact that the properties included in discontinued operations had lower net income during the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013.

We recorded a gain on sale of discontinued operations of $5.4 million for the nine months ended September 30, 2014 as compared to a $71.9 million gain for the nine months ended September 30, 2013. The decrease in the gain is caused by the proceeds received in 2014 being less than the proceeds received in 2013 in relation to the net book value of the properties sold as well as recording a gain on sale of depreciable assets excluded from discontinued operations in 2014, which is discussed further below.

Dispositions of Depreciable Real Estate Assets Excluded from Discontinued Operations We recorded a gain on sale of depreciable assets excluded from discontinued operations of $42.3 million for the nine months ended September 30, 2014. We did not record a similar gain for the nine months ended September 30, 2013 because we did not dispose of any properties which were excluded from discontinued operations.

Net Income Attributable to MAA Primarily as a result of the foregoing, net income attributable to MAA decreased by approximately $11.1 million for the nine months ended September 30, 2014 from the nine months ended September 30, 2013.

Funds from Operations Funds from operations, or FFO, represents net income (computed in accordance with GAAP) excluding extraordinary items, asset impairment, gains or losses on disposition of depreciable real estate assets, plus net income attributable to noncontrolling interest, depreciation and amortization of real estate, and adjustments for joint ventures to reflect FFO on the same basis. Disposition of real estate assets includes sales of discontinued operations.

FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. We believe that FFO is helpful to investors in understanding our operating performance because its calculation excludes depreciation and amortization expense on real estate assets. We believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. Our calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.

Core FFO represents FFO excluding certain non-cash or non-routine items such as acquisition, merger and integration expenses, mark-to-market debt adjustments and loss or gain on debt extinguishment. While our definition of Core FFO is similar to others in our industry, our precise methodology for calculating Core FFO may differ from that utilized by other REITs and, accordingly, may not be comparable to such other REITs. Core FFO should not be considered as an alternative to net income. MAA believes that Core FFO is helpful in understanding our operating performance in that it removes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.

43-------------------------------------------------------------------------------- The following table is a reconciliation of Core FFO and FFO to net income available for MAA common shareholders for the three and nine months ended September 30, 2014 and September 30, 2013 (dollars in thousands): Three months ended September 30, Nine months ended September 30, 2014 2013 2014 2013 Net income available for MAA common shareholders $ 66,976 $ 44,284 $ 113,455 $ 124,553 Depreciation and amortization of real estate assets 69,613 32,200 228,106 95,641 Depreciation and amortization of real estate assets of discontinued operations - 331 42 2,541 Loss (gain) on sales of discontinued operations 103 (28,788 ) (5,378 ) (71,909 ) Gain on sale of depreciable real estate assets excluded from discontinued operations (36,032 ) - (42,254 ) - Gain on disposition within unconsolidated entities (603 ) - (4,017 ) - Depreciation and amortization of real estate assets of real estate joint ventures 37 253 391 744 Net income attributable to noncontrolling interests 3,743 1,772 6,364 4,536 Funds from operations 103,837 50,052 296,709 156,106 Acquisition expense 13 - 971 499 Merger related expenses 331 5,561 3,202 11,298 Integration related expenses 147 35 7,140 35 Gain on sale of non-depreciable real estate assets - - (535 ) - Mark-to-market debt adjustment (5,328 ) (442 ) (19,568 ) (948 ) Loss on debt extinguishment 2,586 218 3,126 (1) 387 Core funds from operations $ 101,586 $ 55,424 $ 291,045 $ 167,377 (1) The loss on debt extinguishment for the nine months ended September 30, 2014 includes MAA's share of debt extinguishment costs incurred by our joint venture, Mid-America Multifamily Fund II.

FFO for the three months ended September 30, 2014 increased approximately $53.8 million from the three months ended September 30, 2013 primarily as a result of the increase in total property revenues of approximately $113.5 million discussed above that was only partially offset by the $44.9 million increase in property operating expenses as well as the $13.3 million of increased interest expense and $2.5 million of increased property management expense.

FFO for the nine months ended September 30, 2014 increased approximately $140.6 million from the nine months ended September 30, 2013 primarily as a result of the increase in total property revenues of approximately $342.0 million discussed above that was only partially offset by the $136.6 million increase in property operating expenses as well as the $43.4 million of increased interest expense and $8.7 million of increased property management expense.

Core FFO for the three months ended September 30, 2014 increased approximately $46.2 million from the three months ended September 30, 2013 primarily as a result of the increase in total property revenues of approximately $113.5 million discussed above that was only partially offset by the $44.9 million increase in property operating expenses as well as the $18.7 million of increased interest expense (excluding the impact of mark to market adjustment) and $2.5 million of increased property management expense.

Core FFO for the nine months ended September 30, 2014 increased approximately $123.7 million from the nine months ended September 30, 2013 primarily as a result of the increase in total property revenues of approximately $342.0 million discussed above that was only partially offset by the $136.6 million increase in property operating expenses as well as the $63.0 million of increased interest expense (excluding the impact of mark to market adjustment) and $8.7 million of increased property management expense.

44-------------------------------------------------------------------------------- Trends During the three months ended September 30, 2014, rental demand for apartments was strong, as it was during the three months ended September 30, 2013. This strength was evident on two fronts: same store average physical occupancy during the three months ended September 30, 2014 was strong, ending the quarter at 96.4% occupancy and averaging in excess of 95.6% for the quarter; while same store effective rent per unit continued to grow, up 3.2% in the three months ended September 30, 2014 as compared to the three months ended September 30, 2013. In addition, effective rent was up 3.5% for the month of September 2014 as compared to the month of September 2013. We have maintained this momentum despite job formation, one of the primary drivers of apartment demand, continuing to increase at a slower pace than a typical growth cycle.

An important part of our portfolio strategy is to maintain a broad diversity of markets across the Sunbelt region of the United States. The diversity of markets tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well-diversified portfolio, including both large and select secondary markets, will perform well in "up" cycles as well as weather "down" cycles better. As of September 30, 2014, we were invested in approximately 47 defined Metropolitan Statistical Areas, with approximately 64% of our multifamily assets, based on gross assets, in large markets and 36% of our multifamily assets in select secondary markets.

New supply of rental units entering the market remained below peak new supply delivery averages, but multifamily permitting did pick up in 2013 and has continued into 2014. We believe this permitting will ultimately lead to an increase in supply but also believe the lack of new apartments in recent years combined with demand from new households will help keep supply and demand in balance. Also, we believe that more sustainable credit terms for residential mortgages should work to favor rental demand at existing multi-family properties. Competition from condominiums reverting back to rental units, or new condominiums being converted to rental, has not been a major factor in our portfolio because most of our submarkets have not been primary areas for condominium development. We have found the same to be true for rental competition from single family homes. We have avoided committing a significant amount of capital to markets or submarkets where most of the excessive inflation in house prices occurred. We saw significant rental competition from condominiums or single family houses in only a few of our submarkets. Long term, we expect demographic trends (including the growth of prime age groups for rentals and immigration and population movement to the southeast and southwest) will continue to build apartment rental demand for our markets.

Our focus is on maintaining strong physical occupancy while increasing pricing where possible through our revenue management system. As noted above, physical occupancy ended the quarter strong while sequential effective rent growth accelerated over the quarter ended June 30, 2014. As we move into the fall leasing season, physical occupancy is strong. This puts us in a good position to maintain occupancy while maximizing pricing in the fourth quarter of 2014.

We continue to develop improved products, operating systems and procedures that we believe enable us to capture more revenues. The continued benefit of ancillary services (such as our cable saver and deposit saver programs), improved collections and utility reimbursements enable us to capture increased revenue. We also actively work on improving processes and products to reduce expenses, such as new web-sites and internet access for our residents that enable them to transact their business with us more simply and effectively.

Liquidity and Capital Resources Net cash flow provided by operating activities increased to $323.1 million for the nine months ended September 30, 2014 from $168.8 million for the nine months ended September 30, 2013. This change was a result of various items, including merger related activities driving higher revenue as discussed above.

Net cash used in investing activities was approximately $81.4 million during the nine months ended September 30, 2014 compared to $94.4 million used in investing activities during the nine months ended September 30, 2013. The decrease in outflows is due to the factors discussed below. In the nine months ended September 30, 2014, we had acquisition cash outflows of $180.3 million compared to $89.9 million for the nine months ended September 30, 2013. We also had outflows of $71.1 million for normal capital improvements during the nine months ended September 30, 2014 compared to only $35.4 million during the nine months ended September 30, 2013. During the nine months ended September 30, 2014, we had cash outflows of $40.8 million for development activities, compared to $26.1 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2014, we also had cash outflows of $12.0 million for improvements to existing real estate assets compared to $8.6 million for the nine months ended September 30, 2013. The cash outflows from investing activities were offset by an increase in cash inflows from disposition activity.

During the nine months ended September 30, 2014, we had cash inflows of approximately $241.7 million, which were related to the sale of eleven properties and five outparcels. During the nine months ended September 30, 2013, we had $118.8 million of cash inflows from eight 45 -------------------------------------------------------------------------------- property sales. During the nine months ended September 30, 2014 we received distributions from real estate joint ventures of $16.0 million compared to only $8.3 million during the nine months ended September 30, 2013. Also, funding of escrow accounts for future acquisitions decreased from $57.4 million during the nine months ended September 30, 2013 to $30.5 million during the nine months ended September 30, 2014.

As of September 30, 2014, we owned 75,242,266 OP Units, comprising a 94.7% limited partnership interest in the Operating Partnership, while the remaining 4,202,123 outstanding OP Units were held by limited partners of the Operating Partnership. Holders of OP Units (other than us and our affiliates) may require us to redeem their OP Units from time to time, in which case we may, at our option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of our common stock on the New York Stock Exchange over a specified period prior to the redemption date) or by delivering one share of our common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed. In addition, we have registered the 4,202,123 shares of our common stock, which as of September 30, 2014, were issuable upon redemption of OP Units held by the Operating Partnership's limited partners under the Securities Act of 1933, as amended, so that those shares can be sold freely in the public markets. To the extent that additional OP Units are issued to limited partners of the Operating Partnership, we will likely register the additional shares of common stock issuable upon redemption of those OP Units under the Securities Act of 1933, as amended, so that those shares can also be sold in the public markets. If we issue shares of our common stock upon the redemption of OP Units in our Operating Partnership, sales of substantial amounts of such shares of our common stock, or the perception that these sales could occur, may adversely affect prevailing market prices for our common stock or may impair our ability to raise capital through the sale of our common stock or other equity securities.

Net cash used in financing activities was approximately $243.3 million for the nine months ended September 30, 2014 compared to $97.6 million provided by financing activities for the nine months ended September 30, 2013. During the nine months ended September 30, 2014 we paid $164.3 million in dividends and $9.2 million in distributions to noncontrolling interests compared to $88.8 million of dividends and $3.6 million of distributions paid during the nine months ended September 30, 2013. We made $258.1 million in principal payments, $253.4 million of which related to the pay-off of various notes and mortgages, during the nine months ended September 30, 2014 compared to $8.7 million of principal payments during the nine months ended September 30, 2013. In the nine months ended September 30, 2014, we had cash inflows of $396.5 million from proceeds of notes payable compared to none for the nine months ended September 30, 2013. We paid $4.2 million in deferred financing costs during the nine months ended September 30, 2014 compared to only $2.7 million during the nine months ended September 30, 2013. In the nine months ended September 30, 2014, we received proceeds of approximately $0.7 million primarily from the issuance of common stock through the optional cash feature of our DRSPP. During the nine months ended September 30, 2013, we received proceeds of approximately $25.0 million primarily through our at-the-market program, or ATM, and the DRSPP. In the nine months ended September 30, 2014, we had cash outflows of $216.2 million from the net change in credit lines compared to $177.0 million of inflows from the net change in credit lines for the nine months ended September 30, 2013. We also received proceeds of $11.9 million related to the exercise of stock options during the nine months ended September 30, 2014. There were no exercises of stock options during the nine months ended September 30, 2013.

During nine months ended September 30, 2014, we sold no shares of common stock through our ATM. This compares to 365,011 shares of common stock sold for net proceeds of approximately $24.8 million for the nine months ended September 30, 2013. As of September 30, 2014, there were 4,134,989 shares outstanding under our ATM.

The weighted average interest rate at September 30, 2014 for the $3.43 billion of debt outstanding was 3.7%, compared to the weighted average interest rate of 3.2% on $1.86 billion of debt outstanding at September 30, 2013. We utilize both conventional and tax exempt debt to help finance our activities. Borrowings are made through individual property mortgages, company-wide secured and unsecured credit facilities, and private and public unsecured notes. We utilize fixed rate borrowings, interest rate swaps and interest rate caps to manage our current and future interest rate risk. More details on our borrowings can be found in the schedules presented later in this section.

At September 30, 2014, we had secured credit facility relationships with Prudential Mortgage Capital which are credit enhanced by Fannie Mae and a $500 million unsecured facility with a syndicate of banks. Together, these credit facilities provided a total line capacity of $1.16 billion with all but $230.0 million collateralized and available to borrow at September 30, 2014. We had total borrowings outstanding under these credit facilities of $437.0 million at September 30, 2014.

Approximately 12.7% of our outstanding obligations at September 30, 2014 were borrowed through credit facilities with/or credit enhanced by Fannie Mae, also referred to as the Fannie Mae Facilities. The Fannie Mae Facilities have a combined line limit of $663.2 million, of which $437.0 million was collateralized and available to borrow at September 30, 2014. We had total borrowings outstanding under the Fannie Mae Facilities of approximately $437.0 million at September 30, 46-------------------------------------------------------------------------------- 2014. Various Fannie Mae rate traunches of the Fannie Mae Facilities mature from 2014 through 2018. The Fannie Mae Facilities provide for both fixed and variable rate borrowings. The interest rate on the majority of the variable portion is based on the Fannie Mae Discount Mortgage Backed Security, or DMBS, rate which are credit-enhanced by Fannie Mae and are typically sold every 90 days by Prudential Mortgage Capital at interest rates approximating three-month LIBOR less a spread that has averaged 0.17% over the life of the Fannie Mae Facilities, plus a credit enhancement fee of 0.49% to 0.67%. We have seen more volatility in the spread between the DMBS and three-month LIBOR since late 2007 than was historically prevalent.

On June 27, 2014, we paid off $198.2 million under our credit facility with/or credit enhanced by Freddie Mac, also referred to as the Freddie Mac Facility. As of September 30, 2014, we no longer had any borrowings outstanding through the Freddie Mac Facility.

We currently maintain a $500.0 million unsecured credit facility with fourteen banks led by KeyBank National Association (Key Bank). The Key Bank credit facility bears an interest rate of LIBOR plus a spread of 0.90% to 1.70%, currently bearing interest at 1.10%, based on an investment grade pricing grid.

This facility has an accordion feature which allows for expansion up to $800.0 million. This credit facility expires in August 2017 with two separate six-month extension options after the initial maturity date. At September 30, 2014, we had $496.2 million available to be borrowed under the Key Bank credit facility agreement with zero borrowings under this facility. Approximately $3.8 million of the facility is used to support letters of credit.

Each of our credit facilities is subject to various covenants and conditions on usage, and the secured facilities are subject to periodic re-evaluation of collateral. If we were to fail to satisfy a condition to borrowing, the available credit under one or more of the facilities could not be drawn, which could adversely affect our liquidity. In the event of a reduction in real estate values the amount of available credit could be reduced. Moreover, if we were to fail to make a payment or violate a covenant under a credit facility, after applicable cure periods, one or more of our lenders could declare a default, accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing such facilities. A default on an obligation to repay outstanding debt could also create a cross default on a separate piece of debt, whereby one or more of our lenders could accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing the related facilities. Any such event could have a material adverse effect.

On October 16, 2013, MAALP issued $350 million in aggregate principal amount of notes, maturing on October 15, 2023 with an interest rate of 4.3% per annum (the "2023 Notes"). The purchase price paid by the initial purchasers was 99.047% of the principal amount. The 2023 Notes are general unsecured senior obligations of MAALP and rank equally in right of payment with all other senior unsecured indebtedness of MAALP. Interest on the 2023 Notes is payable on April 15 and October 15 of each year, beginning on April 15, 2014. The net proceeds from the offering after deducting the original issue discount of approximately $3.3 million and underwriting commissions and expenses of approximately $2.3 million were approximately $344.4 million. The 2023 Notes have been reflected net of discount in the consolidated balance sheet. The Company transacted three swaps totaling $150 million, which resulted in a total effective interest rate of 4.15%.

On December 13, 2013, MAALP completed a series of exchange offers (the "Exchange Offers") pursuant to which it exchanged $154,235,000 aggregate principal amount of 6.25% Senior Notes due 2014, $169,161,000 aggregate principal amount of 5.50% Senior Notes due 2015 and $68,130,000 aggregate principal amount of 6.05% Senior Notes due 2016 (collectively, the "Existing Notes") issued by Colonial Realty Limited Partnership, a Delaware limited partnership and wholly owned subsidiary of MAALP, for $154,235,000 aggregate principal amount of MAALP's new 6.25% Senior Notes due 2014 (the "2014 Notes"), $169,112,000 aggregate principal amount of MAALP's new 5.50% Senior Notes due 2015 (the "2015 Notes") and $68,130,000 aggregate principal amount of MAALP's new 6.05% Senior Notes due 2016 (the "2016 Notes" and together with the 2014 Notes and the 2015 Notes, the "Exchange Notes"), plus approximately $975,000 in cash.

The Exchange Notes are senior unsecured obligations of MAALP and will rank equally in right of payment with all of MAALP's other existing and future senior unsecured indebtedness. Interest on the 2014 Notes accrued from, and including, December 15, 2013 and were payable on June 15, 2014, which was the maturity date for the 2014 Notes. Interest on the 2015 Notes will accrue from, and including, October 1, 2013 and will be payable semiannually on April 1 and October 1 of each year, beginning on April 1, 2014. Interest on the 2016 Notes accrued from, and including, September 1, 2013 and was paid on March 1, 2014. Interest payments will be payable semiannually on March 1 and September 1 of each year, beginning on March 1, 2014. In certain circumstances described below MAALP may be required to pay additional interest on the Exchange Notes.

On June 10, 2014, MAALP issued $400 million in aggregate principal amount of notes, maturing on June 15, 2024 with an interest rate of 3.75% per annum (the "2024 Notes"). The purchase price paid by the initial purchasers was 98.873% of the principal amount. The 2024 Notes are general unsecured senior obligations of MAALP and rank equally in right of payment with all other senior unsecured indebtedness of MAALP. Interest on the 2024 Notes is payable on June 15 and 47 -------------------------------------------------------------------------------- December 15 of each year, beginning on December 15, 2014. The net proceeds from the offering after deducting the original issue discount of approximately $4.5 million and underwriting commissions and expenses of approximately $2.6 million was approximately $392.9 million. The 2024 Notes have been reflected net of discount in the consolidated balance sheet. The Company entered into five forward swaps totaling $250 million, which resulted in a total effective interest rate of 3.98%.

The Indenture under which the 2023 and 2024 notes were issued contains certain covenants that, among other things, limit the ability of MAALP and its subsidiaries to incur secured and unsecured indebtedness if not in pro forma compliance with the following negative covenants: (1) total leverage not to exceed 60% of adjusted total assets, (2) secured leverage not to exceed 40% of adjusted total assets and (3) a fixed charge coverage ratio of at least 1.50 to 1. In addition, MAALP is required to maintain at all times unencumbered consolidated total assets of not less than 150% of the aggregate principal amount of its outstanding unsecured debt. At September 30, 2014, MAALP was in compliance with each of these financial covenants.

All of the Existing Notes tendered into the Exchange Offers were cancelled in connection with the settlement of the Exchange Offers. In connection with the issuance and sale of the Exchange Notes, MAALP also entered into three separate registration rights agreements, each dated as of December 13, 2013, and each with J.P. Morgan Securities LLC, the dealer manager in the Exchange Offers (the "Registration Rights Agreements"). Under the Registration Rights Agreements, MAALP agreed to use commercially reasonable efforts to complete exchange offers registered under the Securities Act pursuant to which MAALP will offer to issue new exchange notes containing terms substantially similar in all material respects to the Exchange Notes (except that the exchange notes will not contain terms with respect to transfer restrictions or any increase in annual interest rate) in exchange for the Exchange Notes. MAALP also agreed, if it determines that a registered exchange offer is not available or specified other circumstances occur, to use commercially reasonable efforts to file and have become effective a shelf registration statement relating to resales of the Exchange Notes. MAALP will be obligated to pay additional interest of up to 0.50% per annum on the Exchange Notes if it does not complete the exchange offers within 270 days after the issue date of the Exchange Notes and in other specified circumstances. We completed the exchange within the 270 day window and did not incur the additional interest.

On October 1, 2013, we acquired the Colonial term loan agreements with Wells Fargo and U.S. Bank Association of $250 million and $150 million, respectively.

The Wells Fargo term loan bore interest at a rate of LIBOR plus a spread of 1.65% to 2.90% based on the credit ratings of our unsecured debt from time to time. The loan matures on August 1, 2018. On July 25, 2014, we repriced the Wells Fargo term loan, and it now bears interest at a rate of LIBOR plus a spread of 0.90% to 1.90% based on the credit ratings of our unsecured debt from time to time. The maturity date was not changed. As of September 30, 2014, the loan is bearing interest at a rate of LIBOR plus 1.15%. The U.S. Bank National Association term loan bears interest at a rate of LIBOR plus a spread of 1.10% to 2.05% based on the credit ratings of our unsecured debt from time to time and matures on May 11, 2017. As of September 30, 2014, it is bearing interest at a rate of LIBOR plus 1.40%. Including our term loan agreement with Key Bank and J.P. Morgan, we had total borrowings of $550 million outstanding under these term loan agreements at September 30, 2014.

As of September 30, 2014, we had entered into interest rate swaps totaling a notional amount of $625.0 million. To date, these swaps have proven to be highly effective hedges. We had also entered into interest rate cap agreements totaling a notional amount of approximately $255.3 million as of September 30, 2014.

48-------------------------------------------------------------------------------- The following schedule outlines our variable versus fixed rate debt, including the impact of interest rate swaps and caps, outstanding as of September 30, 2014 (dollars in thousands): Average Years to Principal Rate Effective Balance Maturity Rate SECURED DEBT Conventional - Fixed Rate or Swapped $ 1,215,496 4.8 4.1 % Conventional - Variable Rate - Capped (1) 192,096 1.7 1.1 % Tax-free - Variable Rate - Capped (1) 90,415 3.4 0.9 % Total Fixed or Hedged Rate Maturity $ 1,498,007 4.3 3.5 % Conventional - Variable Rate (2) 56,585 0.1 0.7 % Total Secured Rate Maturity $ 1,554,592 4.2 3.4 % UNSECURED DEBT Fixed Rate or Swapped $ 1,875,422 5.2 4.0 % Total Unsecured Rate Maturity $ 1,875,422 5.2 4.0 % TOTAL DEBT RATE MATURITY $ 3,430,014 4.7 3.7 % TOTAL FIXED OR HEDGED DEBT RATE MATURITY $ 3,373,429 4.8 3.8 % (1) The effective rate represents the average rate on the underlying variable debt unless the cap rates are reached, which average 4.6% of LIBOR for conventional caps and 6% of SIFMA for tax-free caps.

(2) Includes $27 million of mortgages with an imbedded cap at a 7% all-in interest rate.

The following schedule outlines the interest rate maturities of our outstanding debt as of September 30, 2014 (dollars in thousands): Interest Rate Total Fixed Interest Rate Total Fixed or Fixed Rate Debt Swaps Rate Balances Contract Rate Caps Hedged 2014 $ - $ - $ - - % $ - $ - 2015 252,262 75,000 327,262 5.3 % 51,896 379,158 2016 115,834 - 115,834 5.2 % 104,480 220,314 2017 131,723 300,000 431,723 2.2 % 66,495 498,218 2018 103,149 250,000 353,149 3.2 % 32,945 386,094 Thereafter 1,862,950 - 1,862,950 4.8 % 26,695 1,889,645 Total $ 2,465,918 $ 625,000 $ 3,090,918 4.3 % $ 282,511 $ 3,373,429 The following schedule outlines the contract maturities of our outstanding debt as of September 30, 2014 (dollars in thousands): Credit Facilities Fannie Mae Secured Key Bank Unsecured Other Secured Other Unsecured Total 2014 $ - $ - $ - $ - $ - 2015 105,785 - 71,960 192,015 $ 369,760 2016 80,000 - 51,183 79,682 $ 210,865 2017 80,000 - 63,534 318,190 $ 461,724 2018 80,000 - 52,263 300,909 $ 433,172 Thereafter 91,215 - 878,652 984,626 $ 1,954,493 Total $ 437,000 $ - $ 1,117,592 $ 1,875,422 $ 3,430,014 49-------------------------------------------------------------------------------- We believe that we have adequate resources to fund our current operations, annual refurbishment of our properties, and incremental investment in new apartment properties. We rely on the efficient operation of the financial markets to refinance debt maturities, and on rate renewals for Fannie Mae.

Fannie Mae provided credit enhancement for approximately $437.0 million of our outstanding debt through credit facilities as of September 30, 2014.

The interest rate markets for Fannie Mae DMBS, which in our experience are highly liquid and highly correlated with three-month LIBOR interest rates, are also an important component of our liquidity and interest rate swap effectiveness. Prudential Mortgage Capital, a Delegated Underwriting and Servicing (DUS) lender for Fannie Mae, markets 90-day Fannie Mae Discount Mortgage Backed Securities monthly, and is obligated to advance funds to us at DMBS rates plus a credit spread under the terms of the credit agreements between Prudential and us.

For the quarter ended September 30, 2014, our net cash provided by operating activities was in excess of covering funding of normal capital improvements to existing real estate assets, distributions to unitholders, and dividends paid on common and preferred shares by approximately $78.4 million, as compared to $41.0 million for the same period in 2013. While we had sufficient liquidity to permit distributions at current rates through additional borrowings, if necessary, any significant deterioration in operations could result in our financial resources being insufficient to pay distributions to shareholders at the current rate, in which event we would be required to reduce the distribution rate.

The following table reflects our total contractual cash obligations which consist of our long-term debt, development fees and operating leases as of September 30, 2014 (dollars in thousands): Contractual Obligations (1) 2014 2015 2016 2017 2018 Thereafter Total Long-Term Debt Obligations (2) $ 2,945 $ 395,576 $ 205,429 $ 469,863 $ 392,639 $ 1,963,562 $ 3,430,014 Fixed Rate or Swapped Interest (3) 33,804 97,179 82,335 70,935 62,809 218,596 565,658 Purchase Obligations (4) 936 - - - - - 936 Operating Lease Obligations 62 249 249 244 174 - 978 Total $ 37,747 $ 493,004 $ 288,013 $ 541,042 $ 455,622 $ 2,182,158 $ 3,997,586 (1) Fixed rate and swapped interest are shown in this table. The average interest rates of variable rate debt are shown in preceding tables.

(2) Represents principal payments.

(3) Swapped interest is subject to the ineffective portion of cash flow hedges as described in Note 8 to the financial statements.

(4) Represents development fees.

Off-Balance Sheet Arrangements At September 30, 2014, and 2013, we did not have any relationships with unconsolidated entities or financial partnerships established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Mid-America Multifamily Fund I, LLC, was established to acquire $500 million of apartment communities with redevelopment upside offering value creation opportunity through capital improvements, operating enhancements and restructuring in-place financing. As of September 30, 2014, Mid-America Multifamily Fund I, LLC was legally dissolved and owned zero properties.

Mid-America Multifamily Fund II, LLC, was established to acquire $250 million of apartment communities with redevelopment upside offering value creation opportunity through capital improvements, operating enhancements and restructuring in-place financing. As of September 30, 2014, Mid-America Multifamily Fund II, LLC owned zero properties. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships. We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties other than those disclosed in Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 17 in our Annual Report on Form 10-K filed with the SEC on February 21, 2014.

Our investments in our real estate joint ventures are unconsolidated and are recorded using the equity method for the joint ventures in which we do not have a controlling interest.

50-------------------------------------------------------------------------------- Insurance We renegotiated our insurance programs effective July 1, 2014. We believe that the property and casualty insurance program in place provides appropriate insurance coverage for financial protection against insurable risks such that any insurable loss experienced that can be reasonably anticipated would not have a significant impact on our liquidity, financial position or results of operation.

Inflation Our resident leases at the apartment communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable us to seek rent increases. Almost all leases are for one year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation.

Impact of Recently Issued Accounting Standards In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 requires an entity's management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. If substantial doubt exists, the entity must disclose the principal conditions or events that raised the substantial doubt, management's evaluation of the significance of these conditions, and management's plan for alleviating the substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016; however, early adoption is permitted.

The Company is currently in the process of evaluating the impact of the ASU, but does not expect the adoption of this ASU to have a material impact on our consolidated financial position or results of operations taken as a whole.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial condition and results of operations taken as a whole, but does not expect the impact to be material.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 raises the threshold for disposals to qualify as discontinued operations. It also requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. The ASU is effective for fiscal years beginning after December 15, 2014, and interim periods within those years; however, early adoption is permitted beginning in the first quarter of 2014. We adopted ASU 2014-08 during the period ending March 31, 2014. The adoption of ASU 2014-08 required us to not classify certain disposals occurring during 2014 as discontinued operations.

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2013-01 clarifies that the scope of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, would apply to derivatives accounted for in accordance with FASB ASC 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. This ASU is effective for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods. We adopted ASU 2013-01 during the period ended March 31, 2013. The adoption of ASU 2013-01 has not had a material impact on our consolidated financial condition or results of operations taken as a whole.

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