UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission file number: 1-12110

CAMDEN PROPERTY TRUST

(Exact Name of Registrant as Specified in Its Charter)

Texas		76-6088377
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
3 Greenway Plaza, Suite 1300
Houston, Texas		77046
(Address of principle executive offices)		(Zip Code)

(713) 354-2500
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o Not applicable þ*

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o

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

On May 3, 2010, 65,848,542 common shares of the registrant were outstanding.

 

 

CAMDEN PROPERTY TRUST
Table of Contents

		Page
PART I FINANCIAL INFORMATION			3
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three months ended March 31, 2010 and 2009			4
Condensed Consolidated Statements of Equity (Unaudited) for the three months ended March 31, 2010 and 2009			6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2010 and 2009			8
Notes to Condensed Consolidated Financial Statements (Unaudited)			9
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3 Quantitative and Qualitative Disclosures About Market Risk			36
Item 4 Controls and Procedures			36
Part II OTHER INFORMATION			37
Item 1 Legal Proceedings			37
Item 1A Risk Factors			37
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3 Defaults Upon Senior Securities			37
Item 4 Reserved			37
Item 5 Other Information			37
Item 6 Exhibits			37
SIGNATURES			38
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		March 31,				December 31,
(in thousands, except per share amounts)		2010				2009
Assets
Real estate assets, at cost
Land		$	748,604			$	747,921
Buildings and improvements			4,527,523				4,512,124
			5,276,127				5,260,045
Accumulated depreciation			(1,191,604	)			(1,149,056	)
Net operating real estate assets			4,084,523				4,110,989
Properties under development, including land			196,371				201,581
Investments in joint ventures			42,994				43,542
Total real estate assets			4,323,888				4,356,112
Accounts receivable — affiliates			32,657				36,112
Notes receivable — affiliates			46,118				45,847
Other assets, net			92,983				102,114
Cash and cash equivalents			28,553				64,156
Restricted cash			3,680				3,658
Total assets		$	4,527,879			$	4,607,999
Liabilities and equity
Liabilities
Notes payable
Unsecured		$	1,590,473			$	1,645,926
Secured			980,188				979,273
Accounts payable and accrued expenses			69,858				74,420
Accrued real estate taxes			17,005				23,241
Distributions payable			33,403				33,025
Other liabilities			138,136				145,176
Total liabilities			2,829,063				2,901,061
Commitments and contingencies
Perpetual preferred units			97,925				97,925
Equity
Common shares of beneficial interest; $0.01 par value per share; 100,000 shares authorized; 80,567 and 79,543 issued; 77,793 and 76,996 outstanding, respectively			778				770
Additional paid-in capital			2,548,722				2,525,656
Distributions in excess of net income attributable to common shareholders			(520,798	)			(492,571	)
Notes receivable secured by common shares			(101	)			(101	)
Treasury shares, at cost (12,879 and 12,897 shares, respectively)			(461,517	)			(462,188	)
Accumulated other comprehensive loss			(42,093	)			(41,155	)
Total common equity			1,524,991				1,530,411
Noncontrolling interests			75,900				78,602
Total equity			1,600,891				1,609,013
Total liabilities and equity		$	4,527,879			$	4,607,999

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months
		Ended March 31,
(in thousands, except per share amounts)		2010				2009
Property revenues
Rental revenues		$	131,161			$	136,500
Other property revenues			21,045				20,532
Total property revenues			152,206				157,032
Property expenses
Property operating and maintenance			44,613				42,304
Real estate taxes			18,445				18,601
Total property expenses			63,058				60,905
Non-property income
Fee and asset management			1,838				2,031
Interest and other income			3,045				735
Income (loss) on deferred compensation plans			3,482				(4,152	)
Total non-property income (loss)			8,365				(1,386	)
Other expenses
Property management			5,183				4,929
Fee and asset management			1,194				1,135
General and administrative			7,404				8,232
Interest			31,555				32,245
Depreciation and amortization			43,813				43,980
Amortization of deferred financing costs			726				817
Expense (benefit) on deferred compensation plans			3,482				(4,152	)
Total other expenses			93,357				87,186
Gain on early retirement of debt			—				166
Equity in income (loss) of joint ventures			(105	)			408
Income from continuing operations before income taxes			4,051				8,129
Income tax expense — current			(270	)			(299	)
Income from continuing operations			3,781				7,830
Income from discontinued operations			—				675
Net income			3,781				8,505
Less (income) loss allocated to noncontrolling interests from continuing operations			254				(521	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)
Net income attributable to common shareholders		$	2,285			$	6,234

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months
		Ended March 31,
(in thousands, except per share amounts)		2010				2009
Earnings per share — basic
Income from continuing operations attributable to common shareholders		$	0.03			$	0.10
Income from discontinued operations, attributable to common shareholders			—				0.01
Net income attributable to common shareholders		$	0.03			$	0.11
Earnings per share — diluted
Income from continuing operations attributable to common shareholders		$	0.03			$	0.10
Income from discontinued operations, attributable to common shareholders			—				0.01
Net income attributable to common shareholders		$	0.03			$	0.11
Distributions declared per common share		$	0.45			$	0.70
Weighted average number of common shares outstanding			66,475				55,552
Weighted average number of common and common dilutive equivalent shares outstanding			68,169				56,047
Net income attributable to common shareholders
Income from continuing operations		$	3,781			$	7,830
Less (income) loss allocated to noncontrolling interests from continuing operations			254				(521	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)
Income from continuing operations attributable to common shareholders			2,285				5,559
Income from discontinued operations attributable to common shareholders			—				675
Net income attributable to common shareholders		$	2,285			$	6,234
Condensed Consolidated Statements of Comprehensive Income:
Net income		$	3,781			$	8,505
Other comprehensive income (loss)
Unrealized loss on cash flow hedging activities			(6,817	)			(2,936	)
Reclassification of net losses on cash flow hedging activities			5,879				5,276
Comprehensive income			2,843				10,845
Less (income) loss allocated to noncontrolling interests from continuing operations			254				(521	)
Less income allocated to perpetual preferred units			(1,750	)			(1,750	)
Comprehensive income attributable to common shareholders		$	1,347			$	8,574

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

		Common Shareholders
														Notes
		Common												receivable								Accumulated
		shares of				Additional				Distributions				secured by				Treasury				other
		beneficial				paid-in				in excess of				common				shares, at				comprehensive				Noncontrolling								Perpetual
(in thousands, except per share amounts)		interest				capital				net income				shares				cost				loss				interests				Total equity				preferred units
January 1, 2010		$	770			$	2,525,656			$	(492,571	)		$	(101	)		$	(462,188	)		$	(41,155	)		$	78,602			$	1,609,013			$	97,925
Net income (loss)											2,285																(254	)			2,031				1,750
Other comprehensive income (loss)																							(938	)							(938	)
Common shares issued			4				17,196																								17,200
Net share awards			4				3,169																								3,173
Employee stock purchase plan							(180	)											671												491
Share awards placed into deferred plans			(2	)			2																								—
Common share options exercised							1,731																								1,731
Conversions and redemptions of operating partnership units			2				1,148																				(1,150	)			—
Distributions to perpetual preferred units																																			(1,750	)
Cash distributions to equity holders											(30,512	)															(1,298	)			(31,810	)
March 31, 2010		$	778			$	2,548,722			$	(520,798	)		$	(101	)		$	(461,517	)		$	(42,093	)		$	75,900			$	1,600,891			$	97,925

CAMDEN PROPERTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

		Common Shareholders
										Distributions
										in excess of				Notes
		Common								net income				receivable								Accumulated
		shares of				Additional				attributable				secured by								other												Perpetual
		beneficial				paid-in				to common				common				Treasury				comprehensive				Noncontrolling								preferred
(in thousands, except per share amounts)		interest				capital				shareholders				shares				shares				loss				interests				Total equity				units
January 1, 2009		$	660			$	2,237,703			$	(312,309	)		$	(295	)		$	(463,209	)		$	(51,056	)		$	89,862			$	1,501,356			$	97,925
Net income											6,234																521				6,755				1,750
Other comprehensive income																							2,340								2,340
Net share awards			3				2,752																								2,755
Employee stock purchase plan							(79	)											464												385
Repayment of notes receivable secured by common shares, net															4																4
Share awards placed into deferred plans			2				(2	)																							—
Common share options exercised							155																								155
Conversions and redemptions of operating partnership units			1				1,763																				(1,780	)			(16	)
Common shares repurchased																			(6	)											(6	)
Purchase of noncontrolling interests							648																				(748	)			(100	)
Distributions to perpetual preferred units																																			(1,750	)
Cash distributions to equity holders											(39,406	)															(2,124	)			(41,530	)
March 31, 2009		$	666			$	2,242,940			$	(345,481	)		$	(291	)		$	(462,751	)		$	(48,716	)		$	85,731			$	1,472,098			$	97,925

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months
		Ended March 31,
(in thousands)		2010				2009
Cash flows from operating activities
Net income		$	3,781			$	8,505
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization, including discontinued operations			43,507				43,060
Distributions of income from joint ventures			1,336				1,427
Equity in (income) loss of joint ventures			105				(408	)
Interest from notes receivable — affiliates			(102	)			(36	)
Share-based compensation			3,130				2,160
Gain on early retirement of debt			—				(166	)
Amortization of deferred financing costs			726				817
Accretion of discount on unsecured notes payable			127				142
Net change in operating accounts			(10,858	)			(4,330	)
Net cash from operating activities		$	41,752			$	51,171
Cash flows from investing activities
Development and capital improvements		$	(11,063	)		$	(18,620	)
Payments received on notes receivable — other			—				8,710
Increase in notes receivable — affiliates			(175	)			—
Investments in joint ventures			(281	)			(310	)
Other			(176	)			1,161
Net cash from investing activities		$	(11,695	)		$	(9,059	)
Cash flows from financing activities
Net increase in unsecured line of credit and short-term borrowings		$	—			$	96,000
Repayment of notes payable			(56,120	)			(100,009	)
Proceeds from notes payable			1,761				4,116
Proceeds from issuance of common shares			17,200				—
Distributions to common shareholders, perpetual preferred units and noncontrolling interests			(33,155	)			(43,155	)
Common share options exercised			894				—
Payment of deferred financing costs			(343	)			(465	)
Net decrease in accounts receivable — affiliates			3,455				917
Other			648				333
Net cash from financing activities		$	(65,660	)		$	(42,263	)
Net decrease in cash and cash equivalents			(35,603	)			(151	)
Cash and cash equivalents, beginning of period			64,156				7,407
Cash and cash equivalents, end of period		$	28,553			$	7,256
Supplemental information
Cash paid for interest, net of interest capitalized		$	23,006			$	27,955
Supplemental schedule of noncash investing and financing activities
Distributions declared but not paid		$	33,403			$	43,136
Value of shares issued under benefit plans, net of cancellations			13,709				7,779
Conversion of operating partnership units to common shares			1,150				1,756
Accrual associated with construction and capital expenditures			2,261				2,863

See Notes to Condensed Consolidated Financial Statements.

CAMDEN PROPERTY TRUST

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Description of Business

Business. Formed on May 25, 1993, Camden Property Trust, a Texas real estate investment trust (“REIT”), is engaged in the ownership, development, construction, and management of multifamily apartment communities. Our multifamily apartment communities are referred to as “communities,” “multifamily communities,” “properties,” or “multifamily properties” in the following discussion. As of March 31, 2010, we owned interests in or operated 185 multifamily properties comprising 63,658 apartment homes across the United States. In addition, we own land parcels we may develop into multifamily apartment communities.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Principles of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are continuously evaluated based on the accounting guidance relating to variable interest entities (“VIEs”), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under the remaining consolidation guidance relating to real estate. If we are the general partner in a limited partnership, or manager of a limited liability company, we also consider the consolidation guidance relating to the rights of limited partners or non-managing members, as the case may be, to assess whether any rights held by the limited partners or non-managing members, as the case may be, overcome the presumption of control by us.

Interim Financial Reporting. We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these statements do not include all information and footnote disclosures normally included for complete financial statements. While we believe the disclosures presented are adequate for interim reporting, these interim financial statements should be read in conjunction with the audited financial statements and notes included in our 2009 Form 10-K. In the opinion of management, all adjustments and eliminations, consisting of normal recurring adjustments, necessary for a fair representation of our financial statements have been included. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results which may be expected for the full year.

Asset Impairment. Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if estimated future undiscounted cash flows associated with long-lived assets are not sufficient to recover the carrying value of such assets. We consider projected future discounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. When impairment exists, the long-lived asset is adjusted to its fair value. While we believe our estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. In estimating fair value, management uses appraisals, management estimates, and discounted cash flow calculations which maximize inputs from a marketplace participant’s perspective. In addition, we evaluate our investments in joint ventures and mezzanine construction financing and if, with respect to investments, we believe there is an other than temporary decline in market value, or if, with respect to mezzanine loans, it is probable we will not collect all scheduled amounts due in accordance with the terms, we will record an impairment charge based on these evaluations. In general, we provide mezzanine loans to affiliated joint ventures constructing or operating multifamily assets. While we believe it is currently probable we will collect all scheduled amounts due with respect to these mezzanine loans, current market conditions related to credit markets and real estate market fundamentals inject a significant amount of uncertainty into the environment and any further adverse economic or market development may cause us to re-evaluate our conclusions, and could result in material impairment charges with respect to our mezzanine loans.

The value of our properties under development depends on market conditions, including estimates of the project start date as well as estimates of demand for multifamily communities. We have reviewed market trends and other marketplace information and have incorporated this information as well as our current outlook into the assumptions we use in our impairment analyses. Due to, among other factors, the judgment and assumptions applied in the impairment analyses and the fact limited market information regarding the value of comparable land exists at this time, it is possible actual results could differ substantially from those estimated.

We believe the carrying value of our operating real estate assets, properties under development, and land is currently recoverable. However, if market conditions deteriorate beyond our current expectations or if changes in our development strategy significantly affect any key assumptions used in our fair value calculations, we may need to take material charges in future periods for impairments related to existing assets. Any such material non-cash charges would have an adverse effect on our consolidated financial position and results of operations.

Cash and Cash Equivalents. All cash and investments in money market accounts and other highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash and cash equivalents. We maintain the majority of our cash and cash equivalents at major financial institutions in the United States and deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, we regularly monitor the financial stability of these financial institutions and believe we are not exposed to any significant default risk.

Cost Capitalization. Real estate assets are carried at cost plus capitalized carrying charges. Carrying charges are primarily interest and real estate taxes which are capitalized as part of properties under development. Capitalized interest is generally based on our weighted average unsecured interest rate. Most transaction and restructuring costs associated with the acquisition of real estate assets are expensed. Expenditures directly related to the development and improvement of real estate assets are capitalized at cost as land and buildings and improvements. Indirect development costs, including salaries and benefits and other related costs directly attributable to the development of properties, are also capitalized. All construction and carrying costs are capitalized and reported in the balance sheet as properties under development until the apartment homes are substantially completed. Upon substantial completion of the apartment homes, the total cost for the apartment homes and the associated land is transferred to buildings and improvements and land, respectively.

As discussed above, carrying charges are principally interest and real estate taxes capitalized as part of properties under development and buildings and improvements. Capitalized interest was approximately $1.3 million for the three months ended March 31, 2010, and approximately $2.4 million for the three months ended March 31, 2009. Capitalized real estate taxes were approximately $0.3 million for the three months ended March 31, 2010, and approximately $0.6 million for the three months ended March 31, 2009.

Where possible, we stage our construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment homes. We capitalize renovation and improvement costs we believe extend the economic lives of depreciable property. Capital expenditures subsequent to initial construction are capitalized and depreciated over their estimated useful lives.

Depreciation and amortization is computed over the expected useful lives of depreciable property on a straight-line basis with lives generally as follows:

		Estimated
		Useful Life
Buildings and improvements		5-35 years
Furniture, fixtures, equipment, and other		3-20 years
Intangible assets (in-place leases and above and below market leases)		underlying lease term

Derivative Financial Instruments. Derivative financial instruments are recorded in the condensed consolidated balance sheet at fair value and we do not apply master netting for financial reporting purposes. Accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions are cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes attributable to the earnings effect of the hedged transactions. We may enter into derivative contracts which are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

Income Recognition. Our rental and other property revenue is recorded when due from residents and is recognized monthly as it is earned. Other property revenue consists primarily of utility rebillings and administrative, application, and other transactional fees charged to our residents. Our apartment homes are rented to residents on lease terms generally ranging from six to fifteen months, with monthly payments due in advance. All sources of income, including from interest and fee and asset management income, are recognized as earned. Nine of our properties are subject to rent control. Operations of multifamily properties acquired are recorded from the date of acquisition in accordance with the acquisition method of accounting. In management’s opinion, due to the number of residents, the types and diversity of submarkets in which the properties operate, and the collection terms, there is no significant concentration of credit risk.

Reportable Segments. Our multifamily communities are geographically diversified throughout the United States, and management evaluates operating performance on an individual property level. As each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. Our multifamily communities generate rental revenue and other income through the leasing of apartment homes, which comprised approximately 96.9% and 98.3% of our total property revenues and total non-property income, excluding income (loss) on deferred compensation plans, for the three months ended March 31, 2010 and 2009, respectively.

Use of Estimates. In the application of GAAP, management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods, and related disclosures. Our more significant estimates include estimates supporting our impairment analysis related to the carrying values of our real estate assets, estimates of the useful lives of our assets, estimates related to the valuation of our investments in joint ventures and mezzanine financing, and estimates of expected losses of potential variable interest entities. These estimates are based on historical experience and other assumptions believed to be reasonable under the circumstances. Future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Recent Accounting Pronouncements. In December 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” which codified the previously issued Statement of Financial Accounting Standards 167, “Amendments to FASB Interpretation No. 46R.” ASU 2009-17 changes the consolidation analysis for VIEs and requires a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. The ASU requires an ongoing reconsideration of the primary beneficiary and also amends the events triggering a reassessment of whether an entity is a VIE. ASU 2009-17 requires additional disclosures for VIEs, including disclosures about a reporting entity’s involvement with VIEs, how a reporting entity’s involvement with a VIE affects the reporting entity’s financial statements, and significant judgments and assumptions made by the reporting entity to determine whether it must consolidate the VIE. ASU 2009-17 was effective for us beginning January 1, 2010. Our adoption of ASU 2009-17 did not have a material effect on our financial statements.

3. Per Share Data

Basic earnings per share are computed using net income attributable to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflect common shares issuable from the assumed conversion of common share options and share awards granted and units convertible into common shares. Only those items having a dilutive impact on our basic earnings per share are included in diluted earnings per share. Our unvested share-based payment transactions are considered participating securities and are reflected in the calculation of basic and diluted earnings per share using the two-class method. The number of common share equivalent securities excluded from the diluted earnings per share calculation for the three months ended March 31, 2010, and 2009 was approximately 3.6 million and 4.8 million, respectively. These securities, which include common share options and share awards granted and units convertible into common shares, were excluded from the diluted earnings per share calculation as they were determined to be anti-dilutive.

The following table presents information necessary to calculate basic and diluted earnings per share for the three months ended March 31, 2010 and 2009:

		Three Months Ended
		March 31,
(in thousands, except per share amounts)		2010				2009
Basic earnings per share calculation
Income from continuing operations attributable to common shareholders		$	2,285			$	5,559
Amount allocated to participating securities			(40	)			(76	)
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities		$	2,245			$	5,483
Income from discontinued operations attributable to common shareholders			—				675
Net income attributable to common shareholders, adjusted — basic		$	2,245			$	6,158
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.03			$	0.10
Income from discontinued operations attributable to common shareholders — per share			—				0.01
Net income attributable to common shareholders, as adjusted — per share		$	0.03			$	0.11
Weighted average number of common shares outstanding			66,475				55,552
Diluted earnings per share calculation
Income from continuing operations attributable to common shareholders, net of amount allocated to participating securities		$	2,245			$	5,483
Income allocated to common units			48				5
Income from continuing operations attributable to common shareholders, as adjusted			2,293				5,488
Income from discontinued operations attributable to common shareholders			—				675
Net income attributable to common shareholders, as adjusted		$	2,293			$	6,163
Income from continuing operations attributable to common shareholders, as adjusted — per share		$	0.03			$	0.10
Income from discontinued operations attributable to common shareholders — per share			—				0.01
Net income attributable to common shareholders, as adjusted — per share		$	0.03			$	0.11
Weighted average common shares outstanding			66,475				55,552
Incremental shares issuable from assumed conversion of:
Common share options and share awards granted			173				—
Common units			1,521				495
Weighted average common shares outstanding, as adjusted			68,169				56,047

4. Common Shares

We currently have an automatic shelf registration statement on file with the SEC which allows us to offer, from time to time, an unlimited amount of common shares, preferred shares, debt securities, or warrants. Our declaration of trust provides we may issue up to 110 million shares of beneficial interest, consisting of 100 million common shares and 10 million preferred shares. As of March 31, 2010, we had approximately 65.0 million common shares outstanding, net of treasury shares and shares held in our deferred compensation arrangements, and no preferred shares outstanding.

In March 2010, we announced the creation of an at-the-market (“ATM”) share offering program through which we can sell common shares having an aggregate offering price of up to $250 million from time to time into the existing trading market at current market prices as well as through negotiated transactions. We may, but shall have no obligation to, sell common shares through the ATM share offering program in amounts and at times as we determine. Actual sales will depend on a variety of factors we determine from time to time, including, among others, market conditions, the trading price of our common shares and determinations of the appropriate sources of funding for us. During the three months ended March 31, 2010, we issued approximately 0.4 million shares at an average price of $43.64 per share for total net consideration of approximately $17.2 million through the ATM share offering program. In addition, during the second quarter of 2010 through May 7, 2010, we issued approximately 0.8 million common shares at an average price of $45.27 per share for total net consideration of approximately $36.8 million. Cumulative to date, we have issued approximately 1.2 million common shares at an average price of $44.74 for total net consideration of approximately $54.0 million. As of May 7, 2010, we had common shares having an aggregate offering price of up to $195.0 million remaining available for issuance under the ATM program.

5. Investments in Joint Ventures

As of March 31, 2010, our equity investments in unconsolidated joint ventures, which we account for utilizing the equity method of accounting, consisted of 25 joint ventures, with our ownership percentages ranging from 15% to 72%. We provide property management services to the majority of these joint ventures which own operating properties and may provide construction and development services to the joint ventures which own properties under development. The following table summarizes aggregate balance sheet and statement of income data for the unconsolidated joint ventures as of the periods presented:

		March 31,				December 31,
(in millions)		2010				2009
Total assets		$	1,191.4			$	1,202.0
Total third-party debt			982.5				980.9
Total equity			143.7				151.9

		March 31,				March 31,
		2010				2009
Total revenues		$	33.7			$	33.7
Net loss			(5.0	)			(3.2	)
Equity in income (loss)(1)			(0.1	)			0.4

The joint ventures in which we have an interest have been funded in part with secured, third-party debt. We have guaranteed no more than our proportionate interest, totaling approximately $60.8 million, of five loans utilized for construction and development activities for our joint ventures. Additionally, we eliminate fee income from property management services provided to these joint ventures to the extent of our ownership.

Mezzanine loans we have made to affiliate joint ventures are recorded as “Notes receivable - affiliates” as discussed in Note 6, “Notes Receivable.”

We may earn fees for property management, construction, development, and other services related to joint ventures in which we own an interest. Fees earned for these services amounted to approximately $1.8 million and $2.0 million for the three months ended March 31, 2010 and 2009, respectively.

On April 15, 2010, a $24.5 million secured third-party construction note of one of our joint ventures located in Houston, Texas, originally scheduled to mature in April 2010, was contractually extended to April 2011. Concurrent with the construction note extension, our $8.2 million mezzanine loan to this joint venture was converted into an additional common equity interest in the amount of $7.2 million (with a preference on distribution of cash flows) and the remaining $1.0 million was converted into an additional equity interest in the joint venture.

6. Notes Receivable

Notes receivable — affiliates. We provided mezzanine construction financing with rates ranging from the London Interbank Offered Rate (“LIBOR”) plus 3% to a fixed maximum rate of 12% per year, in connection with certain of our joint venture transactions. As of March 31, 2010 and December 31, 2009, the balance of “Notes receivable — affiliates” totaled approximately $46.1 million and $45.8 million, respectively, on notes maturing through 2019. We eliminate the interest and other income to the extent of our percentage ownership in the joint ventures. We have reviewed the terms and conditions underlying these notes receivable and believe these notes are collectible, and no impairment existed at March 31, 2010.

At March 31, 2010, our commitment to fund additional amounts under the mezzanine loans was an aggregate of approximately $7.1 million.

Notes receivable secured by common shares. At March 31, 2010, one note receivable was outstanding and had a balance of $0.1 million, which was secured 100% by common shares and reported as a component of equity in our condensed consolidated balance sheet.

7. Notes Payable

The following is a summary of our indebtedness:

		March 31,				December 31,
(in millions)		2010				2009
Commercial Banks
Unsecured line of credit and short-term borrowings		$	—			$	—
$500 million term loan, due 2012			500.0				500.0
			500.0				500.0
Senior unsecured notes
$250.0 million 4.39% Notes, due 2010			—				55.3
$100.0 million 6.75% Notes, due 2010			57.8				57.8
$150.0 million 7.69% Notes, due 2011			87.9				87.9
$200.0 million 5.93% Notes, due 2012			189.4				189.4
$200.0 million 5.45% Notes, due 2013			199.5				199.4
$250.0 million 5.08% Notes, due 2015			249.1				249.0
$300.0 million 5.75% Notes, due 2017			246.1				246.1
			1,029.8				1,084.9
Medium-term notes
$10.0 million 4.90% Notes, due 2010			10.1				10.2
$14.5 million 6.79% Notes, due 2010			14.5				14.5
$35.0 million 4.99% Notes, due 2011			36.1				36.3
			60.7				61.0
Total unsecured notes payable			1,590.5				1,645.9

		March 31,				December 31,
(in millions)		2010				2009
Secured notes
1.09% - 6.00% Conventional Mortgage Notes, due 2011 - 2019			939.0				937.8
1.70% Tax-exempt Mortgage Note due 2028			41.2				41.5
			980.2				979.3
Total notes payable		$	2,570.7			$	2,625.2
Floating rate debt included in secured notes (1.09% - 1.68%)		$	187.3			$	186.9
Floating rate tax-exempt debt included in secured notes (1.70%)			41.2				41.5

We have a $600 million unsecured credit facility which matures in January 2011. The scheduled interest rate spreads are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of six months or less and may not exceed the lesser of $300 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations, all of which we are in compliance.

Our line of credit provides us with the ability to issue up to $100 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, it does reduce the amount available. At March 31, 2010, we had outstanding letters of credit totaling approximately $10.4 million and approximately $589.6 million available under our unsecured line of credit.

As an alternative to our unsecured line of credit, from time to time we borrow using competitively bid unsecured short-term notes with lenders who may or may not be a part of the unsecured line of credit bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the unsecured line of credit.

At March 31, 2010 and 2009, the weighted average interest rate on our floating rate debt, which includes our unsecured line of credit, was 1.2% and 1.7%, respectively.

During the three months ended March 31, 2010, we repaid the remaining principal amount of our $250 million, 4.39% senior unsecured notes which matured on January 15, 2010 for a total of approximately $55.3 million.

Our indebtedness, including our unsecured line of credit, had a weighted average maturity of 5.5 years at March 31, 2010. Scheduled repayments on outstanding debt assuming all contractual extensions, including our line of credit and scheduled principal amortizations, and the weighted average interest rate on maturing debt at March 31, 2010 are as follows:

						Weighted
						Average
(in millions)		Amount				Interest Rate
2010		$	85.3				6.5	%
2011			155.0				6.3
2012			761.9				5.4
2013			227.2				5.4
2014			10.1				6.0
2015 and thereafter			1,331.2				4.7
Total		$	2,570.7				5.1	%

8. Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives. We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we may enter into derivative financial instruments to manage exposures arising from business activities resulting in differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.

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

Designated Hedges. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income or loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. Over the next twelve months, we estimate an additional $22.1 million will be reclassified to interest expense. During the three months ending March 31, 2010 and 2009, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. No portion was ineffective during the three months ended March 31, 2010 and 2009.

As of March 31, 2010, we had the following outstanding interest rate derivatives designated as cash flow hedges of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Swaps			2			$516.3 million

Non-designated Hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Non-designated hedges are either specifically non-designated by management or do not meet strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings in other income or other expense.

As of March 31, 2010, we had the following outstanding interest rate derivative which was not designated as a hedge of interest rate risk:

Interest Rate Derivative		Number of Instruments				Notional Amount
Interest Rate Cap			1			$175.0 million

The table below presents the fair value of our derivative financial instruments as well as their classification in the condensed consolidated balance sheets at March 31, 2010 and December 31, 2009 (in millions):

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

March 31, 2010

December 31, 2009

March 31, 2010

December 31, 2009

Balance

Balance Sheet

Fair

Balance Sheet

Fair

Sheet

Fair

Balance Sheet

Fair

Location

Value

Location

Value

Location

Value

Location

Value

Derivatives designated as hedging instruments

Interest Rate Swaps

Other Liabilities

$

42.1

Other Liabilities

$

41.1

Derivatives not designated as hedging instruments

Interest Rate Cap

Other Assets

$

—

Other Assets

$

0.1

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2010 and 2009 (in millions):

Effect of Derivative Instruments

Location of Gain or

(Loss) Recognized

in Income on

Amount of Loss

Location of Loss

Amount of Loss

Derivative

Recognized in Other

Reclassified from

Reclassified from

(Ineffective Portion

Amount of Gain or (Loss) Recognized

Comprehensive Income

Accumulated OCI

Accumulated OCI

and Amount

in Income on Derivative (Ineffective

Derivatives in Cash

(“OCI”) on Derivative

into Income

into Income (Effective

Excluded from

Portion and Amount Excluded from

Flow Hedging

(Effective Portion)

(Effectiveness

Portion)

Effectiveness

Effectiveness Testing)

Relationships

2010

2009

Portion)

2010

2009

Testing)

2010

2009

Interest Rate Swaps

$

6.8

$

2.9

Interest expense

$

5.9

$

5.3

Not applicable

Not applicable

		Location of Gain				Amount of Gain or (Loss) Recognized in
Derivatives not designated as		Recognized in Income on				Income on Derivative
hedging instruments		Derivative				2010				2009
Interest Rate Cap		Other income				$	—			$	—

Credit-risk-related Contingent Features. Derivative financial investments expose us to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. We believe we minimize our credit risk on these transactions by transacting with major creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, which we believe minimizes credit risk concentration. We believe the likelihood of realized losses from counterparty non-performance is remote.

Our agreements with each of our derivative counterparties contain provisions which provide the counterparty the right to declare a default on our derivative obligations if we are in default on any of our indebtedness, subject to certain thresholds. For all instances, these provisions include a default even if there is no acceleration of the indebtedness. Our agreements with each of our derivative counterparties also provide if we consolidate with, merge with or into, or transfer all or substantially all our assets to another entity and the creditworthiness of the resulting, surviving, or transferee entity is materially weaker than ours, the counterparty has the right to terminate the derivative obligations.

At March 31, 2010, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk (the “termination value”), related to these agreements was approximately $44.5 million. As of March 31, 2010, we had not posted any collateral related to these agreements. If we were in breach of any of these provisions at March 31, 2010, or terminated these agreements, we would have been required to settle our obligations at their termination value of approximately $44.5 million.

9. Share-based Compensation

Options. During the three months ended March 31, 2010, 0.1 million options were exercised at prices ranging from $25.88 to $36.87 per option. The total intrinsic value of options exercised was approximately $1.3 million during the three months ended March 31, 2010. There were no options exercised during the three months ended March 31, 2009. As of March 31, 2010, there was approximately $3.0 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next four years.

The following table summarizes share options outstanding and exercisable at March 31, 2010:

		Outstanding Options (1)								Exercisable Options (1)								Remaining
						Weighted								Weighted				Contractual
Range of Exercise						Average								Average				Life
Prices		Number				Price				Number				Price				(Years)
$30.06-$41.91			614,378			$	33.05				222,771			$	38.30				6.3
$42.90-$44.00			525,095				43.31				469,200				43.24				4.1
$45.53-$73.32			734,563				49.60				504,851				50.32				6.0
Total options			1,874,036			$	42.41				1,196,822			$	45.31				5.6

Valuation Assumptions. Options generally have a vesting period of three to five years. We estimate the fair values of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for options granted during the three months ended March 31, 2010:

Weighted average fair value of options granted		$11.69
Expected volatility		35.6% - 39.2%
Risk-free interest rate		3.6% - 3.7%
Expected dividend yield		4.1% - 4.4%
Expected life (in years)		7.0 - 9.0

Our computation of expected volatility for 2010 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is estimated using the annual dividends paid in the prior year and the market price on the date of grant. Our computation of expected life for 2010 is estimated based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Share Awards and Vesting. Share awards generally have a vesting period of five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At March 31, 2010, the unamortized value of previously issued unvested share awards was approximately $29.8 million. The total fair value of shares vested during the three months ended March 31, 2010 and 2009 was approximately $9.6 million and $9.1 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.1 million and $2.3 million for the three months ended March 31, 2010 and 2009, respectively. Total capitalized compensation cost for option and share awards was approximately $0.5 million and $0.4 million for the three months ended March 31, 2010 and 2009, respectively.

The following table summarizes activity under our Share Incentive Plans for the three months ended March 31, 2010:

						Weighted
		Options /				Average
		Share Awards				Exercise /
		Outstanding				Grant Price
Balance at January 1, 2010			4,826,757			$	39.00
Options
Granted			55,895				43.94
Exercised			(127,639	)			31.76
Forfeited			(28,432	)			47.48
Net options			(100,176	)
Share Awards
Granted			350,958				39.46
Forfeited			(1,911	)			33.68
Net share awards			349,047
Balance at March 31, 2010			5,075,628			$	40.67
Exercisable options at March 31, 2010			1,196,822			$	45.31
Vested share awards at March 31, 2010			2,376,781			$	38.62

10. Net Change in Operating Accounts

The effect of changes in the operating accounts on cash flows from operating activities is as follows:

		Three Months Ended
		March 31,
(in thousands)		2010				2009
Decrease in assets:
Other assets, net		$	842			$	4,020
Increase (decrease) in liabilities:
Accounts payable and accrued expenses			(3,678	)			(6,171	)
Accrued real estate taxes			(6,236	)			(4,487	)
Other liabilities			(1,786	)			2,308
Change in operating accounts		$	(10,858	)		$	(4,330	)

11. Commitments and Contingencies

Litigation. We are subject to various legal proceedings and claims which arise in the ordinary course of business. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these legal proceedings and claims cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our condensed consolidated financial statements.

Other Contingencies. In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for acquisitions, dispositions, or joint ventures and also enter into arrangements contemplating various transactions. Such letters of intent and other arrangements are non-binding as to either party unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the purchase or sale of real property are entered into, these contracts generally provide the purchaser with time to evaluate the property and conduct due diligence, during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance definitive contracts will be entered into with respect to any matter covered by letters of intent or we will consummate any transaction contemplated by any definitive contract. Furthermore, due diligence periods for real property are frequently extended as needed. An acquisition or sale of real property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. We are then at risk under a real property acquisition contract, but generally only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a real property sales contract.

Lease Commitments. At March 31, 2010, we had long-term leases covering certain land, office facilities, and equipment. Rental expense totaled approximately $0.8 million for each of the three months ended March 31, 2010 and 2009. Minimum annual rental commitments for the remainder of 2010 are $1.8 million, and for the years ending December 31, 2011 through 2014 are approximately $2.4 million, $2.0 million, $1.9 million, and $1.8 million, respectively, and $1.7 million in the aggregate thereafter.

Investments in Joint Ventures. We have entered into, and may continue in the future to enter into, joint ventures or partnerships (including limited liability companies) through which we own an indirect economic interest in less than 100% of the community or communities owned directly by the joint venture or partnership. Our decision whether to hold the entire interest in an apartment community ourselves, or to have an indirect interest in the community through a joint venture or partnership, is based on a variety of factors and considerations, including: (i) our projection, in some circumstances, that we will achieve higher returns on our invested capital or reduce our risk if a joint venture or partnership vehicle is used; (ii) our desire to diversify our portfolio of communities by market; (iii) our desire at times to preserve our capital resources to maintain liquidity or balance sheet strength; and (iv) the economic and tax terms required by a seller of land or of a community, who may prefer or who may require less payment if the land or community is contributed to a joint venture or partnership. Investments in joint ventures or partnerships are not limited to a specified percentage of our assets. Each joint venture or partnership agreement is individually negotiated, and our ability to operate and/or dispose of a community in our sole discretion is limited to varying degrees in our existing joint venture agreements and may be limited to varying degrees depending on the terms of future joint venture agreements.

12. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. Historically, we have incurred only state and local income, franchise, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level. We have provided for income, franchise, and state income taxes in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2010 and 2009. These taxes are primarily for entity level taxes on certain ventures, state taxes, and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary differences or tax credits associated with our taxable REIT subsidiaries.

We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure as of and for the three months ended March 31, 2010.

13. Dispositions and Assets Held for Sale

Discontinued Operations and Assets Held for Sale. For the three months ended March 31, 2009, income from discontinued operations included the results of operations of one operating property, containing 671 apartment homes, classified as held for sale at March 31, 2009 and subsequently sold in the second quarter of 2009. During the fourth quarter of 2009, we reclassified the undeveloped land parcels previously included in discontinued operations to continuing operations as management made the decision not to sell these assets. As a result, we reclassified approximately $0.1 million of expenses which were previously included in income from discontinued operations to total property expenses in the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2009.

There was no income from discontinued operations for the three months ended March 31, 2010. The following is a summary of income from discontinued operations for the three months ended March 31, 2009:

		Three Months
		Ended March 31,
(in thousands)		2009
Property revenues		$	1,197
Property expenses			522
			675
Interest			—
Depreciation and amortization			—
Income from discontinued operations		$	675

There were no sales of operating properties during the three months ended March 31, 2010 and 2009.

14. Fair Value Disclosures

For financial assets and liabilities fair valued on a recurring basis, fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction which occurs at the transaction date is used to estimate fair value.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions; preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

	•		Level 1: Quoted prices for identical instruments in active markets.
	•		Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
	•		Level 3: Significant inputs to the valuation model are unobservable.

The following table presents information about our financial assets and liabilities measured at fair value as of March 31, 2010 and December 31, 2009 under the fair value hierarchy discussed above.

		March 31, 2010																December 31, 2009
(in millions)		Level 1				Level 2				Level 3				Balance				Level 1				Level 2				Level 3				Balance
Assets
Deferred compensation plan investments		$	42.7			$	—			$	—			$	42.7			$	49.7			$	—			$	—			$	49.7
Derivative financial instruments			—				—				—				—				—				0.1				—				0.1
Liabilities
Derivative financial instruments		$	—			$	42.1			$	—			$	42.1			$	—			$	41.1			$	—			$	41.1