UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-14695
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
| Maryland | 61-1066060 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| incorporation or organization) |
10172 Linn Station Road, Louisville, Kentucky 40223
(Address of Principal Executive Offices)
(502) 426-4800
(Registrant's telephone number, including area code)
(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 [X] No [ ]
Indicate by check mark whether Registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No [X]
TABLE OF CONTENTS
PART I
| Pages | ||||
| Item 1. | Financial Statements | |||
| Consolidated Balance Sheets as of March 31, 2003 | ||||
| and December 31, 2002 | 4 | |||
| Statement of Partners' Equity as of March 31, 2003 | 4 | |||
| Consolidated Statements of Operations for the Three Months | ||||
| Ended March 31, 2003 and 2002 | 5 | |||
| Consolidated Statements of Cash Flows for the Three Months | ||||
| Ended March 31, 2003 and 2002 | 6 | |||
| Notes to Consolidated Financial Statements | 7-14 | |||
| Item 2. | Management's Discussion and Analysis of Financial | |||
| Condition and Results of Operations | 15-21 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 | ||
| Item 4. | Controls and Procedures | 21 |
PART II
| Item 1. | Legal Proceedings | 22 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 22 | ||
| Item 3. | Defaults Upon Senior Securities | 22 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 22 | ||
| Item 5. | Other Information | 22 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 22-23 | ||
| Signatures | 24 | |||
| Certifications | 25-26 |
2
Some of the statements included in this Form 10-Q, particularly those included in Part I, Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A"), may be considered "forward-looking statements" because the statements relate to
matters which have not yet occurred. For example, phrases such as "we anticipate," "believe," or
"expect" indicate that it is possible that the event anticipated, believed or expected may not occur.
If these events do not occur, the result which we expected also may not occur, or may occur in a
different manner which may be more or less favorable to us. We do not undertake any obligations
to publicly release the result of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances. Any forward-looking statements included in MD&A, or elsewhere in this report, reflect our general
partner's best judgment based on known factors, but involve risks and uncertainties. Actual results
could differ materially from those anticipated in any forward-looking statements as a result of a
number of factors, including but not limited to those described in our filings with the Securities and
Exchange Commission, particularly our Form 10-K for the year ended December 31, 2002. Any
forward-looking information provided by us pursuant to the safe harbor established by securities
legislation should be evaluated in the context of these factors. 3
PART I - FINANCIAL INFORMATION NTS-PROPERTIES VI, NTS-PROPERTIES VI, The accompanying notes to consolidated financial statements are an integral part of these statements. 4
NTS PROPERTIES VI, The accompanying notes to consolidated financial statements are an integral part of these statements. 5
NTS-PROPERTIES VI, The accompanying notes to consolidated financial statements are an integral part of these statements. 6
NTS-PROPERTIES VI, The unaudited consolidated financial statements included herein should be read in conjunction with
NTS-Properties VI's 2002 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission on March 31, 2003. In the opinion of our general partner, all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation have been made to the
accompanying consolidated financial statements for the three months ended March 31, 2003 and
2002. The results of operations for the interim periods are not necessarily indicative of the results
that may be expected for the full year or any other interim period. As used in this Quarterly Report
on Form 10-Q the terms "we," "us" or "our," as the context requires, may refer to the Partnership
or its interests in its properties and joint ventures. The consolidated financial statements include the accounts of all wholly-owned properties and
majority-owned joint ventures. Intercompany transactions and balances have been eliminated. Other assets includes minority interest in our joint venture properties totaling approximately
$692,000 and $685,000 as of March 31, 2003 and December 31, 2002, respectively. These amounts
have been derived primarily from distributions of the joint ventures in excess of the respective
minority partner's historical investment in the joint ventures used for financial reporting purposes.
This amount will be realized upon the sale of the respective joint venture property or dissolution of
the respective joint venture. The underlying assets of the joint ventures are assessed for asset
impairment on a periodic basis. The preparation of financial statements in accordance with Accounting Principles Generally
Accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. We own and operate, either wholly or through a joint venture, apartment communities - Park Place
Apartments Phases I and III, in Lexington, Kentucky, Willow Lake Apartments, in Indianapolis,
Indiana and Sabal Park and Golf Brook Apartments, in Orlando, Florida. We also own and operate,
through a joint venture, a commercial rental property - Plainview Point Office Center Phase III, in
Louisville, Kentucky. Substantially all of the commercial property's tenants are local businesses or
are businesses which have operations in the Louisville area. 7
NTS-PROPERTIES VI, Our financial instruments that are exposed to concentrations of credit risk consist of cash and
equivalents. We maintain our cash accounts primarily with banks located in Kentucky. Cash
balances are insured by the FDIC up to $100,000 per bank account. We may at times, in certain
accounts, have deposits in excess of $100,000. In September 2002, we invested $200,000 in two money market accounts. We also have a cash
management program which provides for the overnight investment of excess cash balances. Under
an agreement with a bank, excess cash is invested in a repurchase agreement for U.S. government
or agency securities each night. As of March 31, 2003, approximately $613,000 of our overnight
investment was included in cash and cash equivalents. Cash and equivalents - restricted represents funds received for residential security deposits and funds
which have been escrowed with mortgage companies for property taxes and insurance in accordance
with the loan agreements. Land, buildings and amenities are stated at cost. Costs directly associated with the acquisition,
development and construction of a project are capitalized. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets which are 5-30 years for land
improvements, 5-30 years for buildings and improvements, 3-30 years for amenities and the
applicable lease term for tenant improvements. The aggregate cost of our properties for federal tax
purposes is approximately $76,299,000. Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If such review indicates that the carrying amount of an asset exceeds
the sum of its expected future cash flows, the asset's carrying value may be written down to fair
value. Application of this standard during the period ended March 31, 2003, did not result in an
impairment loss. 8
NTS-PROPERTIES VI, Mortgages and notes payable consist of the following: Based on the borrowing rates currently available to us for mortgages with similar terms and average
maturities, the fair value of long-term debt is approximately $35,473,000. Our mortgages may be prepaid but are generally subject to a yield-maintenance premium. 9
NTS-PROPERTIES VI, Pursuant to an agreement with us, NTS Development Company, an affiliate of our general partner,
receives property management fees on a monthly basis. The monthly fee is equal to 5% of the gross
revenues from the apartment communities and 6% of the gross revenues from the commercial
property. Also pursuant to an agreement, NTS Development Company receives a repair and
maintenance fee equal to 5.9% of costs incurred which relate to capital improvements and major
repair and renovation projects. These repair and maintenance fees are capitalized as part of land,
buildings and amenities. We were charged the following amounts from NTS Development Company for the three months
ended March 31, 2003 and 2002. These charges include items which have been expensed as
operating expenses - affiliated or professional and administrative expenses - affiliated and items
which have been capitalized as other assets or as land, buildings and amenities. During the three months ended March 31, 2003 and 2002, we were charged $7,411 and $7,397,
respectively, for property maintenance fees from an affiliate of NTS Development Company. 10
NTS-PROPERTIES VI, As an owner of real estate, we are subject to various environmental laws of federal, state and local
governments. Our compliance with existing laws has not had a material adverse effect on our
financial condition and results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or on properties that we may acquire in the
future. On December 12, 2001, three individuals filed an action in the Superior Court of the State of
California for the County of Contra Costa against our general partner, the general partners of four
public partnerships affiliated with us and several individuals and entities affiliated with us. The
action purports to bring claims on behalf of a class of limited partners based on, among other things,
tender offers made by the public partnerships and an affiliate of our general partner. The plaintiffs
allege, among other things, that the prices at which limited partnership interests were purchased in
these tender offers were too low. The plaintiffs are seeking monetary damages and equitable relief,
including an order directing the disposition of the properties owned by the public partnerships and
the distribution of the proceeds. No amounts have been accrued as a liability for this action in our
consolidated financial statements. Under an indemnification agreement with our general partner,
we are responsible for the costs of defending this action. For the three months ended March 31,
2003, our share of these legal costs was approximately $41,000, which was expensed. On September 24, 2002, in connection with the above-described lawsuit, the plaintiffs voluntarily
dismissed two of the individuals and one of the entities that had objected to the lawsuit on personal
jurisdiction grounds. This dismissal was the result of an agreement under which some defendants
agreed not to contest jurisdiction and the plaintiffs agreed to dismiss other defendants. Additionally,
on October 22, 2002, the court issued an order sustaining the demurrer of the general partners of
three limited partnerships affiliated with us. The effect of this ruling is that these three general
partners are no longer parties to the lawsuit. On the same date the court overruled the demurrer of
our general partner, the general partner of one other partnership affiliated with us and one individual
and two entities affiliated with us. The entities and individuals whose demurrers were overruled,
including our general partner, remain defendants in the lawsuit. Our general partner believes the
lawsuit is without merit, and is vigorously defending it. On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our general partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of a public partnership affiliated
with us and a partnership that was affiliated with us but is no longer in existence. In the amended 11
NTS-PROPERTIES VI, complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. No
amounts have been accrued as a liability for this action in our consolidated financial statements. Our
general partner believes that this action is without merit, and is vigorously defending it. We, our general partner and two affiliated entities have been sued by Elder Construction &
Associates, Inc. ("Elder Construction") in Jefferson Circuit Court, Louisville, Kentucky. Elder
Construction was hired to be the framing subcontractor with respect to certain improvements at
Phase III of Park Place Apartments in Lexington, Kentucky. The Complaint of Elder Construction,
which was originally filed in November 1999, alleged inter alia, breach of contract. The Complaint
requested judgment against the defendants in the amount of $233,122, plus interest, and other relief. We and the other defendants have answered the complaint, and have asserted counterclaims against
the plaintiff for, inter alia, breach of contract. We, our general partner and the two entities affiliated
with us believe that the suit brought by Elder Construction is without merit and will vigorously
defend it, including the prosecution of counterclaims against Elder Construction. The case had been
set for trial in June 2002, but the parties subsequently agreed to binding arbitration to settle this
lawsuit. We believe that the resolution of these legal proceedings, through binding arbitration, will
not have a material effect on our consolidated financial position or results of operations. We do not believe there is any other litigation threatened against us other than routine litigation
arising out of the ordinary course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material effect on our consolidated financial position or results
of operations except as discussed herein. Our reportable operating segments include Residential and Commercial Real Estate Operations. The
residential operations represent our ownership and operating results relative to apartment
communities known as Willow Lake, Park Place Phase I, Park Place Phase III, Sabal Park and Golf
Brook. The commercial operations represent our ownership and operating results relative to
suburban commercial office space known as Plainview Point Office Center Phase III. 12
NTS-PROPERTIES VI, The financial information of the operating segments has been prepared using a management
approach, which is consistent with the basis and manner in which our management internally
disaggregates financial information for the purposes of assisting in making internal operating
decisions. We evaluate performance based on stand-alone operating segment net income. 13
NTS-PROPERTIES VI, A reconciliation of the totals reported for the operating segments to the applicable line items in the
consolidated financial statements for the three months ended March 31, 2003 and 2002, is necessary
given amounts recorded at the Partnership level and not allocated to the operating properties for
internal reporting purposes. 14
This Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") should be read in conjunction with the Consolidated Financial Statements in Item 1 and
the Cautionary Statements below. The accompanying consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States. Application of these accounting principles
requires us to make estimates about the future resolution of existing uncertainties; as a result, actual
results could differ from these estimates. In preparing these financial statements, we have made our
best estimates and judgements of the amounts and disclosures included in the financial statements,
giving due regard to materiality. Our most critical business assumption is that our properties' occupancy will remain at a level which
provides for debt payments and adequate working capital, currently and in the future. If occupancy
were to fall below that level and remain at or below that level for a significant period of time, then
our ability to make payments due under our debt agreements and to continue paying daily
operational costs would be greatly affected. We review properties for impairment on a property-by-property basis whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. These circumstances
include, but are not limited to, declines in cash flows, occupancy and comparable sales per square
foot at the property. We may recognize an impairment of property when the estimated undiscounted
operating income before depreciation and amortization is less than the carrying value of the property.
To the extent an impairment has occurred, we charge to income the excess of the carrying value of
the property over its estimated fair value. We may decide to sell properties that are held for use. The
sales prices of these properties may differ from their carrying values. The following tables include our selected summarized operating data for the three months ended
March 31, 2003 and March 31, 2002. This data should be read in conjunction with our financial
statements, including the notes thereto, in Part I, Item 1 of this report. 15
During our most recent operating results, net revenues have remained relatively stable. Operating
expenses and operating expenses - affiliated have generally followed in line with net revenues, as
is expected. Rental and other income generated by our properties and joint ventures for the three months ended
March 31, 2003 and 2002 were as follows: The occupancy levels at our properties and joint ventures as of March 31, 2003 and 2002 were as
follows: 16
The average occupancy levels at our properties and joint ventures for the three months ended March
31, 2003 and 2002 were as follows: With the exception of Plainview Point Office Center Phase III, current occupancy levels are
considered adequate to continue operation of our properties without obtaining additional financing.
A tenant occupying 16,895 square feet, or 27%, of Plainview Point Office Center Phase III vacated
its space on November 30, 2001. There will likely be a protracted period for the property to become
fully leased again and substantial funds, currently estimated to be approximately $703,000 will likely
be needed for tenant finish expenses. To fund the costs for the tenant finish, we would have to
obtain additional financing. In an effort to continue to improve occupancy at our apartment communities, we have an on-site
leasing staff, who are employees of NTS Development Company, at each of the apartment
communities. The staff handles all on-site visits from potential tenants, coordinates local advertising
with NTS Development Company's marketing staff, makes visits to local companies to promote
fully furnished apartments, and negotiates lease renewals with current residents. The leasing and renewal negotiations for our commercial property are handled by leasing agents,
who are employees of NTS Development Company, located in Louisville, Kentucky. The leasing
agents are located in the same city as the commercial property. All advertising for the commercial
property is coordinated by NTS Development Company's marketing staff located in Louisville,
Kentucky. The following discussion relating to changes in our results of operations includes only those line
items within our Statements of Operations for which there was a material change between the three
months ending March 31, 2002 and March 31, 2003. Rental income increased approximately $138,000, or 5%, for the three months ended March 31,
2003, as compared to the same period in 2002. The increase is primarily the result of increased
average occupancy at Park Place Apartments Phase III, Park Place Apartments Phase I, Golf Brook 17
Apartments and Sabal Park Apartments. The increase is partially offset by decreased average
occupancy at Plainview Point Office Center Phase III and Willow Lake Apartments. The loss on disposal of assets for the three months ended March 31, 2003, can be attributed to
Willow Lake Apartments due to a partial retirement made as a result of stair bracket replacements. Professional and administrative expenses increased approximately $161,000, for the three months
ended March 31, 2003, as compared to the same period in 2002. The increase is mainly the result
of increased legal and professional fees related to our potential consolidation and litigation related
to limited partner actions. Depreciation and amortization decreased approximately $53,000, or 8%, for the three months ended
March 31, 2003, as compared to the same period in 2002. The decrease is primarily the result of the
roof assets at Park Place Apartments Phase I and Willow Lake Apartments becoming fully
depreciated on December 31, 2002. The following table sets forth the cash provided by or used in operating activities, investing activities
and financing activities for the three months ended March 31, 2003 and 2002. Cash flows provided by (used in): Net cash provided by operating activities increased approximately $173,000, or 29%, for the three
months ended March 31, 2003, as compared to the same period in 2002. The increase was primarily
driven by the change in accounts payables and improved operating results offset partially by changes
in other liabilities. 18
The increase of approximately $138,000, in net cash used in investing activities during the three
months ended March 31, 2003, as compared to the same period in 2002, was primarily due to
increased capital expenditures. The increase of approximately $41,000, or 9%, in net cash used in financing activities, during the
three months ended March 31, 2003, as compared to the same period in 2002, was primarily due to
an increase in principal payments made on mortgages and notes payable. Due to the fact that no distributions were made during the three months ended March 31, 2003 or
2002, the table which presents that portion of the distributions that represents a return of capital on
Accounting Principles Generally Accepted in the United States basis has been omitted. Our future liquidity depends significantly on our properties' occupancy remaining at a level which
provides for debt payments and adequate working capital, currently and in the future. If occupancy
were to fall below that level and remain at or below that level for a significant period of time, then
our ability to make payments due under our debt agreements and to continue paying daily
operational costs would be greatly impaired. The demand on future liquidity is anticipated to increase as a result of the replacement of the roofs
at both Willow Lake Apartments (26 buildings) and Park Place Apartments Phase I (23 buildings)
all of which were installed using shingles produced by a single manufacturer. The shingles appear
to contain defects which may cause roofs to fail. As the shingle manufacturer has declared
bankruptcy, we do not expect to be able to recover any of the costs of the roof replacements in the
event of any such failures. We do not have sufficient working capital to make all of the roof
replacements at one time. As of March 31, 2003, five buildings at Willow Lake Apartments have
had roofs replaced. The total cost of replacing all of the remaining roofs is estimated to be $880,000
($20,000 per building). Two roof replacements have been budgeted for 2003. The demand on future liquidity is also anticipated to increase as we continue our efforts in the
leasing of Plainview Point Office Center Phase III. One tenant which occupied 16,895 square feet,
or 27%, of the building, vacated its space on November 30, 2001. As a result of this vacancy, there
will likely be a protracted period extending beyond 2003 for the property to become fully leased
again. Substantial funds, currently estimated to be approximately $703,000, will likely be needed
for tenant finish costs. Future liquidity will also be affected by the renovation of the clubhouse at Willow Lake Apartments.
The renovation began in February 2003. Total costs for the renovation is estimated to be
approximately $277,000. As of March 31, 2003, we have incurred approximately $116,000 of costs
for the renovation. The completion of the renovation is expected to be in April 2003. 19
In addition to the clubhouse renovation, there will also be a street and parking lot resurfacing project
at Willow Lake Apartments. The resurfacing will take place throughout the community and is
estimated to cost approximately $160,000. The project is scheduled to begin in June 2003. Such demand as discussed above will be managed by our general partner using cash provided by
operations, cash reserves or additional borrowings secured by our properties. There can be no
guarantee that such funds will be available at which time our general partner will manage the
demand on liquidity according to our best interest. We had no other material commitments for renovations or capital expenditures as of March 31, 2003. Leases at Plainview Point Office Center Phase III provide for tenants to contribute toward the
payment of increases in common area maintenance expenses, insurance, utilities and real estate
taxes. These lease provisions, along with the fact that residential leases are generally for a period of
one year, should protect our operations from the impact of inflation and changing prices. Our general partner, along with the general partners of four other public limited partnerships
affiliated with us, is investigating a consolidation with other affiliated entities. In addition to these
affiliated entities, the consolidation would likely involve several private partnerships and our general
partner. The new combined entity would own all of the properties currently owned by the public
limited partnerships, and the limited partners or other owners of these entities would receive an
ownership interest in the combined entity. The number of ownership interests to be received by
limited partners and the other owners of the entities participating in the consolidation would likely
be determined based on the relative value of the assets contributed to the combined entity by each
public limited partnership, reduced by any indebtedness assumed by the entity. The majority of the
contributed assets would consist of real estate properties, whose relative values would be based on
appraisals. The potential benefits of consolidating the entities include: reducing the administrative
costs as a percentage of assets and revenues by creating a single public entity; diversifying limited
partners' investments in real estate to include additional markets and types of properties; and
creating an asset base and capital structure that may enable greater access to the capital markets.
There are, however, also a number of potential adverse consequences to a consolidation such as, the
expenses associated with a consolidation and the fact that the interests of our limited partners in the
combined entity would be smaller on a percentage basis than their interests in us. A consolidation
requires approval of our limited partners and the limited partners and other equity holders of the
other proposed participants to the consolidation. Accordingly, there is no assurance that the
consolidation will occur. 20
Our website address is www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available and may
be accessed free of charge through the "About NTS" section of our website as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Our website and
the information contained therein or connected thereto are not incorporated into this Quarterly
Report on Form 10-Q. Our primary market risk exposure with regard to financial instruments stems from changes in interest
rates. All of our debt bears interest at a fixed rate. A hypothetical 100 basis point increase in interest
rates would result in an approximate $1,646,000 decrease in the fair value of debt. The Chief Executive Officer and Chief Financial Officer of NTS Capital Corporation, the general
partner of our general partner, have concluded, based on their evaluation within 90 days of the filing
date of this report, that our disclosure controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in our reports filed under the Securities
Exchange Act of 1934. There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of the previously
mentioned evaluation. 21
PART II - OTHER INFORMATION On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our general partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of a public partnership affiliated
with us and a partnership that was affiliated with us but is no longer in existence. In the amended
complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. No
amounts have been accrued as a liability for this action in our consolidated financial statements. Our
general partner believes that this action is without merit, and is vigorously defending it. Item 2 - Changes in Securities and Use of Proceeds Item 3 - Defaults Upon Senior Securities Item 4 - Submission of Matters to a Vote of Security Holders Item 5 - Other Information Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 22
23
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 15, 2003 24
CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Brian F. Lavin, certify that: Date: May 15, 2003 /s/ Brian F. Lavin See also the certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is attached as an exhibit
to this report. 25
CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Gregory A. Wells, certify that: Date: May 15, 2003 /s/ Gregory A. Wells See also the certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which is attached as an exhibit
to this report. 26
EXHIBIT INDEX
Item 1 - Financial Statements
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
As of As of
March 31, December 31,
2003 2002
------------------- -------------------
(UNAUDITED)
ASSETS
Cash and equivalents $ 1,147,369 $ 1,058,814
Cash and equivalents - restricted 281,736 237,409
Accounts receivable, net 39,447 34,114
Land, buildings and amenities, net 41,931,684 42,445,109
Other assets 1,220,835 1,222,662
------------------- -------------------
TOTAL ASSETS $ 44,621,071 $ 44,998,108
=================== ===================
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $ 33,019,987 $ 33,536,428
Accounts payable 825,252 614,547
Security deposits 231,543 226,593
Other liabilities 642,773 435,306
------------------- -------------------
TOTAL LIABILITIES 34,719,555 34,812,874
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' EQUITY 9,901,516 10,185,234
------------------- -------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 44,621,071 $ 44,998,108
=================== ===================
A MARYLAND LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
Limited General
Partners Partner Total
------------------ ------------------ ------------------
PARTNERS' EQUITY/(DEFICIT)
Capital contributions, net of offering costs $ 40,518,631 $ 100 $ 40,518,731
Net loss - prior years (15,449,107) (107,661) (15,556,768)
Net loss - current year (280,881) (2,837) (283,718)
Cash distributions declared to date (12,006,384) (121,277) (12,127,661)
Repurchase of limited partnership interests (2,649,068) -- (2,649,068)
------------------ ------------------ ------------------
BALANCES ON MARCH 31, 2003 $ 10,133,191 $ (231,675)$ 9,901,516
================== ================== ==================
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------------------
2003 2002
------------------- -------------------
REVENUES
Rental income $ 2,748,067 $ 2,609,868
Interest and other income 7,629 4,137
------------------- -------------------
TOTAL REVENUES 2,755,696 2,614,005
------------------- -------------------
EXPENSES
Operating expenses 677,090 697,166
Operating expenses - affiliated 390,800 429,623
Loss on disposal of assets 8,195 --
Interest expense 635,720 630,685
Management fees 141,838 134,282
Real estate taxes 224,145 243,481
Professional and administrative expenses 210,212 49,027
Professional and administrative expenses - affiliated 94,892 92,370
Depreciation and amortization 647,779 701,234
------------------- -------------------
TOTAL EXPENSES 3,030,671 2,977,868
------------------- -------------------
Loss before minority interest (274,975) (363,863)
Minority interest 8,743 7,149
------------------- -------------------
Net loss $ (283,718) $ (371,012)
=================== ===================
Net loss allocated to the limited partners $ (280,881) $ (367,302)
=================== ===================
Net loss per limited partnership interest $ (7.22) $ (9.44)
=================== ===================
Weighted average number of limited partnership interests 38,889 38,889
=================== ===================
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------------------------
2003 2002
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (283,718) $ (371,012)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for doubtful accounts 46,834 8,551
Write-off of uncollectible accounts receivable (54,494) (2,390)
Loss on disposal of assets 8,195 --
Depreciation and amortization 660,726 714,752
Changes in assets and liabilities:
Cash and equivalents - restricted (44,327) (48,399)
Accounts receivable 2,327 9,679
Other assets (4,825) (47,053)
Accounts payable 210,705 23,302
Security deposits 4,950 (1,100)
Other liabilities 207,467 296,228
Minority interest income 8,743 7,149
------------------- -------------------
Net cash provided by operating activities 762,583 589,707
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities (142,549) (1,906)
Minority interest distributions (15,038) (17,229)
------------------- -------------------
Net cash used in investing activities (157,587) (19,135)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and notes payable (516,441) (475,177)
------------------- -------------------
Net cash used in financing activities (516,441) (475,177)
------------------- -------------------
Net increase in cash and equivalents 88,555 95,395
CASH AND EQUIVALENTS, beginning of period 1,058,814 60,167
------------------- -------------------
CASH AND EQUIVALENTS, end of period $ 1,147,369 $ 155,562
=================== ===================
Interest paid on a cash basis $ 627,164 $ 628,725
=================== ===================
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, December 31,
2003 2002
------------------ -------------------
Mortgage payable with an insurance company in monthly
installments, bearing interest at 7.74%, due October 15, 2012,
secured by certain land, buildings and amenities. $ 11,275,232 $ 11,365,873
Mortgage payable with an insurance company in monthly
installments, bearing interest at 7.57%, due May 15, 2009,
secured by certain land, buildings and amenities. 6,689,752 6,899,113
Mortgage payable with an insurance company in monthly
installments, bearing interest at 7.32%, due October 15, 2012,
secured by certain land, buildings and amenities. 6,425,928 6,542,283
Mortgage payable with an insurance company in monthly
installments, bearing interest at 8.375%, due December 1, 2010,
secured by certain land, buildings and amenities. 3,046,551 3,065,058
Mortgage payable with an insurance company in monthly
installments, bearing interest at 7.38%, due December 5, 2012,
secured by certain land, buildings and amenities. 2,160,183 2,197,714
Mortgage payable with an insurance company in monthly
installments, bearing interest at 6.93%, due December 5, 2012,
secured by certain land, buildings and amenities. 1,982,219 1,989,927
Mortgage payable with an insurance company in monthly
installments, bearing interest at 7.38%, due December 5, 2012,
secured by certain land, buildings and amenities. 1,440,122 1,465,143
Notes payable to a bank in monthly installments, bearing interest
at the Prime Rate, but not less than 6.00%, repaid in March
2003. -- 11,317
------------------ -------------------
$ 33,019,987 $ 33,536,428
================== ===================
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended
March 31,
------------------------------------
2003 2002
----------------- ----------------
Property management fees $ 141,838 $ 134,282
----------------- ----------------
Property management 269,458 279,737
Leasing 42,270 42,902
Administrative - operating 76,629 82,289
Other 2,443 24,695
----------------- ----------------
Total operating expenses - affiliated 390,800 429,623
----------------- ----------------
Professional and administrative expenses - affiliated 94,892 92,370
----------------- ----------------
Repair and maintenance fees 7,089 106
Leasing commissions 926 2,117
----------------- ----------------
Total related party transactions capitalized 8,015 2,223
----------------- ----------------
Total related party transactions $ 635,545 $ 658,498
================= ================
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2003
---------------------------------------------------------
Residential Commercial Total
----------------- ------------------ ------------------
Rental income $ 2,617,724 $ 130,343 $ 2,748,067
Interest and other income 4,940 112 5,052
----------------- ------------------ ------------------
Total net revenues $ 2,622,664 $ 130,455 $ 2,753,119
================= ================== ==================
Operating expenses and operating
expenses - affiliated $ 992,122 $ 75,768 $ 1,067,890
Loss on disposal of assets 8,195 -- 8,195
Interest expense 220,493 -- 220,493
Management fees 133,600 8,238 141,838
Real estate taxes 217,635 6,510 224,145
Depreciation and amortization 578,281 47,131 625,412
----------------- ------------------ ------------------
Total expenses $ 2,150,326 $ 137,647 $ 2,287,973
================= ================== ==================
Net income (loss) $ 472,338 $ (7,192)$ 465,146
================= ================== ==================
Three Months Ended March 31, 2002
---------------------------------------------------------
Residential Commercial Total
----------------- ------------------ ------------------
Rental income $ 2,466,537 $ 143,331 $ 2,609,868
Interest and other income 1,069 2,517 3,586
----------------- ------------------ ------------------
Total net revenues $ 2,467,606 $ 145,848 $ 2,613,454
================= ================== ==================
Operating expenses and operating
expenses - affiliated $ 1,046,457 $ 80,332 $ 1,126,789
Interest expense 196,602 -- 196,602
Management fees 125,978 8,304 134,282
Real estate taxes 234,685 8,796 243,481
Depreciation and amortization 632,046 46,821 678,867
----------------- ------------------ ------------------
Total expenses $ 2,235,768 $ 144,253 $ 2,380,021
================= ================== ==================
Net income $ 231,838 $ 1,595 $ 233,433
================= ================== ==================
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended
March 31,
--------------------------------------
2003 2002
----------------- -----------------
NET REVENUES
Total revenues for reportable segments $ 2,753,119 $ 2,613,454
Other income for Partnership 2,577 551
----------------- -----------------
Total consolidated net revenues $ 2,755,696 $ 2,614,005
================= =================
INTEREST EXPENSE
Interest expense for reportable segments $ 220,493 $ 196,602
Interest expense for Partnership 415,227 434,083
----------------- -----------------
Total interest expense $ 635,720 $ 630,685
================= =================
DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable segments $ 625,412 $ 678,867
Depreciation and amortization for Partnership 22,367 22,367
----------------- -----------------
Total depreciation and amortization $ 647,779 $ 701,234
================= =================
NET INCOME (LOSS)
Total net income for reportable segments $ 465,146 $ 233,433
Less minority interest for Partnership 8,743 7,149
Plus net loss for Partnership (740,121) (597,296)
----------------- -----------------
Total net loss $ (283,718)$ (371,012)
================= =================
Three Months Ended March 31, 2003
-----------------------------------------------------------------------
Residential Commercial Partnership Total
-----------------------------------------------------------------------
Net revenues $ 2,622,664 $ 130,455 $ 2,577 $ 2,755,696
Operating expenses and operating
expenses - affiliated 992,122 75,768 -- 1,067,890
Interest expense 220,493 -- 415,227 635,720
Depreciation and amortization 578,281 47,131 22,367 647,779
Net income (loss) 472,338 (7,192) (748,864) (283,718)
Three Months Ended March 31, 2002
-----------------------------------------------------------------------
Residential Commercial Partnership Total
-----------------------------------------------------------------------
Net revenues $ 2,467,606 $ 145,848 $ 551 $ 2,614,005
Operating expenses and operating
expenses - affiliated 1,046,457 80,332 -- 1,126,789
Interest expense 196,602 -- 434,083 630,685
Depreciation and amortization 632,046 46,821 22,367 701,234
Net income (loss) 231,838 1,595 (604,445) (371,012)
Three Months Ended
March 31,
-------------------------------------------
2003 2002
------------------- -------------------
Wholly-Owned Properties
Sabal Park Apartments $ 495,191 $ 472,334
Park Place Apartments Phase I $ 432,064 $ 352,479
Willow Lake Apartments $ 561,789 $ 608,451
Park Place Apartments Phase III $ 388,336 $ 302,710
Joint Venture Properties
(Ownership % on March 31, 2003)
Golf Brook Apartments (96.03%) $ 745,284 $ 731,633
Plainview Point Office Center Phase III (95.04%) $ 130,455 $ 145,848
Three Months Ended
March 31,
----------------------------------------------
2003 2002
------------------- -------------------
Wholly-Owned Properties
Sabal Park Apartments 95% 90%
Park Place Apartments Phase I 81% 73%
Willow Lake Apartments 85% 88%
Park Place Apartments Phase III 95% 74%
Joint Venture Properties
(Ownership % on March 31, 2003)
Golf Brook Apartments (96.03%) 90% 84%
Plainview Point Office Center Phase III (95.04%) 49% 54%
Three Months Ended March 31,
----------------------------------------------
2003 2002
------------------- -------------------
Wholly-Owned Properties
Sabal Park Apartments 96% 91%
Park Place Apartments Phase I 84% 72%
Willow Lake Apartments 85% 88%
Park Place Apartments Phase III 95% 74%
Joint Venture Properties
(Ownership % on March 31, 2003)
Golf Brook Apartments (96.03%) 92% 86%
Plainview Point Office Center Phase III (95.04%) 49% 54%
Three Months Ended
March 31,
---------------------------------------------
2003 2002
------------------ -------------------
Operating activities $ 762,583 $ 589,707
Investing activities (157,587) (19,135)
Financing activities (516,441) (475,177)
------------------ -------------------
Net increase in cash and equivalents $ 88,555 $ 95,395
================== ===================
Cash Flows
None.
None.
None.
None.
(3) Amended and Restated Agreement and Certificate of Limited Partnership of NTS-Properties
VI, a Maryland limited partnership. *
(3a) First Amendment to Amended and Restated Agreement of Limited Partnership of NTS-
Properties VI, a Maryland limited partnership. **
(99.1) Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. ***
(99.2) Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. **
(b) Reports on Form 8-K
None.
* Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on March 22, 1985
(effective June 25, 1985) under Commission File No. 2-96583.
** Incorporated by reference to Form 10-K filed with the Securities and Exchange Commission
for the fiscal year ended December 31, 1987 (Commission File No. 0-14695).
*** Attached as an exhibit to this Quarterly Report on Form 10-Q.
NTS-PROPERTIES VI,
A MARYLAND LIMITED PARTNERSHIP
By: NTS-Properties Associates VI,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ Brian F. Lavin
Brian F. Lavin
President of NTS Capital Corporation
/s/ Gregory A. Wells
Gregory A. Wells
Chief Financial Officer of NTS Capital Corporation
President of NTS Capital Corporation, General Partner of NTS-Properties Associates VI, General Partner of NTS-
Properties VI, a Maryland Limited Partnership
Chief Financial Officer of NTS Capital Corporation, General Partner of NTS-Properties Associates VI, General Partner
of NTS-Properties VI, a Maryland Limited Partnership
Exhibit Number Description of Document
3 Amended and Restated Agreement and Certificate of Limited
Partnership of NTS-Properties VI, a Maryland limited partnership. *
3a First Amendment to Amended and Restated Agreement of Limited
Partnership of NTS-Properties VI, a Maryland limited partnership. **
99.1 Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. ***
99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. **
* Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on March 22, 1985
(effective June 25, 1985) under Commission File No. 2-96583.
** Incorporated by reference to Form 10-K filed with the Securities and Exchange Commission
for the fiscal year ended December 31, 1987 (Commission File No. 0-14695).
*** Attached as an exhibit to this Quarterly Report on Form 10-Q.