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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2002
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 0-18444
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YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1300 Altura Road Fort Mill, South Carolina 29708
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(Address of principal executive office) (Zip code)
(803) 547-9100
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(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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------- ------------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents $ 190,597 $ 65,583
Accounts receivable, tenant -- 42,091
Prepaid expenses 1,043 --
Securities available for sale 56,598 59,223
----------- -----------
Total current assets 248,238 166,897
----------- -----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
2002 $705,480; 2001 $705,480 2,287,569 2,287,569
OTHER ASSETS
Deferred charges, net of accumulated amortization
2002 $12,190; 2001 $12,190 2,810 2,810
Deferred leasing commissions, net of accumulated
amortization 2002 $19,265; 2001 $19,265 33,122 33,122
----------- -----------
$ 2,571,739 $ 2,490,398
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 84,000 $ 1,452,000
Accounts payable 11,720 11,793
Accrued expenses 45,698 8,769
----------- -----------
Total current liabilities 141,418 1,472,562
----------- -----------
LONG-TERM DEBT, less current maturities 1,331,000 --
----------- -----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners (12,122) (12,993)
Limited partners 1,127,576 1,041,388
Net unrealized gain (loss) on investment securities (16,133) (10,559)
----------- -----------
1,099,321 1,017,836
----------- -----------
$ 2,571,739 $ 2,490,398
=========== ===========
Note: The Condensed Balance Sheet at December 31, 2001 has been taken from the
audited financial statements at that date. See Notes to Condensed
Financial Statements.
2
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- --------
(Unaudited) (Unaudited)
Rental income $ 152,650 $ 148,664 $ 448,605 $ 438,963
Operating expenses:
Wages and contract labor 1,500 1,500 4,500 4,500
Depreciation and amortization -- -- -- --
Repairs and maintenance 46,377 42,114 127,525 132,009
Management fees 5,663 4,450 14,607 13,156
Utilities 28,077 25,978 76,147 69,964
Professional fees 14,322 10,204 55,720 52,403
Property taxes 9,314 9,621 30,644 28,863
Miscellaneous 1,201 1,148 4,729 4,302
--------- --------- --------- ---------
106,454 95,015 313,872 305,197
--------- --------- --------- ---------
Operating income 46,196 53,649 134,733 133,766
--------- --------- --------- ---------
Nonoperating income (expense):
Interest and dividend income 1,477 1,067 3,849 4,661
Interest expense (16,876) (24,723) (51,523) (84,888)
Other -- -- -- --
--------- --------- --------- ---------
(15,399) (23,656) (47,674) (80,227)
--------- --------- --------- ---------
Net income $ 30,797 $ 29,993 $ 87,059 $ 53,539
========= ========= ========= =========
Net income per limited
partnership unit $ 4.82 $ 4.69 $ 13.62 $ 8.38
========= ========= ========= =========
See Notes to Condensed Financial Statements.
3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
-------------------
2002 2001
-------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 87,059 $ 53,539
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization -- --
Change in assets and liabilities:
(Increase) Decrease in prepaids, deferrals and
other receivables 41,048 11,016
Increase (Decrease) in accounts payable and
accrued expenses 36,856 (5,425)
-------- --------
Net cash provided by (used in) operating activities 164,963 59,130
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (2,949) (3,046)
Improvements in investment property -- (7,538)
-------- --------
Net cash provided by (used in) investing activities (2,949) (10,584)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (37,000) (45,000)
-------- --------
Net cash (used in) financing activities (37,000) (45,000)
Net increase (decrease) in cash and cash equivalents 125,014 3,546
Cash and cash equivalents:
Beginning 65,583 72,209
-------- --------
Ending $190,597 $ 75,755
======== ========
See Notes to Condensed Financial Statements.
4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of Business:
The Partnership was formed in July 1986 to acquire, operate, hold for
investment and sell real estate. The Partnership currently owns the
EastPark Executive Center in Charlotte, North Carolina. On April 24, 1998,
the Partnership sold its only other real property holding, the BB&T
building facilities (formerly the UCB building) located in Greenville,
South Carolina.
2. Opinion of Management:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (all of which were normal
recurring accruals) necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results which may be expected for an entire year.
3. Statement of Cash Flows:
For purposes of reporting the statements of cash flows, the Partnership
includes all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments
purchased with a maturity of three months or less as cash and cash
equivalents on the accompanying condensed balance sheets.
4. Priority Return:
At December 31, 2001, the cumulative unpaid priority return to the unit
holders was $3,137,969 compared to $2,895,185 one year prior. This
increase resulted from no distributions being made to partners during the
year. Based on the current and projected commercial real estate market
conditions, the General Partners believe that it is reasonably unlikely
that a sale of the remaining Partnership property would produce net sale
proceeds sufficient to pay any of such priority return. Furthermore, the
General Partners believe that it is reasonably unlikely that the
Partnership's operating income or any refinancing of Partnership debt
would generate sufficient funds to pay any portion of the priority return.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Changes in Financial Condition
- ------------------------------
There have not been any significant changes in financial condition from December
31, 2001 to September 30, 2002. Accrued expenses have increased from year-end
due to the monthly accrual of the 2002 real property taxes. The tenant, General
Services Administration ("GSA"), historically pays rent in arrears and therefore
an account receivable is established. In September, the GSA paid its rent early
thereby reducing the receivable.
Liquidity and Capital Resources
- -------------------------------
During the quarter ended September 30, 2002, the Partnership operations
continued to meet working capital requirements and working capital was increased
by approximately $5,000. The working capital as of September 30, 2002 was
$106,820. On June 4, 2002 the General Partners refinanced the existing loan with
Wachovia Bank, NA (formerly First Union National Bank). The new loan matures on
December 31, 2004 with interest at the bank's prime rate (currently 4.75%).
Monthly principal payments of $7,000 commenced on August 31, 2002. The new
principal payment is $2,000 higher than the $5,000 previously required.
Results of Operations
- ---------------------
Operating results for the nine months ended September 30, 2002 are comparable to
the same period of the prior year. Rental income is up approximately 2% due to
escalation increases for the current tenants and increased occupancy. Operating
expenses are up approximately 3% as compared to the same period of the prior
year primarily due to the increase in utilities. Interest expense continues to
be down from the prior year due to the decrease in interest rates on the
floating rate loan. Interest expense is currently down approximately 39% from
the prior year.
Status of EastPark Executive Center
- -----------------------------------
The General Partners remain committed to selling the EastPark facility and
continue to have it listed with a commercial real estate broker. At this time,
the facility is not under contract with any potential buyers. The General
Partners are also working towards extending the leases with the current tenants.
Although the facility is 91% leased, all current tenants have the option to
terminate their leases currently or within the next year. GSA has the election
to terminate its lease as of November 2002. The GSA lease accounts for 86% of
the total rental income at East Park; accordingly, the General Partners will
focus their lease extension efforts towards the GSA lease. However, no
assurances can be given that a replacement tenant could be found if GSA decides
to terminate its lease. The General Partners will continue to search for the
best offer for the property and manage it at acceptable standards until such
time as it can sell the property to a qualified buyer.
Forward-Looking Statements
- --------------------------
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of the Partnership. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from those contemplated by such forward-looking statements.
ITEM 4. CONTROLS AND PROCEDURES
In connection with the preparation of this report, the person performing the
function of principal executive officer and the person performing the function
of the principal financial officer of the Partnership have evaluated the
effectiveness of the Partnership's disclosure controls and procedures as of a
date within 90 days of the filing of this report and have concluded that the
Partnership's disclosure controls and procedures are suitable and effective for
the Partnership, taking into consideration the size and nature of the
Partnership's business and operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not engaged in any legal
proceedings of a material nature at the present time.
Item 6. Exhibit Index
(a) Exhibits:
Designation
Number Under
Exhibit Item 601 of
Number Regulation S-K Exhibit Description
------- -------------- -------------------
1* 4 Instrument defining rights of security
holders - set forth in the Limited
Partnership Agreement
2* 10 Limited Partnership Agreement
3** 10.1 Exclusive Leasing and Management
Agreement dated October 1, 1994
(EastPark Executive Center)
4*** 10.2 Listing Agreement of Property For Lease
and/or Sale dated December 22, 1998
(EastPark Executive Center)
5 99.1 Certification pursuant to Section 1350
of Chapter 63 of Title 18 of the United
States Code. (Sarbanes-Oxley Act of
2002.)
6 99.2 Certification pursuant to Section 1350
of Chapter 63 of Title 18 of the
United States Code. (Sarbanes-Oxley Act
of 2002.)
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
three months ended September 30, 2002.
- -------------
* Incorporated by reference to Exhibit A of the Partnership's
Prospectus dated December 1, 1987, Registration Number 33-07056-A.
** Incorporated by reference to Exhibit 3 of the Partnership's
Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to Exhibit 4 of the Partnership's
Form 10-K for the year ended December 31, 1998.
SIGNATURES
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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.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
(Registrant)
By: DRY Limited Partnership,
General Partner of Registrant
Date 11/14/02 By: /s/ Dexter R. Yager, Sr.
------------------- -------------------------------------
Dexter R. Yager, Sr.
General Partner
Date 11/14/02 By: /s/ Thomas K.Emery
------------------- -----------------------------------------------
Thomas K. Emery
(Serving in the function of Principal Financial
Officer)
CERTIFICATE OF PERSON PERFORMING
FUNCTIONS OF CHIEF EXECUTIVE OFFICER
I, Dexter R. Yager, Sr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Yager/Kuester
Public Fund Limited;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to us,
particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Dexter R. Yager, Sr.
-----------------------------------------
Dexter R. Yager, Sr., General Partner of
DRY Limited Partnership,
the General Partner of Registrant
CERTIFICATE OF PERSON PERFORMING
FUNCTIONS OF CHIEF FINANCIAL OFFICER
I, Thomas K. Emery, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Yager/Kuester
Public Fund Limited;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to us,
particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Thomas K. Emery
------------------------------------