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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 June 30, 2003
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
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 Identification Number)
incorporation or organization)
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.
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, 2002, the cumulative unpaid priority return to the unit
holders was $3,380,753 compared to $3,137,969 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.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
June 30, December 31,
2003 2002
----------- -----------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents $ 154,973 $ 124,060
Accounts receivable, tenant 42,247 42,247
Prepaid expenses 2,226 --
Securities available for sale 82,981 73,426
----------- -----------
Total current assets 282,427 239,733
----------- -----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
2003 $705,480; 2002 $705,480 2,287,569 2,287,569
OTHER ASSETS
Deferred charges, net of accumulated amortization
2003 $12,190; 2002 $12,190 2,810 2,810
Deferred leasing commissions, net of accumulated
amortization 2003 $19,265; 2002 $19,265 33,122 33,122
----------- -----------
$ 2,605,928 $ 2,563,234
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 84,000 $ 84,000
Accounts payable 8,565 10,155
Accrued expenses 24,254 14,648
Deferred revenue -- --
----------- -----------
Total current liabilities 116,819 108,803
----------- -----------
LONG-TERM DEBT, less current maturities 1,261,000 1,310,000
----------- -----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners (10,940) (11,721)
Limited partners 1,240,306 1,167,367
Net unrealized gain (loss) on investment securities (1,257) (11,215)
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1,228,109 1,144,431
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$ 2,605,928 $ 2,563,234
=========== ===========
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.
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2003 2002 2003 2002
(Unaudited) (Unaudited)
Rental income $ 148,682 $ 148,330 $ 301,177 $ 295,955
Operating expenses:
Wages and contract labor 1,500 1,500 3,000 3,000
Depreciation and amortization -- -- -- --
Repairs and maintenance 40,288 38,839 74,227 81,148
Management fees 4,461 4,515 8,856 8,944
Utilities 20,831 24,849 43,847 48,070
Professional fees 21,798 24,484 40,909 41,398
Property taxes 10,665 10,665 21,330 21,330
Miscellaneous 791 2,466 3,738 3,528
--------- --------- --------- ---------
100,334 107,318 195,907 207,418
--------- --------- --------- ---------
Operating income 48,348 41,012 105,270 88,537
--------- --------- --------- ---------
Nonoperating income (expense):
Interest and dividend income 1,123 1,159 2,106 2,372
Interest expense (14,600) (17,512) (29,268) (34,647)
Other -- -- -- --
--------- --------- --------- ---------
(13,477) (16,353) (27,162) (32,275)
--------- --------- --------- ---------
Net income $ 34,871 $ 24,659 $ 78,108 $ 56,262
========= ========= ========= =========
Net income per limited
partnership unit $ 5.46 $ 3.86 $ 12.22 $ 8.80
========= ========= ========= =========
See Notes to Condensed Financial Statements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
-----------------------------
2003 2002
--------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 78,108 $ 56,262
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization -- --
Loss on sale of securities available for sale -- --
Change in assets and liabilities:
(Increase) Decrease in prepaids, deferrals and (2,226) (1,085)
other receivables
Increase (Decrease) in accounts payable and accrued expenses 8,016 23,475
--------- ---------
Net cash provided by (used in) operating activities 83,898 78,652
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 403 --
Purchase of securities available for sale -- (1,764)
--------- ---------
Net cash provided by (used in) investing activities 403 (1,764)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (49,000) (30,000)
Cash distributions (4,388) --
--------- ---------
Net cash (used in) financing activities (53,388) (30,000)
Net increase (decrease) in cash and cash equivalents 30,913 46,888
Cash and cash equivalents:
Beginning 124,060 65,583
--------- ---------
Ending $ 154,973 $ 112,471
========= =========
See Notes to Condensed Financial Statements.
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, 2002 to June 30, 2003. Accrued expenses have increased slightly from
year-end due to the monthly accrual of the 2003 real property taxes.
Liquidity and Capital Resources
During the quarter ended June 30, 2003, the Partnership operations continued to
meet working capital requirements and working capital was increased by
approximately $35,000 since year-end. The working capital as of June 30, 2003
was $165,608. Cash distributions in the amount of $4,388 were paid out during
the first quarter. These distributions represented the 2002 Federal and North
Carolina tax paid on behalf of foreign and non-resident partners.
Results of Operations
Operating results for the three months ended June 30, 2003 are slightly more
favorable as comparable to the same period of the prior year. Rental income is
up approximately 2% due to escalation increases for the current tenants and for
common area maintenance reimbursements received. Overall, operating expenses are
down approximately 5.5% as compared to the same period of the prior year
primarily due to the decrease in repairs and maintenance and utilities. However,
the General Partners expect to incur approximately $40,000 in parking lot
repairs during the third quarter of 2003. Interest expense continues to be down
from the prior year due to the decrease in interest rates on the floating rate
loan.
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. The GSA has the option
to cancel its lease upon ninety (90) days written notice and accounts for 85% of
the total rental income; accordingly, the General Partners will focus their
lease extension efforts on a GSA extension. 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 31.1 Certification required by Section 31 of
Item 601 of Regulation S-K
6 31.2 Certification required by Section 31 of
Item 601 of Regulation S-K
7 32.1 Certification pursuant to Section 1350
of Chapter 63 of Title 18 of the United
States Code (Sarbanes-Oxley Act of 2002.)
8 32.2 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 June 30, 2003.
* 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
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 8/14/03 By: /s/ Dexter R. Yager, Sr.
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Dexter R. Yager, Sr.
General Partner
Date 8/14/03 By: /s/ Thomas K. Emery
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Thomas K. Emery
(Serving in the function of Principal
Financial Officer)