CIK: 0001037037
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997.
OR
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 0-22343
Triad Park, LLC
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(Name of small business issuer in its charter)
Delaware 94-3264115
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3055 Triad Drive, Livermore, CA 94550
---------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (510) 449-0606
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___
As of June 30, 1997, the registrant had outstanding 19,708,123
membership interests (shares) with no par value.
Triad Park, LLC
Quarterly Report Form 10-QSB
Index
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at June 30, 1997 and December 31, 1996
Statements of Operations for the Three and
Six Month Periods Ended June 30, 1997 and 1996
Statements of Cash Flows for the Six Month Periods
Ended June 30, 1997 and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 27 Financial Data Schedule-Electronic Filing only
Triad Park, LLC
Balance Sheets
(Unaudited)
(Amounts shown in thousands except share data)
June 30, December 31,
1997 1996
------- -------
Assets
Cash $ 1,488 $ -
Land 29,620 27,876
Property, plant and equipment 12,341 12,362
Assessments receivable 668 2,091
Property development commitments 3,340 -
Prepaid expenses and other assets 403 -
------- -------
Total assets $47,860 $42,329
======= =======
Liabilities
Debt $23,394 $18,840
Other liabilities 318 -
------- -------
Total liabilities 23,712 18,840
Commitments and contingencies
Members' equity
Members' shares; no par value; - -
19,708,123 shares outstanding
at June 30, 1997
Members' equity 24,148 23,489
------- -------
Total liabilities and members' equity $47,860 $42,329
======= =======
The accompanying notes are an integral part of these financial statements.
Triad Park, LLC
Statements of Operations
(Unaudited)
(Amounts shown in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- ------- ------- -------
Revenues:
Rental income $ 627 $ 626 $1,254 $1,253
Land sales - - - -
------- ------- ------- -------
Total revenues 627 626 1,254 1,253
Depreciation of rental property 138 136 283 272
Cost of land sold - - - -
------- ------- ------- -------
Gross Margin 489 490 971 981
------- ------- ------- -------
Costs and Expenses:
Sales expenses - - - -
General and administrative 174 162 393 324
------- ------- ------- -------
Total costs and expenses 174 162 393 324
------- ------- ------- -------
Operating income 315 328 578 657
Interest expense 421 464 828 936
------- ------- ------- -------
Loss before benefit from
income taxes (106) (136) (250) (279)
Benefit from income taxes (9) (12) (18) (25)
------- ------- ------- -------
Net loss $ (97) $ (124) $ (232) $ (254)
======= ======= ======= =======
Net loss per share $(0.01) $(0.01) $(0.01) $(0.01)
======= ======= ======= =======
Shares used in per share
calculation (a) 19,708 19,708 19,708 19,708
======= ======= ======= =======
(a) The number of shares used to compute earnings per share assumes that
shares issued in connection with the spin-off were outstanding for all
periods presented.
The accompanying notes are an integral part of these financial statements.
Triad Park, LLC
Statements of Cash Flows
(Unaudited)
(Amounts shown in thousands)
Six Month Periods Ended June 30,
1997 1996
------- -------
Cash flows from operating activities:
Net loss $ (232) $ (254)
Gain from sale of land - -
Depreciation 283 272
Amortization 10 10
Provision for doubtful accounts 65 -
Changes in assets and liabilities:
Decrease in prepaid expenses and
other assets (403) -
Increase in other liabilities 318 -
------- -------
Net cash provided by operating activities 41 28
------- -------
Cashflows from investing activities:
Land sales - -
Investment in property, plant and
equipment (114) 3
Acquisition of land - (972)
Land improvements (14) (149)
Assessment district improvements (127) (94)
------- -------
Net cash used in investing activities (255) (1,212)
------- -------
Cash flows from financing activities:
Repayment of debt (674) (307)
Reimbursement for property improvements 1,485
Members' contribution net of
note receivable 891 1,491
------- -------
Net cash provided by financing activities 1,702 1,184
------- -------
Net increase in cash 1,488 -
Cash, beginning of period - -
Cash, end of period $1,488 $ -
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 828 $ 936
======= =======
Income taxes $ 5 $ -
======= =======
NONCASH INVESTING AND FINANCIAL
ACTIVITY:
Bond issuance resulting in increased
assessment district improvements
and related debt $5,218 $ -
======= =======
The accompanying notes are an integral part of these financial
statements.
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS
1. Description of Business and Basis of Presentation:
Triad Park, LLC (the Company) is a Delaware limited liability company
organized to effect the spin-off of certain real estate assets and related
liabilities of Cooperative Computing, Inc., a Delaware corporation, formerly
known as Triad Systems Corporation (Triad). On October 17, 1996 Triad signed
a definitive merger agreement with Cooperative Computing, Inc. (CCI), a Texas
corporation, and its affiliate, CCI Acquisition Corp. (CAC), a Delaware
corporation, under which CCI, through CAC, would acquire Triad. Pursuant to
the terms of the merger agreement, CCI through CAC commenced a cash tender
offer for all outstanding shares of Triad at a price of $9.25 per share on
October 23, 1996. As a condition precedent to completion of the merger,
Triad arranged for the spin-off of certain real estate assets and related
liabilities (such assets and liabilities hereinafter referred to as the
Predecessor Business) to Triad stockholders.
On February 27, 1997, immediately prior to completion of the tender
offer, Triad contributed such assets and related liabilities to the Company.
Under the terms of the Real Estate Distribution Agreement (the Agreement),
all indebtedness of Triad or any of its subsidiaries secured, in whole or in
part, by any of the contributed assets have been assumed by the Company.
Stockholders of Triad are entitled to receive one share of Triad Park, LLC,
membership interest for each share of Triad common stock held as of
February 26, 1997, the Distribution Record Date. Such shareholders (Members)
are entitled to share in the income, gains, losses, deductions, credit, or
similar items of, and to receive distributions from, the Company, the right
to vote on certain specified matters, and the right to information concerning
the business and affairs of the Company.
The Company's operations include the ownership and management of the
spun-off real estate assets, all of which are located in Livermore,
California, for their orderly liquidation and distribution of related net
proceeds to the holders of membership interest. The manager of the Company,
3055 Management Corp., (the Manager), is responsible for management and
control of the business of the Company, subject to certain required approvals
of the Advisory Board. The members may elect or vote to remove members of
the Advisory Board but otherwise will not directly or indirectly participate
in the management or operation of the Company or have actual or apparent
authority to act for or bind the Company.
The Company will be dissolved upon the earlier of a majority vote to
dissolve the Company or upon the sale or other disposition of all or
substantially all of the assets and properties of the Company and
distribution of the proceeds to the members. The financial statements for
periods prior to the Distribution Record Date which are presented herein
include the financial position, results of operations and cash flows of the
Predecessor Business as if the Company had existed as a corporation separate
from Triad for all periods presented on a historical basis and may not be
indicative of actual results of operations and financial position of the
Company as an independent stand-alone entity. The statements of operations
for those periods reflect certain expense items incurred by Triad which are
allocated to the Company on a basis which management believes represents a
reasonable allocation of such costs. These allocations consist primarily
of corporate expenses such as management and accounting services. Expenses
related to the normal recurring management activities of the Company have
been allocated based on an estimate of Triad personnel time dedicated to the
operations and management of the Company.
2. In the opinion of management, the unaudited interim financial statements
as of June 30, 1997 and for the periods ended June 30, 1997 and 1996 include
all adjustments, consisting only of those of a normal recurring nature,
necessary for fair presentation. The results of operations for the three
and six month periods ended June 30, 1997 are not necessarily indicative of
the results to be expected for the full year. The balance sheet does not
include all disclosure requirements under GAAP and should be read in
conjunction with the audited financial statements and notes thereto presented
in the Form 10-SB Information Statement (Amendment No.1) filed by the Company
with the Securities and Exchange Commission on June 20, 1997 (Form 10-SB
Information Statement).
3. Property, plant and equipment at June 30, 1997 and December 31, 1996
include accumulated depreciation of $5,214,000 and $4,932,000 respectively.
4. Land consists of property in Livermore, California, classified by planned
use as follows (dollars in thousands):
Use Classification June 30,1997 December 31,1996
Acreage/Cost Acreage/Cost
------------------ ------------ ----------------
Residential 28.1 $ 4,284 28.1 $ 4,029
Retail/commercial 35.9 5,123 35.9 4,797
Retail/industrial/office 114.3 18,976 114.3 17,925
Open space/agricultural 112.0 - 112.0 -
Transportation 12.3 1,237 12.3 1,125
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302.6 $29,620 302.6 $27,876
5. On March 24, 1997, the city of Livermore entered into a Bond Indenture
and issued an additional $9,070,000 in funds from the sale of community
facility bonds for new debt financing as well as for refinancing existing
debt. The Company currently owns 76.56% of the property related to this
issuance. The Company's portion of the bond issuance is for approximately
$5,218,000 of additional debt and $1,726,000 for refinancing of existing
debt. The Company has recorded the net additional debt as a liability and
the improvements as assets. Of these assets, $3,340,000 are recorded as
property development commitments and represent funds set aside by the City
of Livermore for reimbursement to the Company for future improvements.
6. Recent Accounting Pronouncements. In February 1997, the Financial
Accounting Standards board issued Statement of Financial Accounting Standards
No. 128 (SFAS 128), Earnings Per Share, which specifies the computation,
presentation and disclosure requirements for earnings per share. SFAS 128
supersedes Accounting Principles Board Opinion No. 15 and is effective for
financial statements issued for periods ending after December 15, 1997.
SFAS 128 requires restatement of all prior period earnings per share data
presented after the effective date. SFAS 128 will not have a material
impact on the Company's financial position, results of operations or
cashflows.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive
Income. This statement establishes requirements for disclosure of
comprehensive income and becomes effective for the Company for fiscal years
beginning after December 15, 1997, with reclassification of earlier financial
statements for comparative purposes. Comprehensive income generally
represents all changes in stockholders' equity except those resulting from
investments or contributions by stockholders. The Company is evaluating
alternative formats for presenting this information, but does not expect this
pronouncement to materially impact the Company's results of operations.
In June 1997, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 (SFAS 131), Disclosures about
Segments of an Enterprise and Related Information. This statement
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial reports.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement supersedes
Statement of Financial Accounting Standards No. 14, Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for
fiscal years beginning after December 15, 1997, and requires that comparative
information from earlier years be restated to conform to the requirements of
this standard. The Company is evaluating the requirements of SFAS 131 and
the effects, if any, on the Company's current reporting and disclosures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following Management's Discussion and Analysis is based upon and
should be read in conjunction with the Company's financial statements and
notes thereto included in the Form 10-SB Information Statement (Amendment
No. 1) filed by the Company with the Securities and Exchange Commission on
June 20, 1997 (Form 10-SB Information Statement). Since the Distribution
Record Date for the spin-off transaction was February 26,1997, the financial
presentation prior to this date has been carved out of the financial records
of Triad Systems Corporation. See Description of Business and Basis of
Presentation in the Notes to Financial Statements.
Results of Operations
Revenues generated from the leasing of the facilities located at
3055 Triad Drive were $0.6 million for the second quarter in both fiscal 1996
and 1997. These revenues are generated under a lease agreement in effect
through February 2002. There were no land sales during the three or six
month periods ended June 30, 1996 and 1997. The gross margin percentage for
the quarter ended June 30, 1997 was 78%, the same percentage as was recorded
for the quarter ended June 30 in the prior year. Gross margin was
$0.5 million for the quarters ended June 30, 1996 and 1997 and $1.0 million
for each of the six month periods then ended.
Year to date net loss was $232,000 in 1997 compared to a net loss of
$254,000 for the same period in 1996. The net loss for the second quarter
was $97,000 a slight improvement over the $124,000 net loss for the same
quarter a year ago. There was a one cent loss per share recorded for the
quarters ended June 30, 1997 and 1996.
Land Sales
As of June 30, 1997, the Company had approximately 302.6 acres of
unimproved land remaining to be sold. Approximately 35.9 acres are zoned
for retail/commercial use, 28.1 acres for residential use, and 114.3 acres
for retail/light industrial/office use. The remaining acres are zoned for
open space/agricultural and transportation purposes. The Company had no land
sales during the three or six month periods ended June 30, 1996 or 1997.
Gross Margin
Gross margins on rental income were approximately the same for the
quarters ended June 30, 1996 and 1997 as the properties are subject to a
triple net lease whereby substantially all operating expenses are paid by
the tenant.
Costs and Expenses
General and administrative expenses consist of property taxes and other
general management and operational costs including costs necessary to
maintain the appearance of the land in a marketable condition and personnel
and overhead expenses required for the development, management and marketing
of the properties. The expenses were $0.2 million for the quarter ended
June 30, 1997 approximately equal to the same quarter in the prior year.
Operating expenses were $393,000 for the six month period ended June 30, 1997
compared to $324,000 for the same period the prior year.
Interest expense consists of mortgage interest on the buildings and the
bonded indebtedness incurred in connection with the development improvements
and community services. Interest expense was approximately $421,000 for the
quarter ended June 30, 1997 compared to $464,000 for the same quarter the
prior year. Year to date interest expense was relatively unchanged at
$0.8 million and $0.9 million for the six months of 1997 and 1996,
respectively. The reduction is due to normal debt maturation as well as
reduced debt in 1997 due to land sales in the latter half of fiscal 1996
offset by interest expense related to the bond issuance in March 1997. See
Liquidity and Capital Resources.
Future Operating Results
Future operating results are dependent upon the Company's ability to
dispose of its real estate assets. Risks that affect real estate sales
include, but are not limited to, the relative illiquidity of real estate
investments, the ability to obtain entitlements from governmental agencies,
changing tax assessments, compliance with environmental requirements, and
general risks such as changes in interest rates and changes in local
market conditions which affect real estate values. The future operating
results may also be affected by the Company's relationship with Triad. These
risks include, but are not limited to, the indemnification agreement between
the Company and Triad, potential conflicts of interest within the management
and representation of the Company and Triad, and reliance upon Triad lease
payments for the Company's financial performance. For further discussion of
these risks, see Risk Factors in the Form 10-SB Information Statement.
Liquidity and Capital Resources
Triad Park, LLC's ability to continue funding its current business will
depend upon the timing and volume of land sales. Receipts from rental of its
buildings under the existing lease agreements are expected to be sufficient
to fund mortgage obligations for the foreseeable future. Currently, there
is a lease agreement in effect through February 2002 with an option to renew
for an additional term of five years. All expenses related to the building
are paid by the tenant as required by the triple net lease. Ability to
repay the remaining assessment district debt and operating expenses are
dependent in part from future land sales. To the extent additional working
capital is required, management expects that it will have sufficient
borrowing capacity to finance any needs which may arise in the ordinary
course of business.
On March 24, 1997, the City of Livermore completed the sale of Mello-Roos
bonds which raised a total of $9,070,000 in new funds, of which approximately
$6,944,000 encumbers property owned by the Company. The proceeds are
designated to refinance $2,255,000 of prior bonded indebtedness, to fund the
reimbursement to the Company of approximately $2,045,000 of previously
completed improvements, to provide funds of approximately $3,700,000 to
complete improvements required by various agreements with the City of
Livermore and others, to pay financing expenses of $610,000 and to create a
reserve fund of approximately $673,000. Of the indebtedness, approximately
$5,218,000 is an additional encumbrance to the property owned by the Company
and $1,726,000 refinances existing debt. In the quarter ended June 30, 1997,
the Company received approximately $1,485,000 from the City of Livermore as
reimbursement for previously completed projects totaling $2,085,000, net of
a surety deposit of $600,000.
In addition, the Company is obligated to undertake an estimated
additional $7,000,000 in improvements to its land in connection with its
approved development plan. The City of Livermore is expected to issue bonds
to reimburse the Company for such improvements. Improvements are funded as
projects are completed. The current estimates for the required improvements
indicate that bonded funding limits are expected to be adequate to cover
the remaining items of improvement. However, the actual costs of the
improvements may be greater than estimated and may exceed the bond funding
limit. Any shortfall in the bond funding will be borne by the Company or by
purchasers of lots, which may have an adverse effect on the value of the
land.
This Form 10-QSB contains forward looking statements. These statements
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those anticipated in the forward looking
statements. Factors that might cause such a difference include the following:
1. Lease Agreement. Under its existing terms the expiration date of the
Lease Agreement is February 27, 2002. Under the Lease Agreement the
existing rent payments produce a small positive cash flow above the
current mortgage payments. In the event that Triad is unable for any
reason to continue to make its lease payments in a timely manner, such
inability or delay may have a material adverse impact on the Company's
revenues and results of operations.
2. Reimbursement for Improvements. The Company is currently obligated to
undertake approximately $7,000,000 in additional improvements on the
Property. The City of Livermore has indicated that it is willing to
reimburse the Company for improvements undertaken and paid for by the
Company by means of bond financings. Historically, the City of Livermore
has fulfilled such reimbursement commitments to Triad and has been able
to successfully sell related bond offerings. However, if for any reason
the City of Livermore is unsuccessful in completing a bond offering, the
Company would not receive any reimbursement for such improvements.
In addition, there is a possibility the cost of the improvements
undertaken by the Company will exceed the amount of the bond financings
and the Company would be responsible for paying any such cost overruns.
EXHIBIT INDEX
Exhibit No.
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3. Charter and By-Laws
3.1 Limited Liability Company Agreement of Triad Park, LLC (incorporated
by reference to Exhibit 2.1 to Form 10-SB (Amendment No. 1) of the
Company, filed with the Securities and Exchange Commission on
June 20, 1997).
3.2 By-laws of Triad Park, LLC (incorporated by reference to Exhibit 2.2
to Form 10-SB (Amendment No.1) of the Company, filed with the
Securities and Exchange Commission on June 20, 1997).
10. Material contracts
10.1 Real Estate Distribution Agreement, dated as of February 26, 1997,
by and between Triad Systems Corporation, 3055 Triad Dr. Corp.,
3055 Management Corp. and Triad Park, LLC (incorporated by reference
to Exhibit 6.1 to Form 10-SB (Amendment No.1) of the Company, filed
with the Securities and Exchange Commission on June 20, 1997).
10.2 Project Lease Agreement, dated as of August 1, 1988, between
3055 Triad Dr. Corp. and Triad Systems Corporation (incorporated by
reference to Exhibit 6.2 to Form 10-SB (Amendment No.1) of the
Company, filed with the Securities and Exchange Commission on
June 20, 1997).
10.3 First Amendment to Project Lease Agreement, dated as of
February 26, 1997, by and between Triad Park, LLC, 3055 Triad Dr.
Corp. and Triad Systems Corporation (incorporated by reference to
Exhibit 6.3 to Form 10-SB (Amendment No.1) of the Company, filed
with the Securities and Exchange Commission on June 20, 1997).
10.4 Form of rights Plan of Triad Park, LLC (incorporated by reference
to Exhibit 3.3 to Form 10-SB (Amendment No. 1) of the Company, filed
with the Securities and Exchange Commission on June 20, 1997).
10.5 Conflict agreement, dated as of February 26, 1997, by and between
Triad Systems Corporation, 3055 Triad Dr. Corp., Triad Park, LLC
and Cooperative Computing, Inc. (incorporated by reference to
Exhibit 12.3 to Form 10-SB (Amendment No.1) of the Company, filed
with the Securities and Exchange Commission on June 20, 1997).
27. Financial Data Schedule
27.1 Financial Data Schedule
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, a duly authorized officer of the Registrant.
Triad Park, LLC
Date: August 8, 1997 By: 3055 Management Corp.,
its Manager
By: /s/ JAMES R. PORTER
--------------------
James R. Porter
Vice President, Secretary and
Chief Financial Officer
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