FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended June 30, 1997
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Commission file number 0-11068
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SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
State of California 95-3643693
- -------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5850 San Felipe, Suite 500
Houston, Texas 77057
- -------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (713) 706-6271
-----------------------------------------------
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 [_].
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are submitted in the next pages:
Page
number
------
Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 .... 4
Consolidated Statements of Operations - For the Six Months
Ended June 30, 1997 and 1996 and Three Months Ended June 30,
1997 and 1996 ...................................................... 5
Consolidated Statements of Changes in Partners' Equity - From
February 13, 1981 (inception of Partnership) to December 31,
1996 and For the Six Months Ended June 30, 1997 .................... 6
Consolidated Statements of Cash Flows - For the Six Months
Ended June 30, 1997 and 1996 ....................................... 7
Notes to Consolidated Financial Statements ........................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) OVERVIEW
The following discussion should be read in conjunction with the Partnership's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Form 10-Q.
The Partnership currently owns a 95.04% interest in the Sierra Creekside
Partnership, which operates the Sierra Creekside property.
(b) RESULTS OF OPERATIONS
Rental income for the first six months decreased by $18,000, or 5%, when
compared to the corresponding period in the prior year. This decrease was
primarily the result of billing credits given to tenants in May 1997 due to
common area maintenance fees being lower than anticipated in the prior year. In
addition, occupancy decreased from 100% at June 30, 1996 to 97% at June 30,
1997. Rental income for the three months ended June 30, 1997 decreased by
$20,000, or 10%, primarily due to the billing credits given on the common area
maintenance fees.
2
<PAGE>
Operating expenses for the six months ended June 30, 1997 decreased by $8,000,
or 3%, principally due to lower utilities and from a decrease in accounting and
auditing costs incurred during the period. Operating expenses for the three
months ended June 30, 1997 decreased by $19,000, or 13%, due primarily to lower
utilities and maintenance and repair costs incurred for the quarter. In
addition, administrative expenses decreased during the period as a result of
cost cutting measures implemented by management. This decrease was partially
offset by an increase in maintenance and repair costs for the same period.
Depreciation and amortization expenses for the second quarter decreased by
$15,000, or 13%, primarily due to fully depreciated capitalized tenant
improvements.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position at June 30, 1997 with cash and billed
rents of $67,000 and current liabilities of $96,000. A source of cash is
available through advances from the minority owner of the Property, Sierra Mira
Mesa Partners.
The Partnership's primary capital requirements will be for construction of new
tenant space and compliance with the Americans with Disabilities Act ("ADA") or
other yet unknown changes in building codes. The majority of the work required
to comply with ADA has been completed at June 30, 1997. The cost of the
remaining work needed to comply with this act will be funded from the operations
of the Property.
3
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
June 30, 1997 December 31, 1996
------------ ------------
ASSETS
Cash and cash equivalents ................... $ 57,182 $ 55,629
Receivables:
Unbilled rent ............................ 79,044 81,086
Billed rent .............................. 9,415 23,078
Due from affiliates ......................... 26,916 26,916
Income-producing property - net of
accumulated depreciation and valuation
allowance of $4,223,729 and $4,080,645,
respectively .............................. 3,077,414 3,223,328
Other assets ................................ 247,785 299,838
------------ ------------
Total Assets ................................ $ 3,497,756 $ 3,709,875
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ............... $ 96,391 $ 175,729
Due to affiliates ........................... 87,800 0
Note payable ................................ 1,783,561 1,802,820
------------ ------------
Total Liabilities ........................... 1,967,752 1,978,549
------------ ------------
Minority interest in consolidated
joint venture ............................ (112,981) (102,995)
------------ ------------
Partners' equity:
General Partner ........................... 0 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding .......................... 1,642,985 1,834,321
------------ ------------
Total Partners' equity ...................... 1,642,985 1,834,321
------------ ------------
Total Liabilities and Partners' equity ...... $ 3,497,756 $ 3,709,875
============ ============
UNAUDITED
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
AND FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income .......................... $ 354,983 $ 372,584 $ 177,758 $ 197,300
Interest income ........................ 0 7,328 0 2,283
------------ ------------ ------------ ------------
Total revenues ................. 354,983 379,912 177,758 199,583
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses ..................... 247,305 255,607 132,783 152,197
Depreciation and amortization .......... 228,375 233,295 104,485 119,490
Interest ............................... 80,625 82,286 40,204 41,044
------------ ------------ ------------ ------------
Total costs and expenses ....... 556,305 571,188 277,472 312,731
------------ ------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ..... (201,322) (191,276) (99,714) (113,148)
------------ ------------ ------------ ------------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS ........ 9,986 36,094 4,946 14,703
------------ ------------ ------------ ------------
NET LOSS ................................. $ (191,336) $ (155,182) $ (94,768) $ (98,445)
============ ============ ============ ============
Net loss per limited partnership unit .... $ (6.52) $ (5.29) $ (3.23) $ (3.35)
============ ============ ============ ============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FROM FEBRUARY 13, 1981 (INCEPTION OF PARTNERSHIP) TO DECEMBER 31, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Limited Partners Total
---------------------------- General Partners'
Per Unit Total Partner Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Proceeds from sale of
partnership units .................. $ 500.00 $ 14,677,000 $ 14,677,000
Underwriting commissions
and other organization expenses .... (60.29) (1,769,862) (1,769,862)
Cumulative net income (loss)
(to December 31, 1996) ............. (210.47) (6,178,344) $ 14,600 (6,163,744)
Cumulative distributions
(to December 31, 1996) ............. (166.75) (4,894,473) (14,600) (4,909,073)
------------ ------------ ------------ ------------
Partners' equity - January 1, 1997 ... 62.49 1,834,321 0 1,834,321
Net loss ............................. (6.52) (191,336) (191,336)
------------ ------------ ------------ ------------
Partners' equity - June 30, 1997 ..... $ 55.97 $ 1,642,985 $ 0 $ 1,642,985
============ ============ ============ ============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
6
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................... $(191,336) $(155,182)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization ................... 228,375 233,295
Minority interest's share of consolidated
joint venture loss ............................ (9,986) (36,094)
Decrease (increase) in rent receivable .......... 15,705 (20,184)
Decrease (increase) in other assets ............. 15,364 (414,176)
Decrease in accrued and other liabilities ....... (79,338) (34,093)
--------- ---------
Net cash used in operating activities ........... (21,216) (426,434)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions ................... (45,772) (102,564)
--------- ---------
Net cash used in investing activities ............. (45,772) (102,564)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on note payable ................ (19,259) (17,527)
Loan from affiliate ............................... 87,800 0
--------- ---------
Net cash provided by (used in) financing activities 68,541 (17,527)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ............................. 1,553 (546,525)
CASH AND CASH EQUIVALENTS
Beginning of period ............................. 55,629 787,269
--------- ---------
CASH AND CASH EQUIVALENTS
End of period .................................. $ 57,182 $ 240,744
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ......... $ 80,769 $ 82,418
========= =========
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
In February 1994, the Partnership created a general partnership (Sierra
Creekside Partners) with Sierra Mira Mesa Partners ("SMMP") to facilitate cash
contributions by SMMP for the continued development and operation of the Sierra
Creekside property. The Partnership Agreement of Sierra Creekside Partners (the
"Agreement") was amended effective January 1, 1995 to consider both
contributions and distributions when calculating each partners' percentage
interest at January 1 of each year as called for by the Agreement. Accordingly,
on January 1, 1997, the Partnership's interest in Sierra Creekside Partners was
increased from 81.13% to 95.04% to reflect 1996 contributions and distributions.
2. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements include
the accounts of the Partnership and Sierra Creekside Partners, a majority owned
joint venture at June 30, 1997. All significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of the Partnership's management, these unaudited financial
statements reflect all adjustments which are necessary for a fair presentation
of its financial position at June 30, 1997 and results of operations and cash
flows for the periods presented. All adjustments included in these statements
are of a normal and recurring nature. These financial statements should be read
in conjunction with the financial statements and notes thereto contained in the
Annual Report of the Partnership for the year ended December 31, 1996.
3. RELATED PARTY TRANSACTIONS
In 1994, all of the common stock of TCP, Inc. was purchased by Finance Factors,
Inc. from Carlsberg Management Company ("CMC"). TCP, Inc. owns all of the common
stock of S-P Properties, Inc., the General Partner of the Partnership. CMC
continued to manage the affairs of the Partnership through March 31, 1995.
UNAUDITED
8
<PAGE>
Sierra Pacific Development Fund
Notes to Consolidated Financial Statements
Page two
Included in the financial statements for the six months ended June 30, 1997 and
1997 are affiliate transactions as follows:
June 30
-------------------
1997 1996
-------- --------
Management fees ......... $ 14,926 $ 14,041
Administrative fees ..... 18,206 17,342
Leasing fees ............ 6,619 20,031
Construction Fees ....... 8,943 7,470
4. PARTNERS' EQUITY
Equity and net loss per limited partnership unit is determined by dividing the
Limited Partners' share of the Partnership's equity and net loss by the number
of limited partnership units outstanding, 29,354.
UNAUDITED
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K.
Exhibit
Number Description of Exhibit
- ----------- --------------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
SIERRA PACIFIC DEVELOPMENT FUND
a Limited Partnership
S-P PROPERTIES, INC.
General Partner
Date: AUGUST 13, 1997 /S/ THOMAS N. THURBER
Thomas N. Thurber
President and Director
Date: AUGUST 13, 1997 /S/ MICHELE E. JOHNSON
Michele E. Johnson
Chief Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC DEVELOPMENT FUND JUNE 30, 1997 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 57,182
<SECURITIES> 0
<RECEIVABLES> 88,459
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,513
<PP&E> 7,301,143
<DEPRECIATION> 4,223,729
<TOTAL-ASSETS> 3,497,756
<CURRENT-LIABILITIES> 184,191
<BONDS> 1,783,561
0
0
<COMMON> 0
<OTHER-SE> 1,642,985
<TOTAL-LIABILITY-AND-EQUITY> 3,497,756
<SALES> 354,983
<TOTAL-REVENUES> 354,983
<CGS> 0
<TOTAL-COSTS> 247,305
<OTHER-EXPENSES> 228,375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,265
<INCOME-PRETAX> (191,336)
<INCOME-TAX> 0
<INCOME-CONTINUING> (191,336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (191,336)
<EPS-PRIMARY> (6.52)
<EPS-DILUTED> (6.52)
</TABLE>
