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 September 30, 1999
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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 organizaiton)
5850 San Felipe, Suite 450
Houston, TX 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 - September 30, 1999 and
December 31, 1998 ................................................... 5
Consolidated Statements of Operations - For the Nine
Months Ended September 30, 1999 and 1998 and For the
Three Months Ended September 30, 1999 and 1998 ...................... 6
Consolidated Statements of Changes in Partners'
Equity - From February 13, 1981 (inception of
Partnership) to December 31, 1998 and For the Nine
Months Ended September 30, 1999 ..................................... 7
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 1999 and 1998 ............................ 8
Notes to Consolidated Financial Statements .......................... 9
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 93.45% interest in the Sierra Creekside
Partnership, which operates the Sierra Creekside property.
(b) RESULTS OF OPERATIONS
Rental income for the nine months ended September 30, 1999 decreased by $24,000,
or 3%, when compared to the same period in the prior year, primarily as a result
of a lease buy-out negotiated in May 1998. The decrease in rental income was
partially offset due to higher rental rates. Rental income for the quarter ended
September 30, 1999, increased by $18,000, or 8%, principally due to the higher
rental rates. The Property was 100% occupied at September 30, 1999.
2
<PAGE>
Operating expenses for the nine months ended September 30, 1999 increased by
$18,000, or 5%, in comparison to the corresponding period in the prior year,
principally due to an increase in property taxes and administrative costs. This
increase was partially offset by a decrease in utilities accrued during the
period. Operating expenses for the three months ended September 30, 1999
increased by $5,000, or 4%, primarily due to higher maintenance and repair costs
incurred during the quarter.
Depreciation and amortization expenses for the nine months and three months
ended September 30, 1999 decreased by $23,000, or 8%, and by $13,000, or 13%,
respectively, primarily due to fully depreciated capitalized tenant
improvements.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in a liquid position at September 30, 1999 with cash and
billed rents of $158,000 and current liabilities of $83,000. 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 the construction of
new tenant space. It is anticipated that these requirements will be funded from
the operations of the Property.
(d) YEAR 2000 COMPLIANCE
The Year 2000 Compliance issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. As a result,
many companies' software and computer systems may need to be upgraded or
replaced in order to comply with Year 2000 requirements.
The Partnership employs a property management company to manage, operate and
lease the property. The management company believes it will be ready for the
Year 2000 date change by the end of 1999. The impact of Year 2000 non-compliance
by other third parties cannot accurately be gauged.
The total cost to the Partnership of activities associated with Year 2000
Compliance is not anticipated to be material to its financial position or
results of operations in any given year. In January 1999, the Partnership began
utilizing a new software program to maintain books and records. The new software
program is Year 2000 compliant.
The total amount of potential risk that would be reasonably likely to result
from Year 2000 failures cannot presently be estimated. In the event the
Partnership does not properly identify Year 2000 issues in a timely manner,
there can be no assurance that Year 2000 issues will not materially affect the
Partnership's results.
3
<PAGE>
The Partnership's contingency plan should systems fail due to the Year 2000 date
change is to temporarily convert to a manual system. The Partnership believes it
could temporarily operate on a manual system without adversely impacting
operations.
The preceding Year 2000 discussion contains various forward-looking statements
which represent the Partnership's beliefs or expectations regarding future
events. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from
projected results.
4
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
---------------------
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
ASSETS
Cash and cash equivalents ................. $ 153,519 $ 83,408
Receivables:
Unbilled rent .......................... 52,584 47,993
Billed rent ............................ 4,379 8,297
Due from affiliates ....................... 73,916 26,916
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,256,804 and $3,140,905,
respectively ............................ 2,587,860 2,772,712
Other assets .............................. 218,892 252,588
Excess distributions to minority Partner .. 79,957 75,610
---------- ----------
Total Assets .............................. $3,171,107 $3,267,524
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ............. $ 82,582 $ 82,019
Note payable .............................. 1,685,370 1,720,324
---------- ----------
Total Liabilities ......................... 1,767,952 1,802,343
---------- ----------
Partners' equity:
General Partner ......................... 0 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding ........................ 1,403,155 1,465,181
---------- ----------
Total Partners' equity .................... 1,403,155 1,465,181
---------- ----------
Total Liabilities and Partners' equity .... $3,171,107 $3,267,524
========== ==========
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A Limited Partnership)
---------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ..................... $ 682,407 $ 706,189 $ 234,341 $ 216,120
--------- --------- --------- ---------
Total revenues ............ 682,407 706,189 234,341 216,120
--------- --------- --------- ---------
EXPENSES:
Operating expenses ................ 376,008 357,587 128,931 123,719
Depreciation and amortization ..... 257,948 281,037 83,721 96,379
Interest .......................... 114,824 117,844 38,010 39,040
--------- --------- --------- ---------
Total costs and expenses .. 748,780 756,468 250,662 259,138
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S
SHARE OF CONSOLIDATED JOINT VENTURE
LOSS .............................. (66,373) (50,279) (16,321) (43,018)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE
LOSS .............................. 4,347 4,691 1,068 4,014
--------- --------- --------- ---------
NET LOSS ............................ $ (62,026) $ (45,588) $ (15,253) (39,004)
========= ========= ========= =========
Net loss per limited partnership unit $ (2.11) $ (1.55) $ (0.52) $ (1.33)
========= ========= ========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
6
<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, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<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, 1998) ............ (223.05) (6,547,484) $ 14,600 (6,532,884)
Cumulative distributions
(to December 31, 1998) ............ (166.75) (4,894,473) (14,600) (4,909,073)
------- ------------ ------------ ------------
Partners' equity - January 1, 1999 .. 49.91 1,465,181 0 1,465,181
Net loss ............................ (2.11) (62,026) (62,026)
------- ------------ ------------ ------------
Partners' equity - September 30, 1999 $ 47.80 $ 1,403,155 $ 0 $ 1,403,155
======= ============ ============ ============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
---------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $ (62,026) $ (45,588)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation and amortization ...................... 257,948 281,037
Minority interest's share of consolidated
joint venture loss ............................... (4,347) (4,691)
(Increase) decrease in rent receivable ............. (673) 27,396
Increase in other assets ........................... (29,758) (68,083)
Increase (decrease) in accrued and other liabilities 563 (90)
--------- ---------
Net cash provided by operating activities .......... 161,707 189,981
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (9,642) (78,467)
--------- ---------
Net cash used in investing activities .............. (9,642) (78,467)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on note payable ................. (34,954) (31,957)
Loan to affiliate .................................. (47,000) (95,500)
--------- ---------
Net cash used in financing activities .............. (81,954) (127,457)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ................................ 70,111 (15,943)
CASH AND CASH EQUIVALENTS
Beginning of period ................................ 83,408 87,192
--------- ---------
CASH AND CASH EQUIVALENTS
End of period ...................................... $ 153,519 $ 71,249
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ............ $ 115,086 $ 118,084
========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
8
<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, 1999, the Partnership's interest in Sierra Creekside Partners was
increased from 90.67% to 93.45% to reflect 1998 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 September 30, 1999. 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 September 30, 1999 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, 1998.
3. RELATED PARTY TRANSACTIONS
Included in the financial statements for the nine months ended September 30,
1999 and 1998 are affiliate transactions as follows:
September 30
------------------------
1999 1998
------- -------
Management fees ............ $30,414 $32,620
Administrative fees ........ 38,877 27,189
Leasing fees ............... 0 35,485
Construction fees .......... 0 6,209
UNAUDITED
9
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE TWO
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
10
<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: OCTOBER 29, 1999 /s/ THOMAS N. THURBER
---------------- -----------------------------
Thomas N. Thurber
President and Director
Date: OCTOBER 29, 1999 /s/ G. ANTHONY EPPOLITO
---------------- -----------------------------
G. Anthony Eppolito
Chief Accountant
UNAUDITED
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC DEVELOPMENT FUND SEPTEMBER 30, 1999 FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 153,519
<SECURITIES> 0
<RECEIVABLES> 56,963
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 231,814
<PP&E> 5,844,664
<DEPRECIATION> 3,256,804
<TOTAL-ASSETS> 3,171,107
<CURRENT-LIABILITIES> 82,582
<BONDS> 1,685,370
0
0
<COMMON> 0
<OTHER-SE> 1,403,155
<TOTAL-LIABILITY-AND-EQUITY> 3,171,107
<SALES> 682,407
<TOTAL-REVENUES> 682,407
<CGS> 0
<TOTAL-COSTS> 376,008
<OTHER-EXPENSES> 257,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,824
<INCOME-PRETAX> (62,026)
<INCOME-TAX> 0
<INCOME-CONTINUING> (62,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,026)
<EPS-BASIC> (2.11)
<EPS-DILUTED> (2.11)
</TABLE>
