SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997
[ ] 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 0-15571
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
(Exact name or registrant as specified in its charter)
North Carolina 56-1494619
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4000 Blue Ridge Road, Suite 100
Raleigh, North Carolina 27612
(Address of principal executive office)
(Zip Code)
(919) 781-1700
(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
------ -------
The Exhibit Index is located on Page ___.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Information
a) Income Statement
STATEMENTS OF INCOME (Unaudited)
Quarter Ended March 31
1997 1996
---- ----
Deposits on sales contract $ 0 $ 1,800
Interest and other income 552 265
----------- ---------
Total 552 2,065
General and administrative expenses 17,627 9,276
----------- -------
NET INCOME (LOSS) $(17,075) $ (7,211)
========== =========
Allocation of net income (loss) to
General Partner $ -0- $ -0-
Limited Partners (17,075) (7,211)
--------- ---------
TOTAL ALLOCATION $(17,075) $ (7,211)
========= ==========
Net income (loss) per limited partnership
unit (based on 5,900 weighted average
limited partnership units outstanding) $ (2.89) $ (1.22)
========= ==========
See notes to unaudited financial statements.
2
<PAGE>
b) Balance Sheets
BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited)
ASSETS
Cash $ 77,336 $ 194,254
Short-term investments 111,348 11,270
---------- ----------
CASH AND CASH EQUIVALENTS 188,684 205,524
Land held for investment--Note B 4,001,280 4,001,280
Other assets 2,427 -0-
---------- ----------
TOTAL ASSETS $4,192,391 $4,206,804
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Trade accounts payable and other
accrued liabilities $ 18,067 $ 13,898
Accounts payable-related party 6,437 7,944
---------- ----------
TOTAL LIABILITIES 24,504 21,842
---------- ----------
PARTNERS' EQUITY
General partner's equity -0- -0-
Limited partners' equity; 5900 units
authorized, issued, and outstanding 4,167,887 4,184,962
---------- ----------
TOTAL PARTNERS' EQUITY 4,167,887 4,184,962
---------- ----------
TOTAL LIABILITIES
AND PARTNERS' EQUITY $4,192,391 $4,206,804
========== ==========
See notes to unaudited financial statements.
<PAGE>
c) Statements of Changes in Partners' Capital
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (Unaudited)
Limited General Limited
Partnership Partner's Partners'
Units Equity Equity Total
Balance at
January 1, 1997 5,900 $ 0 $ 4,184,962 $ 4,184,962
Net loss for the
quarter ended
March 31, 1997 0 (17,075) (17,075)
----- -------- ----------- ----------
BALANCE AT
MARCH 31, 1997 5,900 $ 0 $ 4,167,887 $ 4,167,887
===== ======== =========== ===========
Balance at
January 1, 1996 5,900 -0- $ 4,818,568 $ 4,818,568
Net loss for the
quarter ended
March 31, 1996 -0- (7,211) (7,211)
----- -------- ----------- -----------
BALANCE AT
MARCH 31, 1996 5,900 $ -0- $ 4,811,357 $ 4,811,357
===== ======== =========== ===========
See notes to unaudited financial statements.
4
<PAGE>
d) Statements of Changes in Financial Position
STATEMENTS OF CASH FLOW (Unaudited)
Quarter Ended
March 31
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (17,075) $ (7,211)
Increase in other assets (2,427) (2,249)
Increase (decrease) in trade accounts
payable 2,662 (4,798)
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES AND
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (16,840) (14,258)
Cash and cash equivalents at beginning
of period 205,524 33,338
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 188,684 $ 19,080
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest during the quarters
ended March 31, 1997 and 1996 for
interest was $0
See notes to unaudited financial statements
5
<PAGE>
e) Notes to Financial Statements
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1997
NOTE A - SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
Carolina Investment Partners, Limited Partnership (the "Registrant"), was
organized in 1985 to invest in real property which it will sell or lease
undeveloped or develop into office or commercial projects. Walsmith Associates
Two, a North Carolina general partnership, is the general partner (the "General
Partner").
Basis of Presentation:
The accompanying March 31, 1997 financial statements of the Registrant are
unaudited. In the opinion of the General Partner, all adjustments (consisting of
normal accruals) considered necessary for a fair presentation have been
included. Operating results for the period presented are not necessarily
indicative of the results that may be expected for the entire year.
NOTE B - LAND HELD FOR INVESTMENT AND RELATED COMMITMENTS AND TRANSACTIONS
In July, 1986, the Registrant purchased for $1,223,175 an undeveloped 16.3 acre
parcel of land in Cary, North Carolina, known as the Wellington Parcel, from
Wellington Park Associates ("WPA"), an affiliate of the General Partner. The
land is carried at the lower of (i) contract cost plus capitalized purchase and
closing costs or (ii) net realizable value. The Registrant may, at its option,
require WPA to repurchase the Wellington Parcel for approximately $3,669,000
(the "Put Option"). The contract under which the Registrant purchased the parcel
provides that WPA will share with the Registrant in any profits resulting from
the sale of the Wellington Parcel. More than 87.5% of the profits will be
retained by the Registrant if the Wellington Parcel is sold to a third party
other than by exercise of the Put Option by the Registrant. If the Put Option is
exercised, the Registrant will retain only 50% of the profit from sale of the
Wellington Parcel.
In June, 1986 the Registrant purchased for approximately $3,080,200 an
undeveloped 26.7 acre parcel of land in Cary, North Carolina, known as the
Martin Parcel, from an affiliate of the General Partner. The land is carried at
the lower of (i) contract cost plus capitalized purchase and closing costs or
(ii) net realizable value.
In September 1996 the Registrant sold approximately 10.9 acres of the Wellington
Parcel to a third party under the terms of an Agreement for the Purchase and
Sale of Real Estate, as amended ("the Agreement"), between the Registrant,
Wellington Center Associates
6
<PAGE>
LLC (successor to Churchill & Banks, Ltd.) ("WCA"),
and ADA Corporation of North Carolina ("ADA"), an affiliate of the Registrant's
General Partner. The total sales price for the property sold, a portion of which
was owned by ADA, was $2,400,000. This sales price was allocated among the
Registrant and ADA based upon acreage sold by each, with $2,388,000 to the
Registrant and $12,000 to ADA.
On May 5, 1997 the Registrant sold an additional .82 acres of the Wellington
Parcel to WCA under the terms of the Agreement for a gross sales price of
$250,917 plus $11,054 interest.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Registrant's operations resulted in a net loss of $17,075 during
the quarter ended March 31, 1997, compared to a net loss of $7,211 during the
same period of 1996. The primary differences between 1997 and 1996 were:
1. In 1996 the Registrant had $1,800 income from a deposit to extend the
WCA contract. There was no such deposit in 1997.
2. Expenses in 1997 include a $3,300 adjustment in accounting fees for the
1996 audit and tax returns. These fees were higher due to additional
procedures required in relation to the land sale and distribution (see
discussion below).
3. Expenses in 1997 increased approximately $4,000 for additional
accounting and administrative services provided by related parties of
the Registrant's General Partner. These additional services included
(1) follow-up procedures performed when checks from the November, 1996
distribution were not received by some limited partners or had to be
replaced and (2) revision of the Registrant's annual Form 10-K and
financial statements.
The Registrant, WCA, and ADA executed an agreement (the "Agreement")
for WCA to purchase certain tracts of real property owned by the Registrant (the
Wellington Parcel) and ADA. The Agreement was amended in August 1995, April
1996, and three times in September 1996. In addition to other matters, the
amendments to the Agreement provided for 10.96 acres (the "Main Site"), of which
10.91 acres were owned by the Registrant, to close in September 1996 and closing
on the remaining 6.21 acres, consisting of four outparcels (the "Outparcels"),
of which 5.40 acres is owned by the Registrant, to occur by March 10, 1997, with
an additional 6 month extension possible on the Outparcels, which WCA has
exercised. The purchase price for the land is $5.25 per net square foot, which
yields a sales price to the Registrant and ADA of $3,927,750. The closing for
the sale of the Main Site was held on September 25, 1996. The Registrant's net
sales proceeds was $2,202,984 (net of closing costs) for the sale of the Main
Site.
On May 5, 1997 the Registrant sold an additional .82 acres of the
Wellington Parcel to WCA under the terms of the Agreement for a gross sale price
of $250,917 plus $11,054 interest. Due to the administrative costs of a
distribution and anticipated closings on the other Outparcels, the Registrant
will retain the net proceeds from this closing until the other Outparcel
closings have been completed.
As of May 12, 1997, the Registrant has $ 426,609 in cash and short-term
investments, which is sufficient to meet its needs during the next year. The
General Partner anticipates the sale and closing of the remaining Outparcels
(see discussion above) by September 10, 1997. The WCA Agreement contains a
number of conditions to
<PAGE>
closing which must be satisfied prior to closing on the
remaining Outparcels which constitute approximately 4.585 acres. Consequently,
there can be no assurance that the Agreement will result in a closing on the
remaining Outparcels. These sales, if closed, will provide the Registrant with
additional funds. The Registrant expects to retain funds from such sales, if
any, for future operating needs and distribute the remainder to the partners in
accordance with the Partnership Agreement.
The Registrant maintains its excess funds in a money market account and
a certificate of deposit at Triangle Bank. The General Partner believes these
accounts are an appropriate investment of the Registrant's funds. Until its
properties are sold, placed into development and/or refinanced, the Registrant
anticipates deficits from operations and administrative expenses.
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE
REGISTRANT'S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING
STATEMENTS.
In connection with the "safe "harbor" provisions of the Private
Securities Litigation Reform Act of 1995, readers of this document, and
any document incorporated by reference herein, are advised that this
document and documents incorporated by reference into this document
contain both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially
from those indicated by the forward looking statements. Examples of
forward looking statements include, but are not limited to (i)
projections of revenues, income or loss, earnings or loss per share,
capital expenditures, dividends, capital structure and other financial
items, (ii) statements of the plans and objectives of the Registrant or
its management, including the introduction of new products, or
estimates or predictions of actions by customers, suppliers,
competitors or regulatory authorities, (iii) statements of future
economic performance, and (iv) statements of assumptions underlying
other statements and statements about the Registrant or its business.
This document and any documents incorporated by reference herein also
identify important factors which could cause actual results to differ
materially from those indicated by the forward looking statements.
These risks and uncertainties include uncertainties about whether real
estate sales under contract will close, the ability of the Registrant
to sell its other real estate assets, the price of real estate sales,
environmental and similar liabilities, future operating expenses and
the adequacy of capital resources to meet future operating expenses,
which are described herein and/or in documents incorporated by
reference herein.
The cautionary statements made pursuant to the Private Litigation
Securities Reform Act of 1995 above and elsewhere by the Registrant
should not be construed as exhaustive or as any admission regarding the
adequacy of disclosures
9
<PAGE>
made by the Registrant prior to the effective date of such Act. Forward
looking statements are beyond the ability of the Registrant to control
and in many cases the Registrant cannot predict what factors would
cause actual results to differ materially from those indicated by the
forward looking statements.
10
<PAGE>
Part II
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
<S> <C> <C>
(a) Exhibit No. 3.1 Amended Agreement of Limited Partnership of the
Registrant (incorporated by reference to Exhibit 4.1 to
the Registrant's Annual Report filed on Form 10-K for the
year ended December 31, 1986).
Exhibit No. 10.1 Purchase Agreement between Registrant and Walsmith
Associates regarding the Martin
Parcel (incorporated by reference
to Exhibit 10.1to the Registrant's
Annual Report filed on Form 10-K
for the year ended December 31,
1986).
Exhibit No. 10.2 Offer to Purchase and Contract for the Sale and Purchase
of Real Estate, dated as of January 24, 1986, between
Wellington Park Associates and the Registrant
(incorporated by reference to Exhibit 6A to the
Registrant's Quarterly Report filed on Form 10-Q for the
period ended June 30, 1989).
Exhibit No. 10.3 Agreement between the North Carolina Department of
Transportation and Walsmith Associates (incorporated by
reference to Exhibit 10.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1986).
Exhibit No. 10.4 Assignment and Assumption Agreement between the
Registrant and Walsmith Associates
(incorporated by reference to
Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the
year ended December 31, 1986).
Exhibit No. 10.5 Amendment to Offer to Purchase and Contract for the Sale
and Purchase of Real Estate, dated as of February 1,
1990, between Wellington Park Associates and the
Registrant (incorporated by reference to Exhibit 10.6 to
the Registrant's Annual Report filed on Form 10-K for the
11
<PAGE>
period ended December 31, 1989).
Exhibit No. 10.6 Agreement for the Purchase and Sale of Real Estate, dated
as of April 20, 1995, between Churchill & Banks, Ltd.,
ADA Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit C to the
Registrant's Current Report filed on Form 8-K, dated
April 20, 1995 ).
Exhibit No. 10.7 First Amendment to the Agreement for the Purchase and
Sale of Real Estate, dated as of August 9, 1995, between
Churchill & Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated by reference
to Exhibit C to the Registrant's Current Report filed on
Form 8-K, dated August 9, 1995).
Exhibit No. 10.8 Second Amendment to the Agreement for the Purchase and
Sale of Real Estate, dated as of April 19, 1996, between
Churchill & Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated by reference
to Exhibit 28.5 to the Registrant's Quarterly Report
filed on Form 10-Q for the period ended March 31, 1996).
Exhibit No. 10.9 Third Amendment to the Agreement for the Purchase and
Sale of Real Estate, dated as of September 10, 1996,
between Churchill & Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated by reference
to Exhibit 10.1 to the Registrant's Current Report filed
on Form 8-K, dated September 25, 1996).
Exhibit No. 10.10 Fourth Amendment to the
Agreement for the Purchase and Sale
of Real Estate, dated as of
September __, 1996, between
Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and
the Registrant (incorporated by
reference to Exhibit 10.2 to the
Registrant's Current Report filed
on Form 8-K, dated September 25,
1996).
12
<PAGE>
Exhibit No. 10.11 Fifth Amendment to the Agreement for the Purchase and
Sale of Real Estate, dated as of September 27, 1996,
between Wellington Center Associates, LLC, ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.3 to the
Registrant's Current Report filed on Form 8-K, dated
September 25, 1996).
</TABLE>
Exhibit No. 27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ending March 31, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP (Registrant)
BY: WALSMITH ASSOCIATES TWO,
General Partner
By: /s/ Alton L. Smith, III
Alton L. Smith, III, General Partner
Date: May 14, 1997.
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Amended Agreement of Limited Partnership of
the Registrant (incorporated by reference
to Exhibit 4.1 to the Registrant's Annual
Report filed on Form 10-K for the year
ended December 31, 1986).
10.1 Purchase Agreement between Registrant and
Walsmith Associates regarding the Martin
Parcel (incorporated by reference to
Exhibit 10.1to the Registrant's Annual
Report filed on Form 10-K for the year
ended December 31, 1986).
10.2 Offer to Purchase and Contract for the Sale
and Purchase of Real Estate, dated as of
January 24, 1986, between Wellington Park
Associates and the Registrant (incorporated
by reference to Exhibit 6A to the
Registrant's Quarterly Report filed on Form
10-Q for the period ended June 30, 1989).
10.3 Agreement between the North Carolina
Department of Transportation and Walsmith
Associates (incorporated by reference to
Exhibit 10.3 to the Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1986).
10.4 Assignment and Assumption Agreement between
the Registrant and Walsmith Associates
(incorporated by reference to Exhibit 10.4
to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1986).
15
<PAGE>
10.5 Amendment to Offer to Purchase and Contract
for the Sale and Purchase of Real Estate,
dated as of February 1, 1990, between
Wellington Park Associates and the
Registrant (incorporated by reference to
Exhibit 10.6 to the Registrant's Annual
Report filed on Form 10-K for the period
ended December 31, 1989).
10.6 Agreement for the Purchase and Sale of Real
Estate, dated as of April 20, 1995, between
Churchill & Banks, Ltd., ADA Corporation of
North Carolina, and the Registrant
(incorporated by reference to Exhibit C to
the Registrant's Current Report filed on
Form 8-K, dated April 20, 1995 ).
10.7 First Amendment to the Agreement for the
Purchase and Sale of Real Estate, dated as
of August 9, 1995, between Churchill &
Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated
by reference to Exhibit C to the
Registrant's Current Report filed on Form
8-K, dated August 9, 1995).
10.8 Second Amendment to the Agreement for the
Purchase and Sale of Real Estate, dated as
of April 19, 1996, between Churchill &
Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated
by reference to Exhibit 28.5 to the
Registrant's Quarterly Report filed on Form
10-Q for the period ended March 31, 1996).
10.9 Third Amendment to the Agreement for the
Purchase and Sale of Real
16
<PAGE>
Estate, dated as of September 10, 1996, between
Churchill & Banks, Ltd., ADA Corporation of North
Carolina, and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrant's
Current Report filed on Form 8-K, dated September
25, 1996).
10.10 Fourth Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of September __,
1996, between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report filed on Form 8-K,
dated September 25, 1996).
10.11 Fifth Amendment to the Agreement for the
Purchase and Sale of Real Estate, dated as
of September 27, 1996, between Wellington
Center Associates, LLC, ADA Corporation of
North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.3
to the Registrant's Current Report filed on
Form 8-K, dated September 25, 1996).
27 Financial Data Schedule
<PAGE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 188,684
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,001,280
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,192,391
<CURRENT-LIABILITIES> 24,504
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,167,887
<TOTAL-LIABILITY-AND-EQUITY> 4,192,391
<SALES> 0
<TOTAL-REVENUES> 552
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,627
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,075)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
