<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 March 31, 1997
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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
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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
incorporation or organization) Identification Number)
12201 Steele Creek Road Charlotte, North Carolina 28273
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(Address of principal executive office) (Zip code)
(704) 588-4074
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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.
This document contains 8 pages. The Exhibit Index is located on page 7.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents $ 108,445 $ 103,036
Accounts receivable, tenant 41,041 91,224
Prepaid expenses 4,524 2,200
Securities available for sale 123,248 190,380
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Total current assets 277,258 386,840
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INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1997 $1,303,609; 1996 $1,244,020 7,311,641 7,371,229
Accrued rent receivable 41,660 44,785
OTHER ASSETS
Deferred charges, net of accumulated amortization
1997 $13,432; 1996 $11,282 8,668 10,818
Deferred leasing commissions, net of accumulated
amortization 1997 $34,775; 1996 $31,476 47,137 50,435
---------- ----------
$7,686,364 $7,864,107
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $1,000,000 $ 942,483
Current maturities of long-term debt 51,953 68,868
Accounts payable 11,281 109,107
Accrued expenses 59,745 131,312
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Total current liabilities 1,122,979 1,251,770
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LONG-TERM DEBT, less current maturities 4,012,829 4,059,909
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COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners 2,199 2,199
Limited partners 2,545,421 2,545,393
Unrealized gain on investment securities 2,936 4,836
---------- ----------
2,550,556 2,552,428
---------- ----------
$7,686,364 $7,864,107
========== ==========
</TABLE>
Note: The Condensed Balance Sheet at December 31, 1996 has been taken from
the audited financial statements at that date. See Notes to Condensed
Financial Statements.
2
<PAGE> 3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Rental income $ 295,072 $ 317,463
Operating expenses:
Wages and contract labor 6,123 4,566
Depreciation and amortization 65,037 45,458
Repairs and maintenance 36,522 29,484
Management fees 11,208 11,384
Utilities 38,425 35,436
Professional fees 11,201 17,522
Property taxes 22,095 22,020
Miscellaneous 5,139 5,484
--------- ---------
195,750 171,354
--------- ---------
Operating income 99,322 146,109
--------- ---------
Nonoperating income (expense):
Interest and dividend income 5,148 2,910
Interest expense (105,268) (104,227)
Other 826 --
--------- ---------
(99,294) (101,317)
--------- ---------
Net income $ 28 $ 44,792
========= =========
Net income per limited
partnership unit $ 0.00 $ 7.03
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28 $ 44,792
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Depreciation and amortization 65,037 45,458
Gain on sale of securities available for sale (826) --
Change in assets and liabilities:
Decrease (Increase) in prepaids, deferrals and 50,984 (32,433)
other receivables
(Decrease) in accounts payable and accrued expenses (169,393) (46,896)
--------- ---------
Net cash (used) provided by operating activities (54,170) 10,921
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 91,057 --
Purchase of securities available for sale (25,000) --
Improvements in investment property -- (422,870)
--------- ---------
Net cash provided (used) in investing activities 66,057 (422,870)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (63,995) (42,636)
Proceeds from note payable 57,517 392,200
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Net cash (used) provided in financing activities (6,478) 349,564
Net increase (decrease) in cash and cash equivalents 5,409 (62,385)
Cash and cash equivalents:
Beginning 103,036 139,930
--------- ---------
Ending $ 108,445 $ 77,545
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
4
<PAGE> 5
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 two properties currently owned are
the UCB Building in Greenville, South Carolina, and the EastPark Executive
Center in Charlotte, North Carolina.
2. Opinion of Management:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (all 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 Limited
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, 1996, the cumulative unpaid priority return to the unit
holders was $1,924,049 compared to $1,681,265 one year prior. This
increase resulted from no distributions being made to partners during the
year and the pro rata share due partners pursuant to the Limited
Partnership Agreement. 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 Partnership properties would
produce net sale proceeds sufficient to pay the 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.
5
<PAGE> 6
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Changes in financial condition
During the first quarter of 1997, an additional $57,517 was drawn on the line of
credit with First Union to pay for the final invoices relating to the IRS upfit
at the EastPark Executive Center. This was the final draw on this line of
credit, bringing the Partnership to the $1,000,000 maximum amount. (See
"Liquidity and Capital Resources" below.) Accounts receivable has decreased
since year end due to the receipt of payment from the IRS for certain
reimburseable items on their upfit. This excess cash was used to pay off the
loan with Internet Services Corporation. This loan was paid off nine months
early, saving the Partnership an additional $1,400 in interest expense for the
year. Accrued expense has decreased in the first quarter due to the payment of
the 1996 property taxes in January 1997.
Liquidity and Capital Resources
During the quarter ended March 31, 1997, the Partnership continued to fund
working capital requirements, and the working capital deficit was reduced by
approximately $19,000 from December 31, 1996. The $1,000,000 line of credit with
First Union was due and payable on April 30, 1997. The line of credit was not
paid and therefore the General Partners are currently negotiating with First
Union and have received a verbal commitment from the bank to renew the loan with
similar terms. No distributions were paid to the limited partners this quarter,
resulting in an increase to their cumulative unpaid priority return. (See note 4
of the condensed consolidated financial statements.)
Results of operations
Net income is down for the first quarter of 1997 compared to the same period of
the prior year by approximately $44,000. Rental income decreased by
approximately $22,000 in the first quarter primarily due to the decrease in
common area maintenance ("CAM") charges as provided in the leases at the UCB
building. Expenses for the first quarter of 1997 are up by approximately
$24,000. This is primarily due to the increase in depreciation expense as a
result of the completion and capitalization of the IRS upfit at the EastPark
Executive Center. Occupancy rate is currently 100% at the UCB building.
Occupancy at EastPark Executive Center has increased from 95% to 98% in the
first quarter due to the signing of a new lease with FSK Properties, LLC to
occupy 1,371 square feet and pay $16,452 annually. FSK Properties, LLC is owned
by Faison S. Kuester, Jr., one of the General Partners of the Partnership.
Status of Sales Efforts; Future Matters
The General Partners continue to focus their efforts on selling both Properties.
The General Partners have extended the listing agreements with the
Charlotte-based real estate broker through August 1997. At this time a qualified
buyer with acceptable terms to the General Partners for either property has not
been secured.
6
<PAGE> 7
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:
<TABLE>
<CAPTION>
Designation
Number Under
Exhibit Item 601 of Page
Number Regulation S-K Exhibit Description Number
------ -------------- ------------------- ------
<C> <C> <S> <C>
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 Exclusive Leasing and Management Agreement dated October 1, 1994
(United Carolina Bank Building)
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
three months ended March 31, 1997.
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* 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 and 4 of the
Partnership's Form 10-K for the year ended
December 31, 1995.
7
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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 05/15/97 By: /s/ Dexter R. Yager, Sr.
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Dexter R. Yager, Sr.
General Partner
Date 05/15/97 By: /s/ Jerry R. Haynes
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Jerry R. Haynes
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 108,445
<SECURITIES> 123,248
<RECEIVABLES> 41,041
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 277,258
<PP&E> 8,615,250
<DEPRECIATION> 1,303,609
<TOTAL-ASSETS> 7,686,364
<CURRENT-LIABILITIES> 1,122,979
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,686,364
<SALES> 0
<TOTAL-REVENUES> 301,046
<CGS> 0
<TOTAL-COSTS> 195,750
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,268
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
