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 the quarterly period ended MARCH 31, 1999 -------------------------------------------------- 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 2-77330 ---------------------------------------------------------- PROPERTY RESOURCES FUND VI - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 94-2838890 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P. O. BOX 7777, SAN MATEO, CALIFORNIA 94403-7777 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (650) 312-2000 ------------------------------ N/A - -------------------------------------------------------------------------------- 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 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 Limited Partnership Units Outstanding as of March 31, 1999: 21,585 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED BALANCE SHEETS MARCH 31, 1999 AND DECEMBER 31, 1998 UNAUDITED MARCH 31 DECEMBER 31 (Dollars in thousands) 1999 1998 - --------------------------------------------------------------------- ASSETS: Real estate: Land $999 $999 Land improvements 179 179 Buildings and improvements 2,295 2,286 Furnishings and equipment 418 418 - --------------------------------------------------------------------- 3,891 3,882 Less: accumulated depreciation 1,932 1,911 - --------------------------------------------------------------------- Total real estate, net 1,959 1,971 Cash and cash equivalents 1,164 1,143 Other assets, net 227 306 - --------------------------------------------------------------------- Total assets $3,350 $3,420 ===================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable $2,115 $2,121 Accrued interest due to General Partner 527 527 Deposits and other liabilities 126 214 - --------------------------------------------------------------------- Total liabilities 2,768 2,862 - --------------------------------------------------------------------- Partners' capital: Limited partners, 21,585 units issued and 985 962 outstanding General Partner (403) (404) - --------------------------------------------------------------------- Total partners' capital 582 558 - --------------------------------------------------------------------- Total liabilities and partners' capital $3,350 $3,420 ===================================================================== The accompanying notes are an integral part of these financial statements. PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (Unaudited) (Dollars in thousands, except 1999 1998 per unit amounts) - ---------------------------------------------------- REVENUE: Rent $229 $512 Interest and dividends 10 9 - ---------------------------------------------------- Total revenue 239 521 - ---------------------------------------------------- EXPENSES: Interest, other than related 50 51 party Depreciation 21 72 Property operating 124 244 Related party 15 30 General and administrative 5 18 - ---------------------------------------------------- Total expenses 215 415 - ---------------------------------------------------- NET INCOME $24 $106 ==================================================== Net income allocable to limited $23 $101 partners ==================================================== Net income allocable to General $1 $5 Partner ==================================================== Net income per $500 limited partnership unit- $1.07 $4.68 based on 21,585 units outstanding ==================================================== The accompanying notes are an integral part of these financial statements. PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 (Unaudited) (Dollars in thousands) 1999 1998 - --------------------------------------------------------------------- Cash flows from operating activities: Net income $24 $106 - --------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24 75 Decrease in other assets 76 44 Decrease in deposits and other (88) (33) liabilities - --------------------------------------------------------------------- 12 86 - --------------------------------------------------------------------- Net cash provided by operating activities 36 192 - --------------------------------------------------------------------- Cash flow from investing activities: Improvements to rental property (9) (10) Principal received on note receivable - 23 - --------------------------------------------------------------------- Net cash (used in) provided by investing (9) 13 activities - --------------------------------------------------------------------- Cash flow from financing activities: - --------------------------------------------------------------------- Principal payments on notes payable (6) (107) - --------------------------------------------------------------------- Net increase in cash and cash equivalents 21 98 Cash and cash equivalents, beginning of 1,143 407 period - --------------------------------------------------------------------- Cash and cash equivalents, end of period $1,164 $505 ===================================================================== The accompanying notes are an integral part of these financial statements. PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Property Resources Fund VI (the "Partnership") have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all appropriate adjustments necessary to a fair presentation of the results of operations have been made for the periods shown. All adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the Partnership's audited financial statements for the year ended December 31, 1998. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned Subsidiary. All significant intercompany accounts and transactions have been eliminated. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In April 1998, a proxy statement was sent to members contemplating the sale of the Partnership's remaining property and ultimate dissolution of the Partnership. As a result of the approval by members, management has commenced efforts to sell the remaining property. Although a firm sales commitment has not been reached, management believes a sale may occur in the foreseeable future. Management believes that the market value of the Partnership's remaining property is at least equal to its book value. Accordingly, management does not expect any material losses to be undertaken in the event of the liquidation of the Partnership. However, there can be no assurance that the eventual sales price of the property will not result in a loss or that a sale will be consummated. NOTE 2 -NEGOTIATIONS FOR PROPERTY SALE As discussed in Note 1 above the Partnership is currently actively marketing the sale of its remaining property. The Partnership has entered into sales negotiations with an independent third party and has secured a non-refundable deposit of $50,000 in this regard. Management currently expects the sale to close by the end of June 1999. However the transaction was not closed at May 13, 1999 and no assurance can be given that a sale will occur. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the Financial Statements and Notes thereto. When used in the following discussion, the words "believes," "anticipates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including, but not limited to, those set forth in the section entitled "Potential Factors Affecting Future Operating Results," below. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. The Partnership undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS COMPARISON OF THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998 Net income for the three-month period ended March 31, 1999 decreased $82,000, or 77%, when compared to 1998 primarily due to the effects of the sale of the Grouse Run Apartments property ("Grouse Run") in June 1998. Total revenue for the three-month period ended March 31, 1999 decreased $282,000, or 54% when compared to 1998. This was due primarily to lower rent revenue following the sale of the Grouse Run in June 1998. Total expenses for the three-month periods ended March 31, 1999 decreased $200,000, or 48%, when compared to 1998. This was caused principally by lower operating expenses and depreciation following the sale of Grouse Run in June 1998. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1999 the Partnership had one operating property: Clearlake Village Apartments ("Clearlake"). The buildings and the land upon which the buildings are located are owned by the Partnership in fee. Clearlake is subject to a mortgage. Management is currently marketing this property, and a sale may occur in 1999. Management estimates that the net realizable value of Clearlake approximates its carrying value; however, there can be no assurance that the eventual sales price of the property will not result in a loss or that a sale will be consummated. As of March 31, 1999, cash and cash equivalents totaled $1,164,000. As of March 31, 1999, accrued interest due to General Partner amounted to $527,000. The General Partner presently intends to continue to make such advances to the Partnership as necessary. Consequently, management believes that the Partnership's current sources of funds will be adequate to meet both its short-term and long-term capital commitments and operating requirements. The Partnership presently believes that funds available from operations together with the sale proceeds of Clearlake will permit it to repay interest owed to the General Partner. Net cash provided by operating activities for the three month period ended March 31, 1999 was $36,000, or $156,000 less than the same period in 1998. The decrease was primarily due to a decrease in net income as described under "Results of Operations". IMPACT OF INFLATION The Partnership's management believes that inflation may have a positive effect on the Partnership's property portfolio, but this effect generally will not be fully realized until such properties are sold or exchanged. YEAR 2000 The Partnership has evaluated whether its computer systems, including on-site and embedded systems, and those of third parties with whom the Partnership interacts will function properly by, at or during the year 2000. The Partnership has determined certain of its own systems are not currently year 2000 compliant. Management has a plan to replace or upgrade these systems within the next nine months. The Partnership does not expect that the costs associated with these replacements or upgrades will have a materially adverse impact on its financial position, results of operations or cash flows in future periods. However, failure to successfully replace or upgrade these systems could result in material disruptions to its business. The Partnership is managed and advised by certain affiliates of Franklin Resources, Inc. It is reliant on these entities for its basic computer network and certain other applications. Management is monitoring the progress of these entities in achieving year 2000 compliance and does not currently anticipate a materially adverse impact on the Partnership's business as a result of their non-compliance. PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Not applicable (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended March 31, 1999. SIGNATURE 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. PROPERTY RESOURCES FUND VI By: /s/ David P. Goss David P. Goss Chief Executive Officer Date: March 13, 1999