UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(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, 2003
[ ] 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 0-15758
JACQUES-MILLER INCOME FUND, L.P. - II
(Exact Name of Registrant as Specified in Its Charter)
Delaware 62-1244325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JACQUES-MILLER INCOME FUND, L.P. - II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2003
Assets
Cash and cash equivalents $ 751
Note receivable from affiliated party (net of
allowance of approximately $950) (Note B) --
$ 751
Liabilities and Partners' (Deficit) Capital
Liabilities
Other liabilities $ 15
Partners' (Deficit) Capital
General partner $ (107)
Limited partners (12,400 units issued and
outstanding) 843 736
$ 751
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2003 2002
Revenues:
Interest income $ 13 $ --
Expenses:
General and administrative 15 16
Net loss $ (2) $ (16)
Net loss allocated to
general partner (1%) $ -- $ --
Net loss allocated to
limited partners (99%) (2) (16)
$ (2) $ (16)
Net loss per limited
partnership unit $(0.16) $(1.29)
Distributions per limited
partnership unit $ -- $ 6.69
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Partners' (deficit) capital at
December 31, 2002 12,400 $ (107) $ 845 $ 738
Net loss for the three months
ended March 31, 2003 -- -- (2) (2)
Partners' (deficit) capital
at March 31, 2003 12,400 $ (107) $ 843 $ 736
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2003 2002
Cash flows from operating activities:
Net loss $ (2) $ (16)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Change in accounts:
Note receivable 730 --
Other liabilities 8 9
Net cash provided by (used in) operating activities 736 (7)
Cash flow used in financing activity:
Distribution to partners -- (84)
Net increase (decrease) in cash and cash equivalents 736 (91)
Cash and cash equivalents at beginning of period 15 160
Cash and cash equivalents at end of period $ 751 $ 69
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Jacques-Miller Income Fund,
L.P. - II ("Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Jacques-Miller, Inc. (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended March 31, 2003, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2003. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2002. The Corporate General Partner is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Note B - Note Receivable from Affiliated Party
Note receivable consists of the following (in thousands):
March 31,
2003
Notes receivable $ 413
Accrued interest receivable 537
950
Provision for uncollectible note
receivable (including
approximately $537 of
deferred interest revenue) (950)
$ --
The Partnership holds a note receivable (the "Catawba Club Note") at March 31,
2003, totaling approximately $413,000 with approximately $537,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. This
promissory note bears interest at 12.5%, and is unsecured by the related
partnership and is subordinated to the underlying mortgage of the related
partnership.
During 2000, the first and second mortgages encumbering Catawba Club were
replaced with a new first mortgage. However, after payment of transaction costs
and establishing a repair escrow, as required by the lender, there were no
proceeds available for a payment on the Catawba Club Note. The Partnership has
obtained a default judgment with respect to the Catawba Club Note. The Corporate
General Partner is currently evaluating its options to collect upon this
judgment.
During the three months ended March 31, 2003, the Partnership received
approximately $743,000 representing full repayment of the Quail Run note
receivable. This payment occurred as a result of the refinancing that occurred
at Quail Run in November 2002. Of the payment received, approximately $454,000
and $289,000 was attributable to the note receivable and accrued interest,
respectively. This payment satisfies in full the obligation of the related
Partnership.
During the three months ended March 31, 2002, the Partnership forgave the
remaining debt of approximately $635,000 on the Highridge note. Highridge
Associates sold all of its investment properties during 2001 and was unable to
fully repay its debt to the Partnership.
Note C - Transactions with Affiliated Parties
Other than the notes receivable previously disclosed, the Partnership had the
following transactions:
An affiliate of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $5,000 for the
three months ended March 31, 2003 and 2002, which is included in general and
administrative expenses.
Note D - Subsequent Event
In April of 2003, the Partnership made a distribution of approximately $618,000
from the proceeds received in satisfaction of the Quail Run note receivable and
accrued interest. Of this amount, approximately $6,000 was paid to the general
partner and approximately $612,000 was paid to the limited partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. The discussions of the Registrant's
business and results of operations, including forward-looking statements
pertaining to such matters, do not take into account the effects of any changes
to the Registrant's business and results of operations. Actual results may
differ materially from those described in the forward-looking statements and
will be affected by a variety of risks and factors including, without
limitation: national and local economic conditions; the terms of governmental
regulations that affect the Registrant and interpretations of those regulations;
the competitive environment in which the Registrant operates; financing risks,
including the risk that cash flows from operations may be insufficient to meet
required payments of principal and interest; real estate risks, including
variations of real estate values and the general economic climate in local
markets and competition for tenants in such markets; and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2003 was
approximately $2,000 compared to a net loss of approximately $16,000 for the
three months ended March 31, 2002. The decrease in net loss is attributable to
an increase in total revenues and a slight decrease in total expenses. The
increase in total revenues is attributable to three months of interest income
recognized on the Quail Run note receivable during 2003. The decrease in total
expenses is attributable to a decrease in general and administrative expenses.
The Partnership currently holds a note from an affiliated partnership, which
requires payments from excess cash flow after payments of the mortgage of the
affiliated partnership (see discussion below).
Liquidity and Capital Resources
At March 31, 2003, the Partnership held cash and cash equivalents of
approximately $751,000 as compared to approximately $69,000 at March 31, 2002.
The increase in cash and cash equivalents of approximately $736,000 from the
Partnership's year ended December 31, 2002, is due to cash provided by operating
activities. The Partnership invests its working capital reserves in interest
bearing accounts.
The Corporate General Partner monitors developments in the area of legal and
regulatory compliance and is studying new federal laws, including the
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests
additional compliance measures with regard to governance, disclosure, audit and
other areas. In light of these changes, the Partnership expects that it will
incur higher expenses related to compliance, including increased legal and audit
fees.
The Partnership holds a note receivable (the "Catawba Club Note") at March 31,
2003, totaling approximately $413,000 with approximately $537,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. During
2000, the first and second mortgages encumbering Catawba Club were replaced with
a new first mortgage. However, after payment of transaction costs and
establishing a repair escrow, as required by the lender, there were no proceeds
available for a payment on the Catawba Club Note. The note was in default at
March 31, 2003. The Partnership obtained a default judgment with respect to the
note. The Corporate General Partner is currently evaluating its options to
collect upon this judgment. Payments on the note are restricted to excess cash
flow after payment on the first mortgage. No payments on the note were received
in the three months ended March 31, 2003 and 2002, respectively.
During the three months ended March 31, 2003, the Partnership received full
repayment of the Quail Run note receivable. This payment occurred as a result of
the refinancing that occurred at Quail Run in November 2002. Of the payment
received, approximately $454,000 and $289,000 was attributable to the note
receivable and accrued interest, respectively. This payment satisfies in full
the obligation of the related partnership. The Partnership processed a
distribution to the partners in April of 2003 from the proceeds.
During the three months ended March 31, 2002, the Partnership forgave the
remaining debt of approximately $635,000 on the Highridge note. Highridge
Associates sold all of its investment properties during 2001 and was unable to
fully repay its debt to the Partnership. The Partnership received a payment of
approximately $125,000 on the Highridge note in December 2001. The Partnership
distributed the following amounts during the three months ended March 31, 2003
and 2002 (in thousands, except per unit data):
Three Months Per Three Months Per
Ended Limited Ended Limited
March 31, Partnership March 31, Partnership
2003 Unit 2002 Unit
Note
Repayments (1) $ -- $ -- $ 84 $ 6.69
(1) From note repayments from Highridge Associates and from note repayments
from Quail Run during 2001 and Woodlawn Village during 2000,
respectively.
Future cash distributions will depend on the levels of net cash generated from
the collection of notes receivable and the availability of cash reserves. The
Partnership's cash available for distribution is reviewed on a monthly basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from collection of the note receivable to permit distributions
to its partners during the remainder of 2003 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 4,059.01 limited partnership units
(the "Units") in the Partnership representing 32.74% of the outstanding Units at
March 31, 2003. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional units of limited partnership interest in the Partnership
in exchange for cash or a combination of cash and units in the operating
partnership of AIMCO either through private purchases or tender offers. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters which would include
voting on certain amendments to the Partnership Agreement and voting to remove
the Corporate General Partner. Although the Corporate General Partner owes
fiduciary duties to the limited partners of the Partnership, the Corporate
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the Corporate General Partner, as corporate general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Corporate General Partner to AIMCO, as its sole stockholder.
ITEM 3. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of the Corporate
General Partner, who are the equivalent of the Partnership's principal executive
officer and principal financial officer, respectively, have, within 90 days of
the filing date of this quarterly report, evaluated the effectiveness of the
Partnership's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls
and procedures are adequate. There have been no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect the Partnership's internal controls since the date of evaluation. The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls. Accordingly, no corrective actions
have been taken.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
3.1 Partnership Agreement, incorporated herein by reference to the
Partnership's Registration Statement, dated October 16, 1985
(2-99745), as filed pursuant to Rule 424(b)(the "Registration
Statement")
4 Form of Certificate representing interests in the Partnership,
incorporated herein by reference to Exhibit 4 to the
Registration Statement on Form S-11 dated October 16, 1985,
Registration Number 2-99745 is incorporated herein by
reference.
99 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JACQUES-MILLER INCOME FUND, L.P. - II
By: Jacques-Miller, Inc
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Treasurer
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2003
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller Income
Fund, L.P.-II;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/Patrick J. Foye
Patrick J. Foye
Treasurer of Jacques-Miller, Inc.,
equivalent of the chief executive officer of
the Partnership
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller Income
Fund, L.P.-II;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of Jacques-Miller, Inc., equivalent
of the chief financial officer of the
Partnership
Exhibit 99
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Jacques Miller Income
Fund, L.P. II (the "Partnership"), for the quarterly period ended March 31, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Patrick J. Foye, as the equivalent of the chief executive officer of
the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: May 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: May 13, 2003
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.