U. S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission file number 0-21455. DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) State of Wisconsin 39-1518732 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 250 Patrick Blvd., Suite 140 Brookfield, Wisconsin 53045-5864 (Address of principal executive offices) (262) 792-9200 (Issuer's telephone number) Not Applicable Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes No . APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: . Transitional Small Business Disclosure Format (check one): Yes No X . Decade Companies Income Properties - A Limited Partnership Form 10-QSB INDEX June 30, 2000 PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (unaudited as to June 30, 2000 and the three months and six months then ended). Balance Sheet at June 30, 2000. 3 Statements of Operations for the three months and six months ended June 30, 2000 and 1999 4 Statements of Partners' Capital for the six months ended June 30, 2000 and the year ended December 31, 1999. 5 Statements of Cash Flows for the six months ended June 30, 2000 and 1999. 6 Notes to Financial Statements. 7 Item 2. Management's Discussion and Analysis or Plan of Operations 7 - 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K. 16 SIGNATURES 17 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BALANCE SHEET June 30, 2000 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,680,569 Escrow deposits 16,394 Prepaid expenses and other assets 39,447 Total Current Assets 4,736,410 INVESTMENT PROPERTIES, AT COST: 32,562,235 Less: accumulated depreciation (10,173,149) Net Investment Property 22,389,086 OTHER ASSETS: Utility deposits 40,453 Debt issue costs, net of accumulated amortization 581,605 Total Other Assets 622,058 Total Assets $27,747,554 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Accounts payable and accrued taxes $ 564,142 Tenant security deposits 127,244 Distributions payable 169,504 Accrued interest payable 20,462 Payables to affiliates 3,928,832 Mortgage notes payable 25,673,004 Total Liabilities 30,483,188 PARTNERS' CAPITAL: General Partner Capital (94,464) Limited Partners (authorized--18,000 Interests; outstanding--13,400.27 Interests) (2,641,170) Total Partners' Capital (2,735,634) Total Liabilities and Partners' Capital $27,747,554 See Notes to Unaudited Financial Statements. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended 6/30/00 6/30/99 6/30/00 6/30/99 Operating revenue: Rental income $ 1,712,999 $1,608,497 $3,368,565 $3,165,427 Operating expenses (813,376) (658,259) 1,486,848) (1,356,957) Real estate taxes (183,900) (187,792) (367,800) (373,583) Total operating expenses (997,276) (846,051) (1,854,648) (1,730,540) Net operating income 715,723 762,446 1,513,917 1,434,887 Interest expense (505,712) (447,733) (1,010,628) (891,982) Depreciation (255,120) (250,200) (505,600) (496,350) Amortization (28,326) (13,150) (56,653) (26,300) Net income (loss) from investment property (73,435) 51,363 (58,964) 20,255 Other income (expenses): Interest income 68,250 22,629 110,099 40,102 Partnership managmnt (52,681) (65,921) (118,365) (133,868) 15,569 (43,292) (8,266) (93,766) NET INCOME (LOSS) $(57,866)$ 8,071 $ (67,230) $ (73,511) Net income (loss) attributable to General Partner(1%) $ (579)$ 81 $ (672) $ (735) Net income (loss) attributable to Limited Partners (99%) (57,287) 7,990 (66,558) (72,776) $ (57,866) $ 8,071 $ (67,230) $ (73,511) Net income (loss) per Limited Partner Interest $ (4.28) $ 0.60 $ (5.02) $ (5.43) See Notes to Unaudited Financial Statements STATEMENTS OF PARTNERS' CAPITAL (Unaudited as to the Six Months Ended June 30, 2000) General Limited Partner Partners' Capital Capital Total BALANCES AT 12/31/98 $(88,085) $(1,596,126) $ (1,684,211) Distributions to Partners (3,975) (670,019) (673,994) Net (loss) for the year 268 26,541 26,809 BALANCES AT 12/31/99 $(91,792) $(2,239,604) $(2,331,396) Distributions to Partners (2,000) (335,008) (337,008) Net income for the period (672) (66,558) (67,230) BALANCES AT 6/30/00 $(94,464) (2,641,170) $(2,735,634) () denotes deficit or deduction. See Notes to Unaudited Financial Statements. STATEMENTS OD CASH FLOWS-(UNAUDITED) For The Six Months Ended June 30, 2000 1999 CASH PROVIDED BY (USED FOR) OPERATIONS $ 849,787 $ 572,700 INVESTING ACTIVITIES: Additions to investment property (216,080) (207,961) FINANCING ACTIVITIES: Principal payments on mortgage notes (184,810) (155,024) Distributions paid to limited partners (335,008) (335,008) Distributions paid to general partner (3,975) 0 NET CASH (USED IN) FINANCING ACTIVITIES (523,793) (490,032) INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 109,914 (125,293) CASH & CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 4,570,655 1,867,814 CASH & CASH EQUIVALENTS AT THE END OF PERIOD $4,680,569 $1,742,521 Supplementary disclosure of cash flow information: Interest paid $ 996,379 $ 917,546 Income taxes paid 0 0 See Notes to Unaudited Financial Statements NOTE A--BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. 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 management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1999. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. FORWARD-LOOKING INFORMATION Forward-looking statements in this report, including without limitation, statements relating to Decade Companies Income Properties (the "Partnership") plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forwarded-looking statements involve risks and uncertainties including without limitation the following: (i) the Partnership's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the General Partner; (ii) the Partnership's plans and results of operations will be affected by the Partnership's ability to manage its growth (iii) other risks and uncertainties indicated from time to time in the Partnership's filings with the Securities and Exchange Commission. Information contained in this Quarterly Report on Form 10-QSB contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "may," "will," "expect, "anticipate," "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. There are number of important factors with respect to such forward looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those contemplated in such forward-looking statements. Such factors, which could adversely effect the Partnership's ability to obtain these results, include, among other things, (i) the volume of transactions and prices for real estate in the real estate markets generally, (ii) a general or regional economic downturn which could create a recession in the real estate markets, (iii) the Partnership's debt level and its ability to make interest and principal payments, (iv) an increase in expenses related to new initiatives, investments in people and technology, and service improvements, (v) the success of the new initiatives and investments and (vi) other factors described elsewhere in this Quarterly Report on Form 10-QSB. RESULTS OF OPERATIONS Operating revenue from rental income was $1,713,000 in the quarter ended June 30, 2000, compared to $1,608,000 for the same period in 1999, an increase of 6.5%. Rental income was provided by the three sites for the comparative three month period as set forth below: Percent Three Months Ended Increase Increase 6/30/00 6/30/99 (Decrease) (Decrease) Pelican Sound $ 721,000 $ 705,000 $ 16,000 2.3% Meadows II 535,000 495,000 40,000 8.1% Town Place 457,000 408,000 49,000 12.0% Total $1,713,000 $1,608,000 $ 105,000 6.5% The $105,000 increase in rental income for the second quarter, compared to the prior year's second quarter, is attributed primarily to both a 2% increase in gross potential rent and a 3% increase in occupancy (from 90% to 93%). The $105,000 increase consisted of increases at Town Place of $49,000, Meadows II of $40,000 and Pelican Sound of $16,000. The $49,000 increase at Town Place is attributed to a 3% increase in gross potential rent, plus a 2% increase in average occupancy (from 93% to 95%). The $40,000 increase at The Meadows II is attributed to a 2% increase in gross potential rent plus a 6% increase in average occupancy (from 84% to 90%). The $16,000 increase at Pelican Sound is attributed to a 2% increase in gross potential rent, offset by a slight decrease in occupancy. Operating revenue from rental income for the six month period ended June 30, 2000 was $3,369,000, compared to $3,165,000 for the same period in 1999, an increase of 6.4%. Rental income was provided by the three sites for the comparative six month periods as set forth below. Percent For Six Months Ended Increase Increase 6/30/00 6/30/99 (Decrease) (Decrease) Pelican Sound $1,400,000 $1,359,000 $ 41,000 3.0% Meadows II 1,082,000 1,014,000 68,000 6.7% Town Place 887,000 792,000 95,000 12.0% Total $3,369,000 $3,165,000 $ 204,000 6.4% The $204,000 increase in rental income for the six month period, compared to the prior year's same six month period, is attributed to both a 2% increase in gross potential rent and a 3% increase in occupancy (from 89% to 92%). The $204,000 increase consisted of increases at all three apartment sites: Town Place ($95,000), Meadows II ($68,000), and Pelican Sound ($41,000). The $95,000 increase at Town Place is attributed to a 2% increase in gross potential rent, plus a 4% increase in average occupancy (from 90% to 94%). The $68,000 increase at The Meadows II is attributed to a 2% increase in gross potential rent, plus a 5% increase in average occupancy (from 86% to 91%). The $41,000 increase at Pelican Sound is attributed to a 2% increase in gross potential rent, plus a slight increase in occupancy (from 91.6% to 92.2%). The average monthly gross potential rent per unit at the Apartments for the second quarter of 2000 and for the six month period of 2000, and the comparative periods in 1999, is set forth below: Number Three Months Ended Six Months Ended of Units 6/30/00 6/30/99 6/30/00 6/30/99 Pelican Sound 379 $650 $635 $647 $634 The Meadows II 316 $623 $612 $622 $611 Town Place 240 $640 $621 $637 $622 All Rental Units 935 $638 $623 $636 $623 "Gross potential rent" represents the asking rent established by the Partnership for a vacant apartment plus the rent in effect for occupied apartments. The average occupancy level at the Apartments for the second quarter ended June 30, 2000 and for the six month period of 2000, and the comparable periods in 1999, is set forth below: Three Months Ended Six Months Ended 6/30/00 6/30/99 6/30/00 6/30/99 Pelican Sound 93.3% 93.9% 92.2% 91.6% The Meadows II 90.3% 84.0% 91.0% 86.2% Town Place 94.9% 93.0% 94.2% 89.6% All Rental Units 92.7% 90.4% 92.3% 89.3% The range of occupancy levels at the Apartments for the second quarter period ended June 30, 2000 and for the six month period of 2000, and the comparable periods in 1999, is set forth below: Three Months Ended Six Months Ended 6/30/00 6/30/99 6/30/00 6/30/99 Pelican Sound 91.8-95.7% 93.4-94.2% 87.8-95.7% 88.5-94.2% The Meadows II 88.3-92.4% 79.0-87.4% 88.3-92.4% 79.0-89.1% Town Place 93.5-96.7% 92.8-93.3% 93.0-96.7% 85.6-93.3% All Rental Units 91.3-93.6% 88.6-91.6% 90.4-93.6% 87.9-91.6% Total rental expenses before depreciation and debt service in the three month period ended June 30, 2000 increased by $151,000, from $846,000 to $997,000, compared to the same period of 1999. The increase was comprised of increases at Pelican Sound of $94,000, at Town Place of $38,000 and Meadows II of $19,000. For the six month period total rental expenses increased by $125,000 from $1,730,000 to $1,855,000. The increases were comprised of increases at Pelican Sound of $64,000, and at Town Place of $33,000, and at The Meadows II of $28,000. A summary of operating expenses before depreciation and debt service by apartment site follows: For the Three Months Ended Increase Increase (Decrease) (Decrease) 6/30/00 6/30/99 Amount Percent Pelican Sound $430,000 $336,000 $ 94,000 28.0% Meadows II 293,000 274,000 19,000 6.9% Town Place 274,000 236,000 38,000 16.1% Total $997,000 $846,000 $151,000 17.8% For The Six Months Ended Increase Increase (Decrease) (Decrease) 6/30/00 6/30/99 Amount Percent Pelican Sound $ 795,000 $ 731,000 $ 64,000 8.8% Meadows II 573,000 545,000 28,000 5.1% Town Place 487,000 454,000 33,000 7.3% Total $1,855,000 $1,730,000 $125,000 7.2% The operating expense increases at Pelican Sound are primarily attributable to the repair of balconies and exterior painting. The increases at Town Place are also primarily attributable to exterior painting and repair. The increases at The Meadows II are primarily attributable to increases in various expense categories, including outside contractor cleaning and painting, and on-site personnel costs for grounds, snow removal, apartment cleaning and maintenance. Net income from rental property operations before debt service, depreciation and amortization, was approximately $716,000 for the second quarter of 2000, compared to $762,000 for the comparative period, a decrease of approximately $46,000. The net decrease was comprised of a decrease at Pelican Sound of $78,000, offset by increases at The Meadows II of $21,000 and at Town Place of $11,000. For the six month period net income from rental operations before depreciation, amortization, and debt service was approximately $1,514,000 for the 2000 period compared to $1,435,000 for the comparable 1999 period, an increase of $79,000. The increase was comprised of increases at Town Place of $62,000, and the Meadows II of $40,000, offset by a decrease at Pelican Sound of $23,000. As a result of the foregoing, a summary of net operating income before depreciation, amortization, and debt service, by site including the percent of total for each site for three month periods ended follows: Increase Increase 6/30/00 6/30/99 (Decrease)(Decrease) Amount Percent Amount Percent Amount Percent Pelican Sound $290,000 40% $368,000 48% $(78,000) (21.2%) Meadows II 242,000 34% 221,000 29% 21,000 9.5% Town Place 184,000 26% 173,000 23% 11,000 6.4% Total $716,000 100% $762,000 100% $(46,000) (6.0%) A summary of net operating income before depreciation, amortization, and debt service, by site for the six month periods ended follows: Increase Increase 6/30/00 6/30/99 (Decrease) (Decrease) Amount Percent Amount Percent Amount Percent Pelican Sound $ 605,000 40% $ 628,000 44% $(23,000) (3.7%) Meadows II 509,000 34% 469,000 33% 40,000 8.5% Town Place 400,000 26% 338,000 23% 62,000 18.3% Total $1,514,000 100% $1,435,000 100% $ 79,000 5.5% Interest expense for the second quarter of 2000 increased $58,000 from the comparative period and increased $119,000 for the six month period, primarily as a result of a higher amount of outstanding debt attributable to the mortgage refinancing of Pelican Sound Apartments in October 1999. The net income before debt service from real estate activities is reduced by deductions for depreciation and amortization which do not affect cash flow. Depreciation and amortization increased $20,000 for the second quarter of 2000 compared to 1999, and by $40,000 for the six month period. The Partnership's net other expenses decreased during the six month period in 2000 by approximately $85,000. The $85,000 decrease consisted of an increase in interest income of $70,000 and a decrease in partnership management expenses of $15,000. The increased interest income is attributable to a larger investment portfolio available to generate such income. As a result of the foregoing, the Partnership's net loss for the quarter ended June 30, 2000 was $58,000, compared to a profit of $8,000 in the same period of 1999. For the six month periods the Partnership's net loss for 2000 was $67,000, compared to net loss of $74,000 for 1999. Exclusive of depreciation and amortization, the Partnership's net income for the quarters ended June 30, 2000 and 1999 was $226,000 and $271,000, and for the six month periods the net income exclusive of depreciation and amortization was $495,000 of 2000 and $449,000 for 1999. LIQUIDITY AND SOURCES OF CAPITAL At June 30, 2000 there was $4.70 million of cash and cash equivalents and escrow deposits available to pay liabilities. The Partnership has a credit line established of approximately $2.56 million from the undisbursed funds from The Meadows II refinancing to provide additional liquidity. The undisbursed funds do not bear interest until they are released by the mortgage lender. The cash balance averaged $4.63 million during the six month period. During the first six months of 2000, cash and cash equivalents increased by $110,000 as shown herein on the Statements of Cash Flows. Operating activities provided $850,000 during the quarter. The cash flow was used to make cash distributions to the partners of $339,000 ($335,000 to the limited partners, and $4,000 to the general partner). Approximately $110,000 (32.0% of the cash distributions) was considered to be portfolio income subject to income taxes. The balance of the cash flow provided by operations was used to make principal payments on the outstanding mortgage notes of $185,000, to purchase capitalized additions to the investment properties of $216,000, and to increase cash reserves. The General Partner believes that the Partnership has the ability to generate adequate amounts of cash to meet the Partnership's current needs. Short-term obligations total $4.4 million, consisting of $881,000 of current liabilities, $406,000 of mortgage principal liabilities, and as described in detail below, $3,069,000 payable to the General Partner and affiliates. On a short-term basis, rental operations are expected to provide a stream of cash flow to pay day-to-day operating expenses and to fund quarterly cash distributions to partners. Investment property operations generated a profit in the second quarter of 2000 of $226,000 (before depreciation and amortization of $283,000) compared to $271,000 for the same period in 1999. For the six month period net income from investment properties generated a profit of $495,000 for year 2000 (before depreciation and amortization of $562,000) compared to $449,000 for the same period in 1999. The Agreement of Limited Partnership provides that the Partnership will make distributions for each calendar quarter of cash flow less amounts set aside for reserves. In April the Partnership paid to the Limited Partners the March declaration of $167,500 ($12.50 per Interest) and declared for the fifteenth consecutive quarter a similar amount payable for the second quarter of 2000 to be paid in July 2000. The distribution payable to the General Partner of $2,000 was accrued and payment will be made subsequently. The Partnership intends, but is not required, to continue to make cash distributions to the Limited Partners each quarter in the same amount of 5.0% per annum on the original capital investment of $1,000 per Interest. This intention will require cash distributions to the limited partners of approximately $670,000 in the next 12 months, which should be met from operations and cash reserves. Through June 30, 2000 the Partnership declared cash distributions of approximately $13.5 million (75% of original capital) to the Limited Partners since inception. Cumulative cash distributions range from $745 (74%) to $892 (89%) per $1,000 Interest of an original holder, depending upon the date of purchasing the Interest. The Town Place loan is due in three years in 2003 and will require a balloon payment of approximately $6.0 million. The Meadows II loan is due in five years in 2005 and will require a balloon payment of approximately $5.7 million. The Pelican Sound note is due in six years in 2006 and will require a balloon payment of approximately $6.0 million. The long-term mortgage obligations of the Partnership require principal reductions (excluding balloon payments) of approximately $2.1 million over the next five years. These obligations will most likely be satisfied by cash generated from operations. It is anticipated that all three properties will be sold or refinanced prior to the maturity dates. The mortgage notes on Pelican Sound, Town Place and Meadows II bear interest at 7.50%, 8.25%, and 7.25% respectively. The Partnership is exploring the possibility of refinancing the Town Place mortgage loan during 2000 if lower interest rates are available. Additional proceeds from the refinancing in excess of the existing mortgage debt would provide additional liquidity. Approximately $3.9 million of deferred fees and deferred interest related thereto has been earned by the General Partner and affiliates, of which approximately $3.0 million is a short term obligation of the Partnership currently due and payable. To date the Partnership has not paid the $3.0 million of deferred fees and deferred interest in order to preserve the ability of the Partnership to acquire additional properties, if deemed advisable. The actual timing of the payment of deferred fees and related interest will take into account the amount of cash reserves to be set aside that the General Partner deems necessary or appropriate for the operation and protection of the Partnership. The General Partner currently intends to make payment only after it is determined that the liquidity is not required to purchase additional properties, either directly or by means of an exchange. Other than the payments described above, there are no long-term material capital expenditures, obligations, or other demands or commitments that might impair the liquidity of the Partnership. Partners' Capital decreased by $404,000 during the first six months of 2000 due to cash distributions declared payable to the partners of $337,000, plus by the net loss for the second quarter of $67,000. IMPACT OF YEAR 2000 COMPLIANCE As a result of its implementation efforts, the Partnership experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Partnership is not aware of any material problems resulting from Year 2000 issues, either with its internal systems, or the products and services of third parties. The Partnership will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDING. There is no material pending litigation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. The following exhibit is included herein: (27) Financial Data Schedule The Partnership did not file any reports on Form 8-K during the three months ended June 30, 2000. 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. DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP (Registrant) By: DECADE COMPANIES (General Partner) Date: August 8, 2000 By: /s/ Jeffrey Keierleber Jeffrey Keierleber General Partner and Principal Financial and Accounting Officer of Registrant