UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 2005
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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 incorporation (I.R.S. Employer Identification
or organization) Number)
1300 Altura Road Fort Mill, South Carolina 29708
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(Address of principal executive office) (Zip code)
(803) 547-9100
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(Registrant's telephone number, including area code)
(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 [ ]
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Balance Sheets as of September 30, 2005 and
December 31, 2004............................................... 3
Condensed Statements of Operations for the three and nine months
ended September 30, 2005 and 2004............................... 4
Condensed Statements of Cash Flows for the three and nine months
ended September 30, 2005 and 2004............................... 5
Notes to Condensed Financial Statements............................. 6
ITEM 2. Management's Discussion and Analysis or Plan of Operation..... 7
ITEM 3. Controls and Procedures....................................... 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................ 8
ITEM 6. Exhibits and Reports on Form 8-K............................. 8
Signatures............................................................... 9
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
September 30, December 31,
2005 2004
------------- ------------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents $320,833 $ 295,689
Accounts receivable, tenant 43,385 42,852
Prepaid expenses 12,393 -
---------- ----------
Total current assets 376,611 338,541
Leased property held for sale, net 2,261,101 2,323,501
---------- ----------
Total assets $2,637,711 $2,662,042
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $1,156,000 $ 84,000
Accounts payable 0 18,990
Accrued expenses 45,401 2,179
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Total current liabilities 1,201,401 105,169
Long-term debt, less current maturities - 1,135,000
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Total liabilities 1,201,401 1,240,169
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Commitment and Contingency
PARTNERS' EQUITY
General partners (8,693) (9,016)
Limited partners 1,445,003 1,430,889
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Total partners' equity 1,436,310 1,421,873
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Total liabilities and partners' equity $2,637,711 $2,662,042
========== ==========
Note: The Condensed Balance Sheet at December 31, 2004 has been taken from the
audited financial statements at that date.
See Notes to Condensed Financial Statements.
3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2005 2004 2005 2004
--------------- ------------ -------------- ------------
(Unaudited) (Unaudited)
Rental income $ 154,143 $ 151,700 $ 461,497 $ 456,599
Operating expenses:
Contract labor 1,500 1,500 4,500 4,500
Repairs and maintenance 62,870 34,043 129,041 102,248
Management fees 4,674 4,372 13,660 13,686
Utilities 29,853 29,262 76,434 74,523
Professional fees 9,283 14,100 53,496 59,683
Property taxes 10,770 10,575 32,310 31,725
Depreciation 62,401 0 62,401 -
Miscellaneous 1,181 1,080 6,854 4,250
--------------- --------------- --------------- ----------
182,531 94,932 378,696 290,615
--------------- --------------- --------------- ----------
Operating income (28,387) 56,768 82,801 165,984
--------------- --------------- --------------- ----------
Nonoperating income (expense):
Interest and dividend income 1,154 645 3,032 952
Interest expense (19,191) (14,064) (53,513) (40,059)
--------------- --------------- --------------- -----------
(18,037) (13,419) (50,481) (39,107)
--------------- --------------- --------------- -----------
Net income $ (46,424) $ 43,349 $ 32,320 $ 126,877
=============== =============== =============== ===========
Deduct net income applicable to limited partners
(per limited partner unit for the quarter ended June
30, 2005 $8.56; 2004 $6.80; and for the six
months ended June 30, 2005 $9.43; 2004 $12.94) $ (45,960) $ 42,916 $ 31,997 $ 125,608
=============== =============== =============== ===========
Net income applicable to general partners
(per general partner unit for the quarter
ended June 30, 2005 $4.14; 2004 $8.78;
and for the six months ended
June 30, 2005 $12.16; 2004 $16.70) $ (464) $ 433 $ 323 $ 1,269
=============== =============== =============== ==========
See Notes to Condensed Financial Statements.
4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
---------------------------------
2005 2004
-------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 32,320 $ 126,877
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 62,401 0
Change in assets and liabilities:
(Increase) in prepaids and accounts receivable (12,926) 1,807
Increase in accounts payable, accrued expenses, and deferred revenue 24,232 38,003
-------------- ---------------
Net cash provided by operating activities 106,027 166,687
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CASH FLOWS FROM INVESTING ACTIVITIES,
Proceeds from sale of securities available for sale - -
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Net cash provided by investing activities - -
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (63,000) (63,000)
Cash distributions (17,883) -
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Net cash (used in) financing activities (80,883) (63,000)
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Net increase in cash and cash equivalents 25,144 103,687
Cash and cash equivalents:
Beginning 295,689 208,237
-------------- ---------------
Ending $ 320,833 $ 311,924
============== ===============
See Notes to Condensed Financial Statements.
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 Partnership currently owns the
EastPark Executive Center in Charlotte, North Carolina. On April 24, 1998,
the Partnership sold its only other real property holding, the BB&T
building facilities (formerly the UCB building) located in Greenville,
South Carolina.
2. Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (all of which were normal
recurring adjustments) 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.
Leased property held for sale has been recorded following the Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Statement No. 144 requires assets held for
sale to be recorded at the lower of their carrying value or estimated fair
value less cost to sell. The fair market value of the property is subject
to potential significant change based on market conditions. Due to the
length of time the property has been on the market, management has decided
to begin depreciating the property over the remaining life of the property
commencing the third quarter of 2005.
3. Statement of Cash Flows:
For purposes of reporting the statements of cash flows, the 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, 2004, the cumulative unpaid priority return to the unit
holders was $3,861,957 compared to $3,619,173 one year prior. This
increase resulted from no distributions being made to partners during the
year. Although no distributions were paid to partners on the priority
return, the Partnership did make distributions in the first quarter of
2005 in the amount of $17,883 representing taxes owed on behalf of foreign
and non-resident partners. 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 remaining Partnership property
would produce net sale proceeds sufficient to pay any of such 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.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Changes in Financial Condition
There have not been any significant changes in financial condition from December
31, 2004 to September 30, 2005.
Liquidity and Capital Resources
During the nine months ended September 30, 2005, the Partnership operations
continued to meet working capital requirements. The working capital deficit as
of September 30, 2005 was $824,790. The large decrease in working capital is due
to the reclassification of the long-term debt to short-term debt due to the
current loan maturing on January 31, 2006. If this reclassification had not been
made, working capital would have been approximately $331,000. When the loan is
closer to maturity, the General Partners will seek refinancing with Wachovia
Bank, N.A. for the loan on EastPark; however, no assurances can be given that
such refinancing will occur. Cash distributions in the amount of $17,883 were
paid during the year. These distributions represented the 2004 Federal and North
Carolina taxes paid on behalf of the foreign and non-resident partners.
Results of Operations
Operating income for the nine months ended September 30, 2005 when compared to
the same period of the prior year, decreased approximately 50%. This is due to
re-commencing depreciation of the property held for sale. Rental income
decreased less than 1% and operating expenses increased approximately 28%, again
as a result of re-commencing depreciation on the property. Interest expense is
about 33% higher than last year as the rate on the floating rate loan has
increased. The rate at September 30, 2005 was approximately 6.5% as compared to
approximately 4.5% on September 30, 2004.
Status of EastPark Executive Center
The General Partners remain committed on selling the EastPark facility and
continue to have it listed with a commercial real estate broker. At this time,
the facility is not under contract with any potential buyers. During the first
quarter of 2005, the General Partners were able to negotiate a 20-month lease
with Management Systems Designers, Inc. ("MSD") that was previously under a
month-to-month tenancy. This lease will expire October 31, 2006, but MSD may
terminate this lease with a ninety (90) day written notice after one year if the
primary tenant, the General Services Administration ("GSA"), either vacates or
terminates its engagement contract with MSD. The primary tenant, GSA has a lease
scheduled to expire October 31, 2006. However, they have the option to terminate
their lease anytime after October 31, 2005 by providing a ninety (90) day
written notice. No assurances can be given that a replacement tenant could be
found if the GSA decides to terminate its lease. The General Partners will
continue to search for the best offer for the property and manage it at
acceptable standards until such time as the Partnership can sell the property to
a qualified buyer.
Forward-Looking Statements
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of the Partnership. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from those contemplated by such forward-looking statements. Factors that may
cause actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
o Inability to sell the building due to current market conditions
o Inability to extend the lease on a long-term basis to its major tenant
7
ITEM 3. CONTROLS AND PROCEDURES
The Partnership's General Partner and Principal Accounting Officer have
conducted an evaluation of the Partnership's disclosure procedures as of
September 30, 2005. Based on their evaluation, the General Partner and Principal
Accounting Officer have concluded that the Partnership's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Partnership in reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the applicable Securities and Exchange Commission
rules and forms. There were no significant changes in the Partnership's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the most recent evaluation of these controls by the
Partnership's General Partner and Principal Accounting Officer, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
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. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation
Number Under
Exhibit Item 601 of
Number Regulation S-K Exhibit Description
------- -------------- -------------------
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 Listing Agreement of Property For Lease
and/or Sale dated February 2,
2004 (EastPark Executive Center)
5 31.1 Certification required by Section 31 of
Item 601 of Regulation S-K
6 31.2 Certification required by Section 31 of
Item 601 of Regulation S-K
7 32.1 Certification pursuant to Section 1350 of
Chapter 63 of Title 18 of the United
States Code (Sarbanes-Oxley Act of 2002.)
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the three months
ended September 30, 2005.
* 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 of the Partnership's Form 10-K
for the year ended December 31, 1995.
*** Incorporated by reference to Exhibit 10.3 of the Partnership's Form
10-K for the year ended December 31, 2003.
8
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
By: YFP, LLC
General Partner
Date 11/14/05 By: /s/ Jeffrey S. Yager
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Jeffrey S. Yager
Manager
Date 11/14/05 By: /s/ Thomas K.Emery
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Thomas K.Emery
(Serving in the function of
Principal Financial Officer)
9