<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission file number: 333-9371
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation or organization)
38-3304095
----------
(IRS Employer Identification Number)
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
------------------------------------------------
(Address of principal executive offices, including zip code)
(734) 994-5505
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(Issuer's telephone number)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last year)
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 filing requirements for the
past 90 days. Yes X No
---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS 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: Not applicable
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: Not applicable
<PAGE> 2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
ITEM NO. PAGE
-------- ----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet, March 31, 2000 and December 31, 1999 3
Statement of Operations for the three months
ended March 31, 2000 and 1999 4
Statement of Changes in Partners' Capital for the three months
ended March 31, 2000 5
Statement of Cash Flows for the three months
ended March 31, 2000 and 1999 6
Notes to Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 10
PART II OTHER INFORMATION
Other Information 11 - 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,459,746 $ 701,725
Restricted cash 34,429 214,035
Investment in leases:
Operating leases, net 25,105,208 25,199,728
Financing leases, net 6,496,110 7,419,695
Accounts receivable 22,280 32,647
Unbilled rent, net 459,555 389,496
Due from related parties 28,210 40,477
Deferred financing costs, net 520,795 535,675
------------ ------------
Total assets $ 34,126,333 $ 34,533,478
============= ============
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Notes payable $ 9,651,000 $ 9,651,000
Accounts payable and accrued expenses 86,804 128,274
Due to related parties 26,717 53,113
------------ ------------
Total liabilities 9,764,521 9,832,387
------------ ------------
Partners' capital:
Limited partners' capital accounts 24,381,928 24,717,802
General partner's capital accounts (20,116) (16,711)
------------ ------------
Total partners' capital 24,361,812 24,701,091
------------ ------------
Total liabilities & partners' capital $ 34,126,333 $ 34,533,478
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Operating revenue:
Rental income $ 720,172 $ 605,860
Finance income 152,487 200,815
--------- ---------
Total operating revenue 872,659 806,675
Operating costs and expenses:
Interest expense 214,067 145,241
Depreciation 94,520 72,611
General and administrative 26,580 19,676
--------- ---------
Total operating costs and expenses 335,167 237,528
--------- ---------
Income from operations 537,492 569,147
Other income (expense):
Interest and other income - 2,832
Gain on sale of equipment 42,433 -
Other - 975
--------- ---------
Total other (expense) income 42,433 3,807
--------- ---------
Net income 579,925 572,954
Net income allocable to general partner 5,799 5,730
--------- ---------
Net income allocable to limited partners $ 574,126 $ 567,224
========= =========
Net income per limited partnership unit $ 19.21 $ 18.91
========= =========
Weighted average number of limited partnership
units outstanding 29,883 30,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
CAPITAL CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the three months ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Limited Limited General Total
Partners' Partners' Partner's Partners'
Units Accounts Accounts Capital
----- -------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 29,883 $ 24,717,802 $ (16,711) $24,701,091
Distributions - ($30.45 per unit) - (910,000) (9,204) (919,204)
Net income - 574,126 5,799 579,925
------ ------------ --------- ------------
Balance, March 31, 2000 29,883 $ 24,381,928 $ (20,116) $ 24,361,812
====== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 579,925 $ 572,954
Adjustments to net income:
Depreciation 94,520 72,611
Amortization of debt issuance costs 14,880 14,122
Gain on sale of equipment (42,433) -
Increase in unbilled rent (70,059) (42,873)
Decrease (increase) in accounts receivable 10,367 (1,626)
(Decrease) increase in accounts payable and accrued expenses (41,470) 92,137
Decrease (increase) in restricted cash 179,606 (751,220)
Decrease in due from related parties 12,267 25,111
(Decrease) increase in due to related parties (26,396) 13,381
------------ -----------
Net cash provided by (used in) operating activities 711,207 (5,403)
------------ -----------
Cash flows from investing activities:
Purchase and construction advances for properties subject
to operating leases - (1,305,181)
Proceeds from sale of equipment 611,121 -
Purchase of equipment for financing leases - (1,131,619)
Principal payments on financing leases 354,897 301,525
------------ -----------
Net cash provided by (used in) investing activities 966,018 (2,135,275)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 3,276,000
Debt issuance costs - (171,643)
Distributions to limited partners (910,000) (812,500)
Distributions to general partner (9,204) -
------------ -----------
Net cash (used in) provided by financing activities (919,204) 2,291,857
------------ -----------
Net increase in cash and cash equivalents 758,021 151,179
Cash and cash equivalents, beginning of period 701,725 1,902,158
------------ -----------
Cash and cash equivalents, end of period $ 1,459,746 $ 2,053,337
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a
Delaware limited partnership, was formed on July 23, 1996 for the
purpose of acquiring income-producing commercial real properties and
equipment leased on a "triple net" or "double net" basis, primarily to
operators of national and regional chain and nationally franchised fast
food and family style restaurants, as well as other national and
regional retail chains. The general partners of the Partnership upon
formation of the Partnership were Captec Franchise Capital Corporation
IV (the "Corporation"), a wholly owned subsidiary of Captec Financial
Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
hereinafter collectively referred to as the Sponsor. Patrick L. Beach
is also the Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation and Captec. In August, 1998 the
general partnership interest of the Partnership was acquired by Captec
Net Lease Realty, Inc., an affiliate of Captec, for $2,912,000.
The Partnership commenced a public offering of limited partnership
interest units on December 23, 1996. A maximum of 30,000 units, priced
at $1,000 per unit, were offered on a "best efforts, part or none"
basis. The Partnership broke impound on March 5, 1997, and the
Partnership immediately commenced operations. The Partnership completed
the sale of all 30,000 units in 1998. On April 1, 1999 the Partnership
repurchased a total of 2.86 units for $2,570.64, or 90% of the
investor's capital account. An additional 114 units were repurchased on
October 1, 1999 for $102,828, or 90% of the investor's capital account.
The repurchase of the units was completed pursuant to the terms of the
Repurchase Plan set forth in the Partnership's Prospectus. At March 31,
2000, the Partnership had 29,883 units issued and outstanding.
Allocation of profits, losses and cash distributions from operations
and cash distributions from sale or refinancing are made pursuant to
the terms of the Partnership Agreement. Profits and losses from
operations are allocated among the limited partners based upon the
number of units owned.
The balance sheet of the Partnership as of March 31, 2000 and the
statements of operations and cash flows for the period ending March 31,
2000 and 1999 have not been audited. In the opinion of the Management,
these unaudited financial statements contain all adjustments necessary
to present fairly the financial position and results of operations and
cash flows of the Partnership for the periods then ended. Results of
operations for the interim periods are not necessarily indicative of
results for the full year. These unaudited financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1999 filed with the United States Securities and
Exchange Commission on March 30, 2000.
2. LAND AND BUILDING SUBJECT TO OPERATING LEASES:
The net investment in operating leases as of March 31, 2000 is
comprised of the following:
<TABLE>
<S> <C>
Land $ 10,635,450
Building and improvements 15,033,423
------------
25,668,873
Less accumulated depreciation (563,665)
------------
Total $ 25,105,208
============
</TABLE>
7
<PAGE> 8
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. NET INVESTMENT IN FINANCING LEASES:
The net investment in financing leases as of March 31, 2000 is
comprised of the following:
<TABLE>
<S> <C>
Minimum lease payments to be received $ 8,656,756
Estimated residual value 232,697
-------------
Gross investment in financing leases 8,889,453
Less unearned income (2,152,400)
Less direct origination costs (240,943)
-------------
Net investment in financing leases $ 6,496,110
=============
</TABLE>
4. NOTES PAYABLE:
In November, 1998, the Partnership entered into a $6.375 million term
note, the proceeds of which were used to acquire additional properties.
The note has a 10-year term, is collaterized by certain properties
subject to operating leases, and bears an interest rate of 8.13% per
annum.
In March, 1999, the Partnership entered into an additional $3.3 million
term note. The note also has a 10-year term, is collaterized by certain
properties subject to operating leases, and bears an interest rate of
8.5% per annum.
Debt issuance costs of approximately $595,500 in aggregate were
incurred in connection with the issuance of the notes, and are being
amortized using the straight-line method over the 10-year term.
8
<PAGE> 9
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
When used in this discussion, the words, "intends", "anticipates", "expects",
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. Such risks and
uncertainties include the following: (i) a tenant may default in making rent
payments, (ii) a fire or other casualty may interrupt the cash flow stream from
a property, (iii) the properties may not be able to be leased at the assumed
rental rates, (iv) unexpected expenses may be incurred in the ownership of the
properties, and (v) properties may not be able to be sold at the presently
anticipated prices and times.
As a result of these and other factors, the Partnership may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition and
operating results. These forward-looking statements speak only as of the date
hereof. The Partnership undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000. During the three months ended March 31, 2000
total operating revenue increased 8% to $873,000 as compared to $807,000 for the
three months ended March 31, 1999. Rental revenue from operating leases for the
three months ended March 31, 2000 increased 19% to $720,000 as compared to
$606,000 for the three months ended March 31, 1999 primarily from the benefit of
a full period of rental revenue from properties acquired and leased in
preceeding periods. Earned income from financing leases for the three months
ended March 31, 2000 decreased 24% to $153,000 as compared to $201,000 for the
three months ended March 31, 1999 primarily due to the sale of one equipment
lease.
Operating expenses were approximately $335,000 for the three months ended March
31, 2000 as compared to $238,000 for the three months ended March 31, 1999.
Total operating expenses for the three months ended March 31, 2000 is comprised
of $94,000 of depreciation expense, $27,000 of general and administrative
expenses, and $214,000 of interest expense. The increase in operating expenses
for the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999 is primarily due to additional interest expense related to the
note payable issued in March, 1999, and increased depreciation expense for new
property acquisitions.
Other income for the three months ended March 31, 2000 increased to $42,000 as
compared to $4,000 for the three months ended March 31, 1999 as a result of a
gain on the sale of one equipment lease.
As a result of the foregoing, the Partnership's net income increased 1% to
$580,000 for the three months ended March 31, 2000 as compared to $573,000 for
the three months ended March 31, 1999.
DISTRIBUTIONS. The Partnership announced first quarter distributions of
$900,000, of which $783,089 was distributed to its Limited Partners on April 14,
2000 and the remaining $116,911 will be distributed to those limited partners
who elected to receive distributions on a monthly basis.
9
<PAGE> 10
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL COMMITMENTS
The Partnership commenced the offering of up to 30,000 limited partnership units
registered under the Securities Act of 1933, as amended, by means of a
Registration Statement which was declared effective by the Securities and
Exchange Commission on December 23, 1996. The Offering reached final funding in
December, 1998 with subscriptions for the entire offering of 30,000 units. Net
proceeds after offering expenses were approximately $26.1 million.
In December, 1998 the Partnership entered into a $6.375 million term note. The
Partnership entered into an additional $3.276 million term note in March, 1999.
Proceeds from the notes were used to acquire additional properties. The notes
have a 10-year term, are collaterized by certain properties subject to operating
leases, and bear interest at rates ranging from 8.13 to 8.5% per annum. Debt
issuance costs of approximately $595,500 in aggregate incurred in connection
with the issuance of the notes are being amortized into interest expense over
the life of the notes using the straight-line method.
At March 31, 2000 the Partnership had a portfolio of 20 properties located in 10
states, with a cost of $26.8 million, and 24 equipment leases with an original
investment of $8.5 million. As of March 31, 2000 the Partnership's investments
were allocated approximately 76% to properties and 24% to equipment.
The Partnership expects to require limited amounts of liquid assets since the
properties and equipment leases require the lessees to pay all taxes and
assessments, maintenance and repair items (except, with respect to double net
properties, costs associated with maintenance and repair of the exterior walls
and roof of the property) and insurance premiums, including casualty insurance.
The general partners expect that the cash flow to be generated by the
Partnership's properties and equipment will be adequate to pay operating
expenses and provide distributions to Limited Partners.
10
<PAGE> 11
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
11
<PAGE> 12
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein or incorporated by
reference:
Number Exhibit
------ -------
4 Agreement of Limited Partnership of Registrant. (Incorporated
by reference from Exhibit B of the final Prospectus dated
December 23, 1996, as supplemented and filed with the
Securities and Exchange Commission, SEC File No. 333-9371)
4.1 Amended Agreement of Limited Partnership of Registrant.
(Incorporated by reference to the corresponding exhibit in the
Registrant's Form 10-K for the year ended December 31, 1998)
10.1 Promissory Note dated December 17, 1998 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrant's Form 10-K for the
year ended December 31, 1998)
10.2 Promissory Note dated March 30, 1999 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrant's Form 10-Q for the
quarter ended March 31, 1999)
27 Financial Data Schedule
99.1 Pages 35-42 of the final Prospectus dated December 23, 1997 as
supplemented. (Incorporated by reference from the final
Prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) promulgated under the Securities Act
of 1933, as amended. SEC File No. 333-9371)
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the first quarter ended March 31,
2000.
12
<PAGE> 13
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.
By: Captec Net Lease Realty, Inc.
Managing General Partner of
Captec Franchise Capital Partners L.P. IV
By: /s/ W. Ross Martin
----------------------------------------
W. Ross Martin
Executive Vice President,
Chief Financial Officer
Date: May 15, 2000
13
<PAGE> 14
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,494,175
<SECURITIES> 0
<RECEIVABLES> 50,490
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,544,665
<PP&E> 32,164,983
<DEPRECIATION> (563,665)
<TOTAL-ASSETS> 34,126,333
<CURRENT-LIABILITIES> 113,521
<BONDS> 9,651,000
0
0
<COMMON> 0
<OTHER-SE> 24,361,812
<TOTAL-LIABILITY-AND-EQUITY> 34,126,333
<SALES> 0
<TOTAL-REVENUES> 872,659
<CGS> 0
<TOTAL-COSTS> 121,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,067
<INCOME-PRETAX> 537,492
<INCOME-TAX> 0
<INCOME-CONTINUING> 537,492
<DISCONTINUED> 0
<EXTRAORDINARY> 42,433
<CHANGES> 0
<NET-INCOME> 579,925
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
