United States 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, 1996
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: 0-11059
BURGER KING LIMITED PARTNERSHIP II
Exact Name of Registrant as Specified in its Charter
New York 13-3133321
State or Other Jurisdiction I.R.S. Employer
of Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285-2900
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 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 ____
Balance Sheets
At March 31, At December 31,
1996 1995
Assets
Real estate held for sale $ 5,617,793 $ 5,617,793
Cash and cash equivalents 617,436 653,171
Rent receivable and other assets 214,304 232,047
Total Assets $ 6,449,533 $ 6,503,011
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 269,565 $ 271,548
Due to affiliates 1,700 1,300
Distributions payable 317,438 553,173
Total Liabilities 588,703 826,021
Partners' Capital (Deficit):
General Partner (51,936) (61,128)
Limited Partners (15,000 interests outstanding) 5,912,766 5,738,118
Total Partners' Capital 5,860,830 5,676,990
Total Liabilities and Partners' Capital $ 6,449,533 $ 6,503,011
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 5,738,118 $ (61,128) $ 5,676,990
Net income 483,090 25,426 508,516
Distributions to Partners (308,442) (16,234) (324,676)
Balance at March 31, 1996 $ 5,912,766 $ (51,936) $ 5,860,830
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Rental income $ 677,894 $ 631,164
Interest income 7,433 7,535
Miscellaneous income 1,250 295
Total Income 686,577 638,994
Expenses
Depreciation $ --- $ 67,896
Ground lease rent 93,292 92,398
Management fee 58,460 53,576
General and administrative 26,309 16,382
Total Expenses 178,061 230,252
Net Income $ 508,516 $ 408,742
Net Income Allocated:
To the General Partner $ 25,426 $ 23,832
To the Limited Partners 483,090 384,910
$ 508,516 $ 408,742
Per limited partnership interest
(15,000 outstanding) $32.21 $25.66
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 508,516 $ 408,742
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation --- 67,896
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Rent receivable and other assets 17,743 16,046
Accounts payable and accrued expenses (1,983) (13,260)
Due to affiliates 400 978
Net cash provided by operating activities 524,676 480,402
Cash Flows From Financing Activities
Cash distributions to partners (560,411) (598,933)
Net cash used for financing activities (560,411) (598,933)
Net decrease in cash and cash equivalents (35,735) (118,531)
Cash and cash equivalents, beginning of period 653,171 680,377
Cash and cash equivalents, end of period $ 617,436 $ 561,846
Notes to the financial statements
Burger King Limited Partnership II's (the "Partnership") unaudited financial
statements for the quarter ended March 31, 1996 should be read in conjunction
with the Partnership's 1995 annual audited financial statements within Form
10-K.
The Partnership's unaudited financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of March 31, 1996 and the results of operations and cash
flows for the three months ended March 31, 1996 and 1995 and the statement of
partners' capital (deficit) for the three months ended March 31, 1996. Results
of operations for the period are not necessarily indicative of the results to
be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
The Partnership agreed, subject to the satisfaction of certain conditions, to
sell the Partnership's remaining 29 restaurant properties (the "Properties")
to U.S. Restaurant Properties Operating L.P., a Delaware limited partnership
(the "Buyer"), pursuant to an Agreement of Purchase and Sale, dated as of
October 11, 1995, as amended by the First Amendment to Agreement of Purchase
and Sale dated as of January 9, 1996 and the Second Amendment to Agreement of
Purchase and Sale dated as of May 1, 1996 (as amended, the "Purchase
Agreement"). Pursuant to the terms of the Purchase Agreement, the Buyer
agreed to acquire the Properties for consideration in the amount of
$17,325,000 in cash (the "Purchase Price"), subject to adjustments and
prorations for base and percentage rents as well as certain other charges
payable in respect of the Properties and adjustments in respect of certain
closing costs (the "Proposed Sale").
In connection with the Proposed Sale and in accordance with the terms of the
Agreement of Limited Partnership dated as of August 23, 1982 (the
"Partnership Agreement"), a proxy statement (the "Proxy") was mailed to
limited partners of the Partnership (the "Unitholders") on March 25, 1996,
describing the terms of the Proposed Sale and presenting Unitholders with the
opportunity to call a meeting to consider whether to disapprove the Proposed
Sale. In order to effect a disapproval of the Proposed Sale, Unitholders
holding 10% or more in interest of the outstanding limited partnership
interests (the "Units") were required to submit written requests by April 30,
1996 to call for a meeting of the Unitholders to consider whether to
disapprove the Proposed Sale. The Partnership did not receive written
requests aggregating an amount equal to or in excess of the required 10% in
interest of the outstanding Units required to call a meeting of Unitholders
to disapprove the Proposed Sale. As a result, no meeting was convened and BK
II Properties Inc., the general partner of the Partnership (the "General
Partner"), completed the Proposed Sale on May 10, 1996.
The General Partner intends to distribute to the Unitholders the net proceeds
from the Proposed Sale as a special distribution (the "Special
Distribution"), which the General Partner currently expects to occur during
the second quarter of 1996. The General Partner currently estimates that the
Special Distribution will be approximately $1,045 per Unit. The General
Partner then intends to liquidate the Partnership in 1996 in accordance with
the Partnership Agreement.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At March 31, 1996, the Partnership had cash of $617,436, compared to $653,171
at December 31, 1995. The $35,735 decrease is primarily the result of
distributions made to the partners in excess of cash flow generated from
operations for the first quarter of 1996. The cash balance at March 31, 1996
consists of the Partnership's working capital and undistributed cash flow from
operations.
The Partnership agreed, subject to the satisfaction of certain conditions, to
sell the Partnership's remaining 29 Properties to the Buyer, pursuant to the
Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the Buyer
agreed to acquire the Properties for a Purchase Price of $17,325,000 in cash,
subject to adjustments and prorations for base and percentage rents as well as
certain other charges payable in respect of the Properties and adjustments in
respect of certain closing costs.
In connection with the Proposed Sale and in accordance with the terms of the
Partnership Agreement, the Proxy was mailed to Unitholders on March 25, 1996,
describing the terms of the Proposed Sale and presenting Unitholders with the
opportunity to call a meeting to consider whether to disapprove the Proposed
Sale. In order to effect a disapproval of the Proposed Sale, Unitholders
holding 10% or more in interest of the outstanding Units of the Partnership
were required to submit written requests by April 30, 1996 to call for a
meeting of the Unitholders to consider whether to disapprove the Proposed Sale.
The Partnership did not receive written requests aggregating an amount equal to
or in excess of the required 10% in interest of the outstanding Units required
to call a meeting of Unitholders to disapprove the Proposed Sale. As a result,
no meeting was convened and the General Partner completed the Proposed Sale on
May 10, 1996.
The General Partner intends to distribute to the Unitholders the net proceeds
from the Proposed Sale as a Special Distribution, which the General Partner
currently expects to occur during the second quarter of 1996. The General
Partner currently estimates that the Special Distribution will be approximately
$1,045 per Unit. The General Partner then intends to liquidate the Partnership
in 1996 in accordance with the terms of the Partnership Agreement.
Rent receivable and other assets totalled $214,304 at March 31, 1996, compared
to $232,047 at December 31, 1995. The decrease is primarily attributable to a
decrease in percentage rent as a result of a decrease in sales at the
Properties in the first quarter of 1996 as compared to the fourth quarter of
1995.
For the quarter ended March 31, 1996, the Partnership declared a distribution
in the amount of $324,676 which consisted of cash flow from operations. Such
amount represents a decrease of $155,727 from the corresponding period in 1995,
primarily as a result of the Partnership retaining approximately $200,000 of
cash flow from operations in reserve to pay legal costs associated with the
Proxy. This amount would have otherwise been included in the 1996 first
quarter distribution to the partners. On April 30, 1996, the Partnership paid a
cash distribution to the partners in the amount of $311,689, of which $11,741
was used to pay state non-resident and Federal foreign withholding taxes. The
unpaid portion of $12,987 primarily represents an amount equal to 4% of the
quarterly distributions of net cash flow from operations, which is required to
be retained pursuant to the terms of the Partnership Agreement. Net cash flow
from operations is distributed 95% to the Limited Partners and 1% to the
General Partner with the remaining 4% being retained by the Partnership as a
contingent reserve (the "Contingent Reserve"). To the extent the Limited
Partners do not receive an annual return of 12.5% of their remaining invested
capital, all or a portion of the Contingent Reserve shall be distributed to the
Unitholders with the remainder, if any, distributed to the General Partner.
Results of Operations
For the three months ended March 31, 1996, the Partnership generated net income
of $508,516, compared to $408,742 for the corresponding period in 1995. The
increase is primarily attributable to an increase in rental income and a
decrease in depreciation expense.
Rental income totalled $677,894 for the three months ended March 31, 1996,
compared to $631,164 for the corresponding period in 1995. The increase is
primarily attributable to an increase in percentage rent resulting from higher
sales at the Properties during the first quarter of 1996.
Depreciation expense decreased from $67,896 for the three months ended March
31, 1995 to $0 for the three months ended March 31, 1996. No depreciation
expense was recorded by the Partnership during the first quarter of 1996 since
the Properties were required, pursuant to Financial Accounting Standards No.
121, to be treated as real estate held for sale.
General and administrative expenses for three months ended March 31, 1996
totalled $26,309, compared to $16,382 for the corresponding period in 1995. The
increase is primarily attributable to costs associated with the completion of
the Proxy and professional fees incurred by the Partnership in connection with
the Proposed Sale.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(99) Second Amendment to Agreement of Purchase and Sale
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended March 31, 1996
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.
BURGER KING LIMITED PARTNERSHIP II
BY: BK II PROPERTIES INC.
General Partner
Date: May 13, 1996 BY: /s/ Rocco F. Andriola
NAME: Rocco F. Andriola
TITLE: President, Director and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 617,436
<SECURITIES> 000
<RECEIVABLES> 214,304
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 6,449,533
<CURRENT-LIABILITIES> 588,703
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 5,860,830
<TOTAL-LIABILITY-AND-EQUITY> 6,449,533
<SALES> 000
<TOTAL-REVENUES> 686,577
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 178,061
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 508,516
<INCOME-TAX> 000
<INCOME-CONTINUING> 508,516
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 508,516
<EPS-PRIMARY> 32.21
<EPS-DILUTED> 000
</TABLE>
SECOND AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE
SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "Amendment") made
as of 1st day of May 1996, by and between Burger King Limited Partnership II, a
New York limited partnership (the "Seller"), and U.S. Restaurant Properties
Operating L.P., a Delaware limited partnership (the "Buyer").
W I T N E S S E T H :
WHEREAS, Buyer and Seller are parties to that certain Agreement of
Purchase and Sale, dated as of October 11, 1995, as amended by the First
Amendment to Agreement of Purchase and Sale dated as of January 9, 1996
(collectively, the "Agreement") for the sale of twenty-eight Burger King
restaurants together with an option to sell Burger King store #3891 located in
Marietta, Georgia (the "Marietta Property") as more particularly provided in
the Agreement;
WHEREAS, Buyer and Seller desire to amend the terms of the Agreement to
provide for the purchase and sale of the Marietta Property; and
WHEREAS, all capitalized terms not defined herein shall have the meanings
ascribed to them in the Agreement.
NOW, THEREFORE, Buyer and Seller agree that the Agreement is hereby
amended as follows:
1. Sections 1.14 and 32, together with any and all references in the
Agreement to the "Option" are hereby deleted in their entirety.
2. The Marietta Property shall hereafter be included as one of the Owned
Properties as defined in Section 1.15 of the agreement. The Schedule attached
hereto and identified as "Burger King Limited Partnership II, Schedule 1,
Revised as of May 6, 1996" shall be substituted for Schedule 1 attached to the
Agreement. The Purchase Price as defined in Section 1.18 and Section 3 of the
Agreement shall be increased by Three Hundred Thousand Dollars ($300,000) to
Seventeen Million Three Hundred Twenty Five Thousand Dollars ($17,325,000).
3. Buyer has received a Title Report with respect to the Marietta Property
and has no Objections with respect to the same.
4. Notwithstanding anything to the contrary contained in Section 8(g) of
the Agreement, Seller shall have no obligation to furnish an estoppel
certificate from the Franchisee of the Marietta Property.
5. The definition of "Escrow Agent" set forth in Section 1.9 of the
Agreement shall be changed to : "Lawyers Title Insurance Corporation, 600 North
Pearl, Suite 700, Lock Box 185, Dallas, Texas 75201, Attn: Nancy Shirar." The
Deposit shall be transferred to one or more money market accounts at Nations
Bank, Dallas, Texas, and shall be held in escrow in accordance with the terms
of the Agreement. By signing as indicated below (a) the New York Office of
Lawyers Title Insurance Corporation agree to transfer the Deposit by wire
transfer, together with all accrued interest thereon, to the Escrow Agent and
(b) the Escrow Agent agrees to hold the Deposit in accordance with the terms
and conditions of Section 5 of the Agreement. The wire transfer shall be
effected as soon as possible following the opening of banking business in New
York on the day following execution following this Amendment by all parties
hereto. Any accrued interest posted to the account held by the New York Office
of Lawyers Title Insurance Corporation after the transfer of the Deposit to the
Escrow Agent shall be delivered to the Escrow Agent to be handled in accordance
with the terms of the Agreement.
6. Other than as amended hereby, the Agreement remains unmodified and in
full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as
of the day and year first above written.
SELLER: BUYER:
BURGER KING LIMITED U.S. RESTAURANT PROPERTIES
PARTNERSHIP II, OPERATING L.P.,
a New York limited partnership a Delaware limited partnership
By: BK II PROPERTIES INC., By: U.S. Restaurant Properties Inc.
General Partner (f/k/a QSV Properties Inc.),
General Partner
By: /s/ Kenneth F. Boyle By: /s/ Fred Margolin
Name: Kenneth F. Boyle Name: Fred Margolin
Title: Vice President Title: Chairman
LAWYERS TITLE INSURANCE LAWYERS TITLE INSURANCE
CORPORATION CORPORATION
(New York Office) (Dallas Office)
By: /s/ Craig Feder By: /s/ Nancy Shirar
Name: Craig Feder Name: Nancy Shirar
Title: Counsel Title: National Accounts Administrator
BURGER KING LIMITED PARTNERSHIP II
SCHEDULE 1
Revised as of May 6, 1996
STORE LOCATION SALES PRICE
3642 Redlands, CA 665,000
3647 Garland, TX 514,000
3659 Nederland, TX 951,000
3677 St. Peters, MO 681,000
3692 Marietta, GA 428,000
3693 Corpus Christi, TX 619,000
3696 Pelham, AL 387,000
3701 Milan, TN 191,000
3704 Greenville, NC 704,000
3706 Phoenix, AZ 604,000
3720 Wilmington, NC 539,000
3722 Southbend, IN 834,000
3723 Riverdale, GA 697,000
3732 Kansas City, KS 247,000
3758 Erlanger, KY 344,000
3773 Ceres, CA 1,265,000
3777 Orange, CA 268,000
3779 Statesboro, GA 780,000
3830 Plano, TX 193,000
3833 Hot Spring, AR 631,000
3871 Columbus, MS 1,087,000
3892 Vernon, CT 764,000
3925 Tucson, AZ 231,000
3978 Springfield, MA 302,000
4005 Glendale, AZ 619,000
4056 Rocky Mt., NC 1,049,000
4115 Mt. Clemens, MI 435,000
4185 Greenville, MS 996,000
3891 Marietta, GA 300,000
TOTAL 17,325,000
