UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number: 2-88051
BURGER KING LIMITED PARTNERSHIP III
Exact name of registrant as specified in its charter
New York 13-3178415
State or other jurisdiction
of incorporation or organization I.R.S. Employer Identification No.
Attn: Andre Anderson
3 World Financial Center,
29th Floor, New York, NY 10285-2900
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 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
No market for the limited partnership interests exists and therefore a market
value for the interests cannot be determined.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Unitholders for the year ended December 31, 1995 (Portions of
parts I, II, III and IV)
PART I
Item 1. Business
(a) General Development of Business
Burger King Limited Partnership III (the "Partnership") was formed as a limited
partnership on November 22, 1983 under the partnership laws of the State of New
York. The general partner of the Partnership is BK III Restaurants Inc.
(formerly Shearson/BK Restaurants, Inc.), a New York corporation (the "General
Partner") and an affiliate of Lehman Brothers Inc. ("Lehman"), formerly
Shearson Lehman Brothers, Inc. ("Shearson") (see Item 10). The Partnership
engages in the business of acquiring, constructing, improving, holding and
maintaining Burger King restaurants (each referred to as a "Property",
collectively, the "Properties"). The Properties are leased on a long-term net
basis to franchisees of Burger King Corporation ("Burger King").
(b) Financial Information About Industry Segment
The Partnership's sole business is leasing the Properties to franchisees of
Burger King. All of the Partnership's revenues, operating profit or losses and
assets relate solely to such industry segment.
(c) Narrative Description of Business
The Properties consist of the buildings, fixtures and improvements and, in some
cases, the underlying land. The Properties are net leased to franchisees of
Burger King. For a Property located on land owned by the Partnership, the
annual rent is the greater of (i) 14.5% of the Partnership's investment (which
equals the cost of land acquisition plus construction costs, as estimated at
the date the lease is executed, and capitalized interest) or (ii) 8.5% of the
Property's annual gross sales. For a Property located on land leased by the
Partnership, the annual rent is the greater of (i) 14.5% of the Partnership's
investment plus the annual ground rent paid by the Partnership to Burger King
which, in turn, pays rent to the owner of the underlying land or (ii) 8.5% of
the Property's annual gross sales.
The Partnership's principal investment objectives are to:
(1) provide regular cash distributions, a portion of which will be "tax
sheltered;" and
(2) provide realization of the long-term appreciation in the value of the
Properties, consistent in all cases with the preservation of partners'
capital.
Burger King had the option to purchase any or all of the restaurants at fair
market value from May 17, 1991 through May 16, 1994 at which time the option
expired unexercised. The Partnership is currently evaluating market conditions
to determine when the Partnership's remaining 24 Properties should be marketed
for sale. Until the Partnership's remaining Properties are sold, the
Partnership will continue to operate, and it is intended that cash flow from
operations will be distributed to the partners in accordance with the terms of
the Agreement of Limited Partnership dated as of November 22, 1983 (the
"Partnership Agreement"). Prior to December 31, 1995, the Partnership sold
three Properties. Please refer to Note 5 in the Notes to the Financial
Statements of the Partnership's Annual Report to Unitholders for the year ended
December 31, 1995 for additional information regarding Property sales to third
parties.
Employees
- ---------
The Partnership has no employees.
Competition
- -----------
Percentage rents received by the Partnership from the leases with the
franchisees at the Properties are based on the food and beverage sales
generated by the Properties. Competition in the fast food industry has
generally become more intense as the number of chains competing for the
consumer's business has increased. For most chains, in 1996, the primary
source of revenue growth is projected to be the development of new restaurants
or the acquisition of existing restaurants. As a result, intense price
competition and aggressive marketing promotions have become essential
ingredients in increasing sales from existing restaurants. Other factors which
influence sales include, but are not limited to, product quality, customer
service, and the diversity of menu offerings.
Item 2. Properties.
Incorporated by reference to the section captioned "Partnership's Restaurants"
on the Table of Contents page and Note 4 captioned "Real Estate" in the Notes
to the Financial Statements of the Partnership's 1995 Annual Report to
Unitholders.
Item 3. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters.
(a) Market Information
There is no established trading market for the limited partnership
units (the "Units").
(b) Holders
As of December 31, 1995, there were 2,552 holders of record (the
"Unitholders") of the Units.
(c) Distributions
The following table illustrates the per Unit quarterly cash
distributions paid to Unitholders during the past two years:
Quarter Declared 1995 1994
------------------------------------------------------------
First Quarter $ 32.46 $ 32.83
Second Quarter 24.02 23.60
Third Quarter 26.69 24.00
Fourth Quarter 25.59 25.36
-----------------------
Total Cash Distributions $ 108.76 $ 105.79
=======================
Reference is also made to Note 3, captioned "Partnership Allocations"
and Note 6 captioned "Distributions" of the Notes to Financial
Statements in the Partnership's 1995 Annual Report to Unitholders for
additional information concerning cash distributions paid by the
Partnership.
Item 6. Selected Financial Data.
The information set forth below should be read in conjunction with the
Partnership's Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," also
included elsewhere herein.
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
Rental income $2,159,733 $2,044,028 $1,941,005 $2,082,814 $2,098,73
Gain on sales of
Properties 0 0 162,513 0 76,012
Net income 1,328,509 1,418,073 1,486,673 1,339,253 1,231,863
Net income per Unit 83.21 88.89 93.55 83.36 76.00
Total assets at year end 6,192,050 6,577,380 6,802,582 8,022,257 8,380,350
Cash distributions
per Unit 108.76 105.79 153.77 (a) 126.95 (b)145.83 (c)
a Includes a $61.38 per Unit distribution from the sale of two Properties
located in Kansas City, Missouri and Waterford Township, Michigan.
b Includes $.51 per Unit paid for foreign and state non-resident tax
withholding in March 1992. Does not include $.17 per Unit of
non-recoupable withholding taxes.
c Includes $.07 per Unit paid for foreign tax withholding in March 1991
and a $25.08 per Unit distribution from the sale of a Property
located in Woodstock, Georgia.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
- -------------------------------
At December 31, 1995, the Partnership had a cash balance of $502,341 virtually
unchanged from $500,420 at December 31, 1994. Cash consists of the
Partnership's working capital and undistributed cash flow from operations.
Cash flow generated from operations is distributed quarterly to the partners.
Cash was largely unchanged due to the payment of net cash flow generated from
operations as quarterly cash distributions to the partners.
Due from Burger King decreased from $176,963 at December 31, 1994 to $50,977 at
December 31, 1995. Due from Burger King represents management fees paid during
the year which are required to be refunded in accordance with the terms of the
management agreement between Burger King and the Partnership (the "Management
Agreement"). Pursuant to the Management Agreement, Burger King is required to
refund all or a portion of management fees paid by the Partnership if the
annual rents received from the Properties, less the property management fee
paid to Burger King, does not equal at least 15.5% of the Partnership's
investment in the Properties. The decrease in the amount due from Burger King
for the year ended December 31, 1995 is primarily a result of an increase in
percentage rents received from the Properties from 1994 to 1995 which reduced
the amount of the management fees required to be refunded by Burger King.
During 1995, the Partnership paid $214,897 in management fees to Burger King,
of which $50,977 was refunded to the Partnership in February 1996.
At December 31, 1995, the Partnership had distributions payable of $404,096
which were paid on January 30, 1996.
On February 15, 1996, based upon, among other things, the advice of the
Partnership's counsel, Skadden, Arps, Slate, Meagher & Flom, the General
Partner adopted a resolution that states, among other things, if a Change of
Control (as defined below) occurs, the General Partner may distribute the
Partnership's cash balances not required for its ordinary course day-to-day
operations. "Change of Control" means any purchase or offer to purchase more
than 10% of the Units that is not approved in advance by the General Partner.
In determining the amount of the distribution, the General Partner may take
into account all material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner, and no partner will be
entitled to receive any distribution, until the General Partner has declared
the distribution and established a record date and distribution date for the
distribution. The Partnership filed a Form 8-K disclosing this resolution on
February 29, 1996.
Results of Operations
- ---------------------
1995 vs. 1994
The Partnership generated net income for the year ended December 31, 1995 of
$1,328,509 compared to $1,418,073 for the year ended December 31, 1994. The
decrease in net income is primarily attributable to an increase in management
fees paid to Burger King.
Rental income for the year ended December 31, 1995 was $2,159,733 compared to
$2,044,028 for the year ended December 31, 1994. The increase is primarily a
result of increased sales at the Properties resulting in an increase in
percentage rental income and, to a lesser extent, scheduled rent escalations in
the Partnership's ground leases. Ground lease rent escalations are passed on
to the franchisees in the form of higher base rents.
Interest income for the year ended December 31, 1995 was $26,299 compared to
$16,366 for the year ended December 31, 1994. The increase in interest income
is primarily attributable to a rise in interest rates earned during the 1995
period.
Total expenses for the year ended December 31, 1995 were $859,688 compared to
$646,097 for the year ended December 31, 1994. The increase is primarily
attributable to an increase in the management fee paid to Burger King which is
attributable to the increase in percentage rental income received by the
Partnership as a result of an increase in sales at the Properties. See Note 5
in the Notes to the Financial Statements of the Partnership's 1995 Annual
Report to Unitholders. Also contributing to the increase in expenses for the
year ended December 31, 1995, was higher ground lease rent resulting from
scheduled rent escalations on three of the Partnership's leased Properties.
1994 vs. 1993
The Partnership generated net income for the year ended December 31, 1994 of
$1,418,073 compared to $1,486,673 for the year ended December 31, 1993. The
decrease in net income is primarily a result of a gain on the sale of two
restaurants during the first quarter of 1993 of $162,513, whereas no such gain
was recognized in 1994. Partially offsetting the decrease in net income from
1993 to 1994 was an increase in percentage rental income in 1994 resulting from
an increase in sales at the Properties.
Rental income for the year ended December 31, 1994 was $2,044,028 compared to
$1,941,005 for the year ended December 31, 1993. The increase in rental income
is primarily due to an increase in percentage rents.
Total expenses for the year ended December 31, 1994 were $646,097 compared to
$635,927 for the year ended December 31, 1993. The increase is primarily
attributable to an increase in general and administrative expenses due to
certain environmental surveys performed in order to evaluate the possibility of
selling the restaurants, and an increase in the management fee paid to Burger
King. See Note 5 in the Notes to the Financial Statements of the Partnership's
Annual Report to Unitholders for the year ended December 31, 1994. The
increases were partially offset by a decrease in depreciation expense due to
the sale of two Properties in the first quarter of 1993.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the Partnership's 1995 Annual Report to
Unitholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partner is a New York corporation and an affiliate of Lehman.
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney, Harris Upham & Co. Incorporated
("Smith Barney"). Subsequent to this sale, Shearson changed its name to Lehman
Brothers Inc. The transaction did not affect the ownership of the Partnership
or the General Partner. However, the assets acquired by Smith Barney included
the name "Shearson." Consequently, effective January 24, 1994, the General
Partner changed its name from Shearson/BK Restaurants, Inc. to BK III
Restaurants Inc. to delete any reference to "Shearson."
The Partnership has no officers and directors. The General Partner manages and
controls the affairs of the Partnership and has general responsibility and
authority in all matters affecting its business. Certain officers and the
director of the General Partner are now serving (or in the past have served) as
officers or directors of entities which act as general partners of a number of
real estate limited partnerships which have sought protection under the
provisions of the Federal Bankruptcy Code. The partnerships which have filed
bankruptcy petitions own real estate which has been adversely affected by the
economic conditions in the markets in which that real estate is located and,
consequently, the partnerships sought the protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
The director and executive officers of the General Partner as of December 31,
1995 are set forth below. There are no family relationships between or among
any officer and any other officer or director.
Name Age Office
Rocco F. Andriola 37 Director, President and Chief Financial Officer
Kenneth Boyle 32 Vice President
Mark J. Marcucci 33 Vice President
Timothy Needham 27 Vice President
The foregoing director has been elected to serve as director until the annual
meeting of the General Partner to be held in October 1996. The business
experience of the director and each of the officers of the General Partner is
as follows:
Rocco F. Andriola is a Senior Vice President of Lehman Brothers in its
Diversified Asset Group. Since joining Lehman Brothers in 1986, Mr. Andriola
has been involved in a wide range of restructuring and asset management
activities involving real estate and other direct investment transactions.
From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman Brothers, Mr. Andriola practiced corporate and
securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola
received a B.A. degree from Fordham University, a J.D. degree from New York
University School of Law, and an LL.M degree in Corporate Law from New York
University's Graduate School of Law.
Kenneth Boyle is a Vice President of Lehman Brothers' Diversified Asset Group.
Mr. Boyle joined Lehman Brothers in January 1991. Mr. Boyle is a Certified
Public Accountant and was employed by the accounting firm of KPMG Peat Marwick
LLP from 1985 to 1990. Mr. Boyle graduated from the State University of New
York at Binghamton with a B.S. degree in Accounting.
Mark J. Marcucci is a Vice President of Lehman Brothers in its Diversified
Asset Group. Since joining Lehman Brothers in 1988, Mr. Marcucci's
responsibilities have been concentrated in the restructuring, asset management,
leasing, financing, refinancing and disposition of commercial office and
residential real estate. Prior to joining Lehman Brothers, Mr. Marcucci was
employed in a corporate lending capacity at Republic National Bank of New York.
Mr. Marcucci received a B.B.A. degree in Finance from Hofstra University and a
Master of Science degree in Real Estate from New York University. In addition,
Mr. Marcucci holds both Series 7 and Series 63 securities licenses.
Timothy E. Needham is an Associate of Lehman Brothers and assists in the
management of commercial real estate in the Diversified Asset Group. Mr.
Needham joined Lehman Brothers in September 1995. Prior to joining Lehman
Brothers Mr. Needham was a consultant with KPMG Peat Marwick LLP in the Banking
and Investment Services Group from 1994-1995. Mr. Needham received his M.B.A.
from the American Graduate School of International Management in December of
1993. Previous to entering graduate school, Mr. Needham worked in Tokyo, for
approximately one year doing market research for a Japanese firm (1991). In
addition, Mr. Needham is a candidate for the designation of Chartered Financial
Analyst.
Item 11. Executive Compensation.
Officers and the director of the General Partner are employees of Lehman and
are not compensated by the Partnership or the General Partner for services
rendered in connection with the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners
The Partnership knows of no person who beneficially owns more than 5%
of the Units.
(b) Security ownership of management
Under the terms of the Partnership Agreement, the Partnership's affairs
are managed by the General Partner. The General Partner owns the
equivalent of one Unit. No director or officers of the General Partner
own any Units.
(c) Changes in control
None.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others
Incorporated by reference to Note 7 captioned "Transactions with
Affiliates" in the Notes to the Financial Statements of the
Partnership's 1995 Annual Report to Unitholders.
(b) Certain Business Relationships
There have been no business transactions between the director and
officers of the General Partner and the Partnership.
(c) Indebtedness of Management
No management person is indebted in any amount to the Partnership.
(d) Transactions with Promoters
There have been no transactions with promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following are filed as part of this report:
1. Financial Statements
BURGER KING LIMITED PARTNERSHIP III
(a New York limited partnership)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report (1)
Balance Sheets at December 31, 1995 and 1994 (1)
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 (1)
Statements of Partners' Capital (Deficit) for
the years ended December 31, 1995, 1994 and 1993 (1)
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 (1)
Notes to Financial Statements (1)
(1) Incorporated by reference to the Partnership's 1995 Annual
Report to Unitholders.
2. Financial Statement Schedule
Independent Auditors' Report on Schedule III (F-1)
Schedule III - Real Estate and Accumulated Depreciation (F-2)
3. Exhibits
13 1995 Annual Report to Unitholders
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 29, 1996
BURGER KING LIMITED PARTNERSHIP III
BY: BK III Restaurants Inc.
General Partner
BY: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
BK III RESTAURANTS INC.
General Partner
Dated: March 29, 1996 BY: /s/ Rocco F. Andriola
Rocco F. Andriola
Director, President and
Chief Financial Officer
Dated: March 29, 1996 BY: /s/ Kenneth Boyle
Kenneth Boyle
Vice President
Dated: March 29, 1996 BY: /s/ Mark J. Marcucci
Mark J. Marcucci
Vice President
Dated: March 29, 1996 BY: /s/ Timothy Needham
Timothy Needham
Vice President
INDEPENDENT AUDITORS' REPORT
The Partners
Burger King Limited Partnership III:
Under date of February 15, 1996 we reported on the balance sheets of Burger
King Limited Partnership III (a New York limited partnership) as of December
31, 1995 and 1994, and the related statements of operations, partners' captial
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1995, as contained in the 1995 annual report to unit holders.
These financial statements and our report thereon are incorporated by reference
in the annual report on Form 10-K for the year 1995. In connection with our
audits of the aforementioned financial statements, we also have audited the
related financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, the financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 15, 1996
BURGER KING LIMITED PARTNERSHIP III
(a New York limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Costs Capitalized
Subsequent
Initial Costs To Acquisition
Buildings and Buildings and
Description (A) Encumbrances Land Improvements Improvements
- ------------------------------------------------------------------------------
Largo, FL $ 0 $ 210,000 $ 276,604 $ 0
Mounds View, MN 0 120,000 330,988 0
Sulphur Springs, TX 0 112,000 309,767 0
Atlanta, GA 0 250,000 362,443 0
Albuquerque, NM 0 (B) 286,252 0
Montgomery, AL 0 (B) 288,273 0
Covina, CA 0 270,000 346,210 0
Federal Heights, CO 0 (B) 231,001 0
Gallatin, TN 0 131,500 270,748 0
Edison, NJ 0 150,000 534,340 0
Cleburne, TX 0 129,588 336,846 0
Chattanooga, TN 0 180,000 309,706 0
Sheltbyville, TN 0 139,000 359,891 0
Gary, IN 0 207,000 409,521 0
Wilson, NC 0 135,000 381,867 0
Memphis, TN 0 225,000 398,988 0
North Augusta, SC 0 160,000 329,445 0
Columbus, IN 0 175,000 360,545 0
Brooklyn Park, MD 0 (B) 289,307 0
Fayetteville, NC 0 (B) 371,762 0
San Bernadino, CA 0 (B) 325,297 0
Frankfurt, KY 0 175,000 400,684 0
Delhi Township, OH 0 (B) 386,627 0
Nashville, TN 0 212,000 399,849 0
---------------------------------------------------
$ 0 $2,981,088 $ 8,296,961 $ 0
===================================================
BURGER KING LIMITED PARTNERSHIP III
(a New York limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Cost Basis at December 31, 1995
--------------------------------
Buildings and Accumulated
Description (A) Land Improvements Total Depreciation
- ---------------------------------------------------------------------------
Largo, FL $ 210,000 $ 276,604 $ 486,604 $ 197,718
Mounds View, MN 120,000 330,988 450,988 237,557
Sulpher Springs, TX 112,000 309,767 421,767 222,565
Atlanta, GA 250,000 362,443 612,443 256,688
Albuquerque, NM - 286,252 286,252 202,551
Montgomery, AL - 288,273 288,273 205,071
Covina, CA 270,000 346,210 616,210 242,867
Federal Heights, CO - 231,001 231,001 163,793
Gallatin, TN 131,500 270,748 402,248 190,461
Edison, NJ 150,000 534,340 684,340 365,823
Cleburne, TX 129,588 336,846 466,434 235,099
Chattanooga, TN 180,000 309,706 489,706 214,248
Sheltbyville, TN 139,000 359,891 498,891 248,689
Gary, IN 207,000 409,521 616,521 279,489
Wilson, NC 135,000 381,867 516,867 260,203
Memphis, TN 225,000 398,988 623,988 268,915
North Augusta, SC 160,000 329,445 489,445 222,103
Columbus, IN 175,000 360,545 535,545 243,745
Brooklyn Park, MD - 289,307 289,307 204,685
Fayetteville, NC - 371,762 371,762 250,354
San Bernadino, CA - 325,297 325,297 216,015
Frankfurt, KY 175,000 400,684 575,684 263,441
Delhi Township, OH - 386,627 386,627 251,486
Nashville, TN 212,000 399,849 611,849 259,252
-------------------------------------------------
$ 2,981,088 $8,296,961 $11,278,049(D) $5,702,818(C)
=================================================
BURGER KING LIMITED PARTNERSHIP III
(a New York limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Years of Dates Estimated
Description (A) Construction Acquired Useful Life
Largo, FL 1984 04/03/84 7 - 20 years
Mounds View, MN 1984 04/13/84 7 - 20 years
Sulpher Springs, TX 1984 03/08/84 7 - 20 years
Atlanta, GA 1984 06/15/84 7 - 20 years
Albuquerque, NM 1984 07/10/84 7 - 20 years
Montgomery, AL 1984 07/16/84 7 - 20 years
Covina, CA 1984 05/31/84 7 - 20 years
Federal Heights, CO 1984 08/31/84 7 - 20 years
Gallatin, TN 1984 10/11/84 7 - 20 years
Edison, NJ 1984 10/31/84 7 - 20 years
Cleburne, TX 1984 10/18/84 7 - 20 years
Chattanooga, TN 1985 01/18/85 7 - 20 years
Sheltbyville, TN 1985 02/07/85 7 - 20 years
Gary, IN 1985 05/09/85 7 - 20 years
Wilson, NC 1985 05/16/85 7 - 20 years
Memphis, TN 1985 08/01/85 7 - 20 years
North Augusta, SC 1985 08/02/85 7 - 20 years
Columbus, IN 1985 07/23/85 7 - 20 years
Brooklyn Park, MD 1985 02/20/85 7 - 20 years
Fayetteville, NC 1985 08/26/85 7 - 20 years
San Bernadino, CA 1985 12/11/85 7 - 20 years
Frankfurt, KY 1986 02/27/86 7 - 20 years
Delhi Township, OH 1986 06/16/86 7 - 20 years
Nashville, TN 1985 10/22/85 7 - 20 years
(A) Represents Burger King restaurants.
(B) Properties operated under a ground lease.
(C) Depreciation is computed under the straight-line method.
(D) Federal income tax basis of the real estate at December 31, 1995 is
$11,278,049.
BURGER KING LIMITED PARTNERSHIP III
(a New York limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
A summary of real estate held for investment and accumulated depreciation for
the three years ended December 31, 1995, 1994 and 1993 is as follows:
1995 1994 1993
Real Estate investments:
Beginning of year $ 11,278,049 $ 11,278,049 $ 12,514,335
Deduct: real estate sold 0 0 1,236,286
End of year $ 11,278,049 $ 11,278,049 $ 11,278,049
Accumulated Depreciation:
Beginning of year $ 5,425,179 $ 5,147,540 $ 5,305,277
Add: depreciation expense 277,639 277,639 311,064
Deduct: real estate sold 0 0 468,801
End of year $ 5,702,818 $ 5,425,179 $ 5,147,540
BURGER KING LIMITED PARTNERSHIP III
1995 ANNUAL REPORT
Burger King Limited Partnership III commenced operations in 1984 and was formed
to acquire Burger King restaurants which are leased to franchisees of Burger
King Corporation. The Partnership's principal investment objectives are to
make regular cash distributions and to realize long-term appreciation from the
sale of the restaurants.
Partnership's Restaurants (as of December 31, 1995) *
_____________________________________________________________
Albuquerque, New Mexico Gary, Indiana
Atlanta, Georgia Gallatin, Tennessee
Brooklyn Park, Maryland Largo, Florida
Chattanooga, Tennessee Memphis, Tennessee
Cleburne, Texas Montgomery, Alabama
Columbus, Indiana Mounds View, Minnesota
Covina, California Nashville, Tennessee
Delhi Township, Ohio North Augusta, South Carolina
Edison, New Jersey San Bernardino, California
Fayetteville, North Carolina Shelbyville, Tennessee
Federal Heights, Colorado Sulphur Springs, Texas
Frankfort, Kentucky Wilson, North Carolina
_____________________________________________________________
* This list does not include three restaurants either sold or conveyed
prior to December 31, 1995. Please refer to the Notes to Financial
Statements for information regarding properties sold prior to
December 31, 1995.
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
(800) 223-3464 (select option 1) (800) 223-3464 (selection option 2)
Contents
1 Message to Investors
3 Financial Statements
6 Notes to Financial Statements
10 Independent Auditors' Report
- --------------------------MESSAGE TO INVESTORS----------------------------
We are pleased to present for your review the 1995 Annual Report for Burger
King Limited Partnership III (the "Partnership"). Included in this report is a
brief update regarding the marketing of the Partnership's portfolio of 24
restaurant properties (the "Properties"), an overview of the Partnership's cash
distributions and financial performance, and audited financial statements for
the years ended December 31, 1995, 1994 and 1993, respectively.
Marketing Update
The Partnership is currently evaluating market conditions to determine when the
Partnership's remaining 24 Properties should be marketed for sale. Until all
of the Properties are sold, the Partnership intends to continue operating the
Properties and distributing the cash flow from operations to the partners in
accordance with the terms of the Partnership Agreement.
Property Operations
We are pleased to report that the same-store sales for 23 of the Properties
were $23,171,858 in 1995 compared to $21,582,966 for the same period in 1994,
representing an increase of 7.36%. This excludes a Property located in
Memphis, TN which was closed in 1994. Same-store sales results are an
important statistic since they eliminate the effect of Property dispositions
and allow for an accurate comparison of sales from year-to-year. Furthermore,
the growth in same-store sales measures the ability of mature stores, like the
Properties, to withstand competition and to increase existing sales through
efficient operations and advertising.
Rental income received by the Partnership from the franchisees of the
Properties is the greater of a minimum annual base rent or 8.5% of the
Properties' annual food and beverage sales. Sales at the Properties have
increased as a result of Burger King Corporation's aggressive marketing
efforts, such as the .99 cent Whopper promotion and tie-in promotions with The
Walt Disney Company, which have generally contributed to increases in the
volume of sales at participating restaurants.
Cash Distributions
Limited Partners received distributions of $108.76 per Unit for 1995, including
the Partnership's fourth quarter distribution in the amount of $25.59 per Unit
which was paid on January 30, 1996. Since the inception of the Partnership,
Limited Partners have received cumulative cash distributions of $1,329.12 per
original $1,000 Unit. This total includes distributions of net cash flow from
operations in the amount of $1,242.66 per Unit and distributions of net
proceeds from the sale of Properties in the amount of $86.46 per Unit.
Distributions of net proceeds from the sale of Properties represent a return of
capital which has reduced each Limited Partner's Unit from $1,000 to $913.54.
Financial Highlights
For the years ended December 31,
1995 1994
Rental Income $ 2,159,733 $ 2,044,028
Total Expenses 859,688 646,097
Net Income 1,328,509 1,418,073
- Rental income for the year ended December 31, 1995 increased 6% from
1994 primarily due to increased percentage rental income resulting from
higher food and beverage sales at the Properties.
- Total expenses increased primarily due to higher management fees paid
to Burger King Corporation, which were primarily attributable to the
increase in percentage rental income. Also contributing to the
increase in total expenses was an increase in ground lease rent
resulting from scheduled rent escalations at three of the Properties.
It should be noted that ground lease rent escalations are passed on to
the franchisees in the form of higher base rents.
- Net income in 1995 declined from 1994 primarily due to the increase in
management fees paid to Burger King Corporation.
Net Asset Value
The Partnership's Net Asset Value for the year ended December 31, 1995 was
$852.37 per Unit. This amount represents the estimated value of each Unit if
the Partnership sold the Properties at appraised values as of that date.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sale may differ. As a result of these
factors and the illiquid nature of an investment in Units of the Partnership,
the variation between the appraised value of the Properties and the price at
which Units of the Partnership could be sold is likely to be significant.
Fiduciaries of Limited Partners which are subject to ERISA or other provisions
of law requiring valuation of Units should consider all relevant factors,
including, but not limited to Net Asset Value per Unit, in determining the fair
market value of the investment in the Partnership for such purposes.
Summary
The General Partner is currently formulating a strategy for the sale of the
Partnership's remaining 24 Properties. However, it is uncertain at this time
when the actual marketing of the Properties to potential buyers will commence.
We will keep you updated on the status of the sale of the Properties in future
correspondence.
Very truly yours,
Burger King Limited Partnership III
By: BK III Restaurants Inc.
General Partner
/s/ Rocco F. Andriola
By: Rocco F. Andriola
President
March 29, 1996
Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
Real estate at cost (Note 4):
Land $ 2,981,088 $ 2,981,088
Buildings 5,552,773 5,552,773
Fixtures and equipment 2,744,188 2,744,188
11,278,049 11,278,049
Less - accumulated depreciation (5,702,818) (5,425,179)
5,575,231 5,852,870
Cash and cash equivalents 502,341 500,420
Rent receivable 50,447 34,238
Due from affiliates (Note 7) 13,054 12,889
Due from Burger King Corporation (Note 5) 50,977 176,963
Total Assets $ 6,192,050 $ 6,577,380
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 40,838 $ 41,160
Distributions payable (Note 6) 404,096 400,420
Total Liabilities 444,934 441,580
Partners' Capital (Deficit):
General Partner (22,629) (17,076)
Limited Partners
(15,000 interests outstanding) 5,769,745 6,152,876
Total Partners' Capital 5,747,116 6,135,800
Total Liabilities and
Partners' Capital $ 6,192,050 $ 6,577,380
Statements of Partners' Capital (Deficit)
For the years ended December 31, 1995, 1994 and 1993
Limited General
Partners Partner Total
Balance at December 31, 1992 $ 7,309,706 $ (19,490) $ 7,290,216
Net income 1,403,287 83,386 1,486,673
Distributions to partners (Note 6) (2,306,572) (82,241) (2,388,813)
Balance at December 31, 1993 6,406,421 (18,345) 6,388,076
Net income 1,333,287 84,786 1,418,073
Distributions to partners (Note 6) (1,586,832) (83,517) (1,670,349)
Balance at December 31, 1994 6,152,876 (17,076) 6,135,800
Net income 1,248,202 80,307 1,328,509
Distributions to partners (Note 6) (1,631,333) (85,860) (1,717,193)
Balance at December 31, 1995 $ 5,769,745$ (22,629) $ 5,747,116
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Income 1995 1994 1993
Rental income (Note 4) $ 2,159,733 $ 2,044,028 $ 1,941,005
Interest income 26,299 16,366 16,646
Miscellaneous income 2,165 3,776 2,436
Total Income 2,188,197 2,064,170 1,960,087
Expenses
Depreciation 277,639 277,639 311,064
Ground lease rent (Note 4) 279,546 257,583 255,866
Management fee (Note 5) 211,958 21,464 --
General and administrative 90,545 89,411 68,997
Total Expenses 859,688 646,097 635,927
Income from operations 1,328,509 1,418,073 1,324,160
Other Income
Gain on sales of properties (Note 4) -- -- 162,513
Net Income $ 1,328,509 $ 1,418,073 $ 1,486,673
Net Income Allocated:
To the General Partner $ 80,307 $ 84,786 $ 83,386
To the Limited Partners 1,248,202 1,333,287 1,403,287
$ 1,328,509 $ 1,418,073 $ 1,486,673
Per limited partnership
interest (15,000 outstanding) $83.21 $88.89 $93.55
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
Cash Flows from Operating Activities: 1995 1994 1993
Net income $ 1,328,509 $ 1,418,073 $ 1,486,673
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 277,639 277,639 311,064
Gain on sales of properties -- -- (162,513)
Increase (decrease) in cash
arising from changes in
operating assets and liabilities:
Rent receivable (16,209) (19,161) (4,199)
Due from affiliates, net (165) (609) 1,473
Due from Burger King
Corporation 125,986 (3,103) 13,279
Accounts payable and
accrued expenses (322) (2,233) (543)
Net cash provided by operating
activities 1,715,438 1,670,606 1,645,234
Cash Flows from Investing Activities:
Proceeds from sales of properties -- -- 929,998
Net cash provided by investing activities -- -- 929,998
Cash Flows from Financing Activities:
Cash distributions to
partners (1,713,517) (1,641,042) (2,705,805)
Net cash used for financing
activities (1,713,517) (1,641,042) (2,705,805)
Net increase (decrease) in cash
and cash equivalents 1,921 29,564 (130,573)
Cash and cash equivalents at
beginning of year 500,420 470,856 601,429
Cash and cash equivalents at
end of year $ 502,341 $ 500,420 $ 470,856
Notes to Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
Burger King Limited Partnership III (the "Partnership") was formed as a New
York limited partnership on November 22, 1983. The Partnership was formed for
the purpose of acquiring, constructing, improving, holding and maintaining
Burger King restaurants (the "Properties"). The Properties are leased on a
long-term net basis to franchisees of Burger King Corporation ("Burger King").
The general partner is BK III Restaurants Inc. (the "General Partner"),
formerly Shearson/BK Restaurants, Inc., an affiliate of Lehman Brothers Inc.
On July 31, 1993, certain of Shearson Lehman Brothers Inc.'s domestic retail
brokerage and management businesses were sold to Smith Barney, Harris Upham &
Co. Inc. Included in the purchase was the name "Shearson." Consequently, the
General Partner's name was changed to delete any reference to "Shearson."
On February 15, 1996, based upon, among other things, the advice of
Partnership's counsel, Skadden, Arps, Slate, Meagher & Flom, the General
Partner adopted a resolution that states, among other things, if a Change of
Control (as defined below) occurs, the General Partner may distribute the
Partnership's cash balances not required for its ordinary course day-to-day
operations. "Change of Control" means any purchase or offer to purchase more
than 10% of the Units that is not approved in advance by the General Partner.
In determining the amount of the distribution, the General Partner may take
into account all material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner, and no partner will be
entitled to receive any distribution, until the General Partner has declared
the distribution and established a record date and distribution date for the
distribution. The Partnership filed a Form 8-K disclosing this resolution on
February 29, 1996.
2. Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles. Revenues are recognized as earned and expenses are
recorded as obligations are incurred. Partnership's revenue is realized from
base and percentage rents received on each individual property. Base rents on
the leased properties increase in an amount equal to corresponding increases in
expenses incurred pursuant to the underlying ground leases. Accordingly, the
net base rents that the Partnership receives do not change during the lease
terms.
Real Estate Investments - Real estate investments, which consist of buildings,
fixtures and improvements and, in some cases, the underlying land are recorded
at cost less accumulated depreciation. Cost includes the initial purchase
price of the Properties plus closing costs, acquisition and legal fees and
original capital improvements. Depreciation of buildings is computed using the
straight-line method over an estimated useful life of 20 years. Depreciation
of the fixtures and improvements was computed under the straight-line method
over an estimated useful life of 7 years.
Accounting for Impairment - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121, " Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Partnership
adopted FAS 121 in the fourth quarter of 1995. Based on current circumstances,
adoption of FAS 121 had no impact on the Partnership's financial statements.
Cash Equivalents - Cash equivalents consist of short-term highly liquid
investments which have maturities of three months or less from the date of
purchase. The carrying value approximates fair value because of the short
maturity of these instruments.
Concentration of Credit Risk - Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
in excess of the financial institutions' insurance limits. The Partnership
invests available cash with high credit quality financial institutions.
Income Taxes - No provision for income taxes has been made in the financial
statements of the Partnership since such taxes are the responsibility of the
individual partners rather than of the Partnership.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Partnership Allocations
Allocation of Income and Loss - Pursuant to the terms of the partnership
agreement dated November 22, 1983 (the "Partnership Agreement"), credits and
income or gain from the Partnership's operations are allocated, without regard
to depreciation, in proportion to distributions of net cash flows from
operations made to the partners. To the extent that any such income or gain
exceeds distributions in any year, such excess shall be allocated 95% to the
limited partners and 5% to the General Partner. Depreciation shall be
allocated annually in proportion to the partners' respective capital accounts
as of the beginning of each year.
Net income is allocated monthly, and is apportioned to the limited partners of
the Partnership in the pro rata basis in which the number of interests owned by
each limited partner on the last day of the month bears to the total number of
interests owned by the General Partner and all the limited partners as of that
date. At December 31, 1995, 1994 and 1993 and for the years then ended, there
were 15,000 units of limited partnership interests outstanding (the
"Interests").
Gains with respect to dispositions of the Properties shall be allocated as
follows: first, 99% to the limited partners and 1% to the General Partner until
the limited partners achieve payout as defined in the Partnership Agreement
("Payout"); second, to any partner in an amount sufficient to increase his
negative capital account to zero; and third, 94.12% to the limited partners and
5.88% to the General Partner. Subsequent to Payout, gains shall be allocated
to the General Partner until his capital account equals 5.88% of the aggregate
outstanding capital account balances of all partners, and any remaining gain
shall be allocated 94.12% to the limited partners and 5.88% to the General
Partner.
Prior to Payout losses shall be allocated 99% to the limited partners and 1% to
the General Partner. Subsequent to Payout, losses shall be allocated 94.12% to
the limited partners and 5.88% to the General Partner.
Cash Distributions - Distributions of net cash flows from operations are made
quarterly and are allocated 95% to the limited partners and 5% to the General
Partner.
Distributions of net property disposition proceeds will be allocated 99% to the
limited partners and 1% to the General Partner until Payout. After Payout, an
additional management fee of 15% of the excess of the net property disposition
proceeds over the amount required to reach Payout is paid to Burger King and
the remainder is distributed 94.12% to the limited partners and 5.88% to the
General Partner. As of December 31, 1995, Payout had not occurred.
4. Real Estate
As of December 31, 1995, 1994 and 1993, the Partnership owned 24 Properties,
consisting of the restaurant buildings, fixtures and improvements, and in some
cases, the underlying land.
The leases between the Partnership and the franchisees (the "Leases") had an
initial term of 20 years with no renewal options. With respect to those
Properties in which the Partnership does not own the underlying land, there is
a ground lease between the Partnership and Burger King (collectively, the
"Ground Leases"). The Ground Leases had an initial term of 10 years with a
minimum of two five-year renewal options. All of the Leases expire in the year
2003 or 2004. Minimum future rentals on the noncancelable terms of the Leases
and the related Ground Leases as of December 31, 1995 are as follows:
Minimum Ground
Years ending Rental Lease
December 31, Income Obligations
1996 $ 1,907,327 $ 296,001
1997 1,908,472 297,146
1998 1,909,617 298,291
1999 1,914,514 303,188
2000 1,939,537 328,210
Later years 8,689,166 1,565,214
$ 18,268,633 $ 3,088,050
The Leases are on a net basis and the franchisees are required to pay all
taxes, assessments, maintenance costs, insurance premiums and other impositions
against the premises. The lessee is also required to make percentage rental
payments to the extent that 8.5% of such lessee's gross sales exceed the
minimum base rent paid by the lessee. Percentage rental income for December
31, 1995, 1994 and 1993 was $268,846, $175,104, and $41,173, respectively.
The General Partner is currently formulating a strategy for the sale of the
properties that will maximize their value.
5. Management Agreement
The Partnership has entered into agreements with Burger King for the management
of the Properties. These agreements provide for a fee equal to 10% of all base
rents and 20% of all percentage rent received by the Partnership from the
Properties, as defined in the Partnership Agreement. To the extent that the
Partnership does not receive annual rents from the Properties equal to a 15.5%
return on its investment in the Properties, Burger King will refund all or a
portion of the management fee received to provide the Partnership with such a
return. At December 31, 1995, 1994 and 1993, $50,977, $128,924 and $173,860,
respectively, were due from Burger King for such refunds.
Pursuant to an indemnity agreement, Burger King is obligated to contribute
minimum monthly rent payments in the event of a default under any lease up to
the indemnity amount, as defined below. The indemnity amount was originally
10% of the Partnership's original investment in the Properties as defined in
the Partnership Agreement, or $1,261,922. The indemnity amount may be
decreased by the amount of the minimum monthly rent payments made by Burger
King to the Partnership pursuant to the indemnity agreement. In 1989 and
subsequent years, the indemnity amount has been decreased on an annual basis by
an amount equal to the greater of (1) payments made by Burger King pursuant to
the indemnity agreement, or (2) 6-2/3% of the fifth year amount of the
indemnity until it is reduced to zero. On December 31, 1995, the indemnity
amount was approximately $673,031.
The property located in Memphis, Tennessee ceased operations on September 9,
1994. Burger King funded the minimum monthly rent payments to the Partnership
in accordance with the indemnity agreement.
Two Properties located in Kansas City, Missouri and Waterford Township,
Michigan ceased operations and subsequently defaulted on their minimum rent
obligations. These Properties remained in default on their rent obligations,
and Burger King declared economic abandonment of the Properties. Burger King
funded monthly rent payments to the Partnership in accordance with the
indemnity agreement, and on February 10 and March 8, 1993, the Partnership sold
the stores for $398,189 and $531,809, respectively to a third party in
accordance with the terms and conditions of the Partnership Agreement. The
Property located in Kansas City, Missouri, at the date of the sale, had a book
value of $336,807, resulting in a gain on the sale in the amount of $61,382.
The Property located in Waterford Township, Michigan, at the date of the sale,
had a book value of $430,678, resulting in a gain on the sale in the amount of
$101,131. The net proceeds of the sale were distributed to the partners
pursuant to the Partnership Agreement and were included in the Partnership's
1993 first quarter distribution.
6. Distributions
Distributions paid or payable to limited partners and the General Partner for
the years ended December 31, 1995, 1994 and 1993 aggregated:
1995 1994 1993
-------------------- ------------------- ---------------
Total Per Unit Total Per Unit Total Per Unit
Limited Partners
Cash flow from $1,631,333 $108.76 $1,586,832 $105.79 $1,385,874 $ 92.39
operations
Net property
disposition
proceeds -- -- -- -- 920,698 61.38
Total Limited
Partners $1,631,333 $108.76 $1,586,832 $105.79 $2,306,572 $153.77
General Partner
Cash flow from $ 85,860 -- $ 83,517 -- $ 72,947 --
operations
Net property
disposition
proceeds -- -- -- -- 9,300 --
Total General
Partner $ 85,860 -- $ 83,517 -- $ 82,247 --
As of December 31, 1995, the Partnership had declared distributions of
$404,096, of which $383,891 ($25.59 per Unit) was paid to the limited partners
and $20,204.80 was paid to the General Partner on January 30, 1996.
7. Transactions with Affiliates
The amount of fees received for services performed and reimbursements for
expenses incurred on the Partnership's behalf by affiliates as of December 31,
1995, 1994 and 1993 was $5,276, $3,508 and $4,371, respectively, of which
$1,185 and $1,350 was unpaid at December 31, 1995 and 1994, respectively.
Cash and cash equivalents reflected on the Partnership's balance sheets at
December 31, 1995 and 1994 were on deposit with an affiliate of the General
Partner.
8. Reconciliation of Financial Statement Net Income and Partners' Capital to
Federal Income Tax Basis Net Income and Partners' Capital
Reconciliation of financial statement net income to federal income tax basis
net income:
Years Ended December 31,
1995 1994 1993
Financial statement net income $ 1,328,509 $ 1,418,073 $ 1,486,673
Tax basis depreciation over financial
statement depreciation (219,940) (226,948) (226,837)
Tax basis gain on sales of Properties
under financial statement gain on
sales of Properties -- -- (130,711)
Other (21,462) 21,462 --
Federal income tax basis net income $ 1,087,107 $ 1,212,587 $ 1,129,125
Reconciliation of financial statement basis partners' capital to federal income
tax basis partners' capital:
Years Ended December 31,
1995 1994 1993
Financial statement basis partners'
capital $ 5,747,116 $ 6,135,800 $ 6,388,076
Current year financial statement net
income over federal income tax basis
net income (241,402) (205,486) (357,548)
Cumulative federal income tax basis
net income over cumulative financial
statement net income 1,876,267 2,081,753 2,439,301
Federal income tax basis partners'
capital $ 7,381,981 $ 8,012,067 $ 8,469,829
Because many types of transactions are susceptible to varying interpretations
under Federal and state tax laws and regulations, the amounts reported above
may be subject to change at a later date upon final determination by the taxing
authorities.
__________________ INDEPENDENT AUDITORS' REPORT ____________________
The Partners
Burger King Limited Partnership III:
We have audited the accompanying balance sheets of Burger King Limited
Partnership III (a New York limited partnership) as of December 31, 1995 and
1994, and the related statements of operations, partners' capital (deficit) and
cash flows for each of the years in the three-year period ended December 31,
1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Burger King Limited
Partnership III as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 15, 1996
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