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 period ended June 30, 1997
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
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Commission File Number 0-15802
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QSR Income Properties, Ltd., a California Limited Partnership
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4084042
- ----------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2394
- ----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Indicate by check mark whether the registrant (1) had 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
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<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Balance Sheets at June 30, 1997
and December 31, 1996 2
Condensed Statements of Operations for the three
and six months ended June 30, 1997 and 1996 3
Condensed Statement of Partners' Equity for the
six months ended June 30, 1997 4
Condensed Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
(Items 1 through 4 are not applicable)
Item 5 - Other Information 9
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 535,000 $ 1,816,000
Rent and other receivables 1,000 1,000
Notes receivable 180,000 202,000
Facilities, at net realizable value 7,335,000 7,335,000
Other assets 152,000 46,000
--------------------------------------
Total assets $ 8,203,000 $ 9,400,000
======================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 165,000 $ 157,000
Partners' equity:
Limited partners' equity, $500 per
unit, 52,004 units authorized,
issued and outstanding 7,982,000 9,174,000
General partner's equity 56,000 69,000
--------------------------------------
Total partners' equity 8,038,000 9,243,000
--------------------------------------
Total liabilities and partners' equity $ 8,203,000 $ 9,400,000
======================================
</TABLE>
See accompanying notes to Condensed Financial Statements.
2
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------------------------
1997 1996 1997 1996
--------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Lease income $ 282,000 $ 265,000 $ 575,000 $ 553,000
Interest income 8,000 26,000 24,000 51,000
--------------------------------------------------------------
290,000 291,000 599,000 604,000
--------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 37,000 36,000 72,000 72,000
Depreciation and amortization - - - 58,000
Idle facility costs 5,000 5,000 10,000 13,000
Write-down of restaurant facilities - 2,350,000 - 2,350,000
Partnership administrative expenses 25,000 24,000 52,000 50,000
--------------------------------------------------------------
67,000 2,415,000 134,000 2,543,000
--------------------------------------------------------------
NET INCOME (LOSS) $ 223,000 $ (2,124,000) $ 465,000 $ (1,939,000)
==============================================================
Allocation of net income (loss)
Limited partners $ 329,000 $ (1,949,000)
General partner 136,000 10,000
-------------------------------
$ 465,000 $ (1,939,000)
===============================
Limited partners' allocation per unit $ 6.33 $ (37.48)
===============================
</TABLE>
See accompanying notes to Condensed Financial Statements.
3
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-----------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1996 $ 9,174,000 $ 69,000 $ 9,243,000
Net income 329,000 136,000 465,000
Distributions (1,521,000) (149,000) (1,670,000)
-----------------------------------------------------------
Balance at June 30, 1997 $ 7,982,000 $ 56,000 $ 8,038,000
===========================================================
</TABLE>
See accompanying notes to Condensed Financial Statements.
4
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1997 1996
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 465,000 $ (1,939,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization - 58,000
Write-down of restaurant facilities - 2,350,000
Increase in rent and other receivables - (32,000)
Increase in other assets (106,000) -
Increase (decrease) in accounts payable 8,000 (1,000)
---------------------------------------
Total adjustments (98,000) 2,375,000
---------------------------------------
Net cash provided by operating activities 367,000 436,000
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes receivable 22,000 6,000
Distributions paid to partners (1,670,000) (371,000)
---------------------------------------
Net cash used in financing activities (1,648,000) (365,000)
---------------------------------------
Net (decrease) increase in cash and cash equivalents (1,281,000) 71,000
Cash and cash equivalents at the beginning of the period 1,816,000 1,630,000
---------------------------------------
Cash and cash equivalents at the end of the period $ 535,000 $ 1,701,000
=======================================
</TABLE>
See accompanying notes to Condensed Financial Statements.
5
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures contained herein are adequate to make the information presented
not misleading. These unaudited condensed financial statements should be
read in conjunction with the financial statements and related notes
appearing in the Partnership's Form 10-K for the year ended December 31,
1996.
2. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
accruals, necessary to present fairly the Partnership's financial position
at June 30, 1997 and December 31, 1996, the results of its operations for
the six months ended June 30, 1997 and 1996 and its cash flows for the six
months then ended.
3. The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results expected for the full year.
4 In November 1995, the general partner decided to place the facility assets
for sale and hired an investment banker to determine the valuation of the
assets and solicit offers. Based on offers to buy the assets received, the
general partner determined that the carrying value of the assets needed to
be reduced by $2,350,000 to present the value of such assets at their net
realizable value. Such valuation assumes costs to be incurred in the
ordinary course of sale.
On September 16, 1996, the general partner entered into a purchase and sale
agreement with US Restaurants Properties Master LP ("USRPMLP"), a Delaware
limited partnership and US Restaurants Properties Operating LP ("USRPOLP"),
a Delaware limited partnership whereby the Partnership would sell its
restaurant assets to USRPOLP for $7,571,234 and certain of its notes
receivable at a price which provides USRPOLP with a 13.5% yield. USRPOLP
expected to pay for the purchase of the assets with limited partnership
units of USRPMLP. USRPMLP is a New York Stock Exchange traded master
limited partnership traded under the symbol "USV."
On June 12, 1997, the general partner and USRPOLP amended the purchase and
sale agreement to sell all of the Partnership's assets to USRPOLP for cash.
The transaction was completed in July 1997. The Partnership expects to make
its liquidating distribution in the third quarter of 1997.
6
<PAGE>
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1997
Results of Operations
- ---------------------
The Partnership's net income of $465,000 and net loss of $1,939,000 for the
six months ended June 30, 1997 and 1996, respectively, represent an increase in
income of $2,404,000. Excluding the $2,350,000 write-down of facilities related
to the sale of the Partnership, net income increased $54,000 from $411,000 to
$465,000 during the six months ended June 30, 1996 and 1997, respectively. This
increase is primarily attributable to a decrease in depreciation expense related
to the valuation of the Partnership's facility assets at their net realizable
value.
Lease income for the six months ended June 30, 1997 increased $22,000 over
the same period in 1996 as a result of one additional facility being leased in
1997 compared to the same period in 1996. Included in lease income for the six
months ended June 30, 1997 and 1996, respectively, is approximately $22,000 and
$25,000 of additional lease income under a percentage rent feature with respect
to incremental sales above specified levels.
Idle facility costs decreased $3,000 for the six months ended June 30, 1997
compared to the same period in 1996. The decrease was primarily attributable to
decreases in utilities and property tax expenses associated with the
Partnership's final restaurant facility redeployed in December 1996.
Depreciation expense decreased $58,000 for the six months ended June 30,
1997 compared to the same period in 1996. The decrease is the result of the
Partnership's presentation of its properties at net realizable value and the
discontinuation of the provision for depreciation.
Liquidity and capital resources
- -------------------------------
For the six months ended June 30, 1997, the Partnership's operating
activities generated cash flow of $367,000. This represents a $69,000 decrease
compared to the cash flow of $436,000 generated by the Partnership for the six
months ended June 30, 1996. The decrease is primarily attributable to
capitalized costs related to the proposed sale of the Partnership's properties.
Such costs are reflected in other assets. Cash flow from the Partnership's
operations has been sufficient to meet all current obligations of the Company.
For the six months ended June 30, 1997, the Partnership's distribution
increased to $29.25 from $6.50 per Partnership unit for the six months ended
June 30, 1996. Included in the distribution for the six months ended June 30,
1997 was a special distribution of $26.00 per Partnership unit.
7
<PAGE>
Sale of assets
- --------------
In November 1995, the general partner decided to place the facility assets
for sale and hired an investment banker to determine the valuation of the assets
and solicit offers. Based on offers to buy the assets received, the general
partner determined that the carrying value of the assets needed to be reduced by
$2,350,000 to present the value of such assets at their net realizable value.
Such valuation assumes costs to be incurred in the ordinary course of sale.
On September 16, 1996, the general partner entered into a purchase and sale
agreement with US Restaurants Properties Master LP ("USRPMLP"), a Delaware
limited partnership and US Restaurants Properties Operating LP ("USRPOLP"), a
Delaware limited partnership whereby the Partnership would sell its restaurant
assets to USRPOLP for $7,571,234 and certain of its notes receivable at a price
which provides USRPOLP with a 13.5% yield. USRPOLP expected to pay for the
purchase of the assets with limited partnership units of USRPMLP. USRPMLP is a
New York Stock Exchange traded master limited partnership traded under the
symbol "USV."
On June 12, 1997, the general partner and USRPOLP amended the purchase and
sale agreement to sell all of the Partnership's assets to USRPOLP for cash. The
transaction was completed in July 1997. The Partnership expects to make its
liquidating distribution in the third quarter of 1997.
8
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 4 are not applicable.
Item 5 Other Information
-----------------
In November 1995, the general partner decided to place the facility assets
for sale and hired an investment banker to determine the valuation of the assets
and solicit offers. Based on offers to buy the assets received, the general
partner determined that the carrying value of the assets needed to be reduced by
$2,350,000 to present the value of such assets at their net realizable value.
Such valuation assumes costs to be incurred in the ordinary course of sale.
On September 16, 1996, the general partner entered into a purchase and sale
agreement with US Restaurants Properties Master LP ("USRPMLP"), a Delaware
limited partnership and US Restaurants Properties Operating LP ("USRPOLP"), a
Delaware limited partnership whereby the Partnership would sell its restaurant
assets to USRPOLP for $7,571,234 and certain of its notes receivable at a price
which provides USRPOLP with a 13.5% yield. USRPOLP expected to pay for the
purchase of the assets with limited partnership units of USRPMLP. USRPMLP is a
New York Stock Exchange traded master limited partnership traded under the
symbol "USV."
On June 12, 1997, the general partner and USRPOLP amended the purchase and
sale agreement to sell all of the Partnership's assets to USRPOLP for cash. The
transaction was completed in July 1997. The Partnership expects to make its
liquidating distribution in the third quarter of 1997.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits - the following exhibit is included herein:
(27) Financial Data Schedule
b) Reports on 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: August 13, 1997
QSR Income Properties, Ltd.,
a California Limited Partnership
BY: /s/ B. Wayne Hughes
--------------------
B. Wayne Hughes
General Partner
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783287
<NAME> QSR INCOME PROPERTIES, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 535,000
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 536,000
<PP&E> 10,591,000
<DEPRECIATION> (3,256,000)
<TOTAL-ASSETS> 8,203,000
<CURRENT-LIABILITIES> 165,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,038,000
<TOTAL-LIABILITY-AND-EQUITY> 8,203,000
<SALES> 0
<TOTAL-REVENUES> 599,000
<CGS> 0
<TOTAL-COSTS> 72,000
<OTHER-EXPENSES> 62,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 465,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 465,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465,000
<EPS-PRIMARY> 6.33
<EPS-DILUTED> 6.33
</TABLE>
