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 June 30, 1995
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: 33-1624
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
(Exact name of registrant as specified in its charter)
13-3100473
13-3143115
New York 13-3178423
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
ATTN: Andre Anderson
3 World Financial Center, 29th Floor, New York, NY 10285
(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
BK I REALTY INC.
June 30, December 31,
Assets 1995 1994
Investment in Burger King Limited
Partnership I $ (55,566) $ (15,052)
Liabilities and Stockholder's Deficit
Liabilities:
Distributions payable $ 28,316 $ 73,385
Total Liabilities 28,316 73,385
Stockholder's Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 404,652 394,567
Accumulated deficit (489,534) (484,004)
Total Stockholder's Deficit (83,882) (88,437)
Total Liabilities and Stockholder's
Deficit $ (55,566) $ (15,052)
BK REALTY INC.
Statement of Changes in Stockholder's Deficit
For the six months ended June 30, 1995
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Stockholder's deficit at
December 31, 1994 $ (88,437) $ 1,000 $ 394,567 $ (484,004)
Distributions (28,316) - - (28,316)
Capital contribution 10,085 - 10,085 -
Net income 22,786 - - 22,786
Stockholder's deficit at
June 30, 1995 $ (83,882) $ 1,000 $ 404,652 $ (489,534)
BK I REALTY INC.
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Equity in earnings of Burger
King Limited Partnership I $ 9,753 $ 16,732 $ 32,871 $ 33,966
Income taxes 2,992 5,133 10,085 10,421
Net Income $ 6,761 $ 11,599 $ 22,786 $ 23,545
Per COP Unit (3,084 outstanding)$ 1.75 $ 3.01 $ 5.91 $ 6.11
BK I REALTY INC.
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 22,786 $ 23,545
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King
Limited Partnership I (32,871) (33,966)
Contributions to capital 10,085 10,421
Net cash provided by operating activities - -
Cash Flows from Financing Activities:
Distributions from Burger King
Limited Partnership I 73,385 65,175
Cash distributions paid (73,385) (65,175)
Net cash provided by financing activities - -
Net change in cash - -
Cash at beginning of period - -
Cash at end of period $ - $ -
BK I REALTY INC.
Notes to the Financial Statements
The interim financial statements presented should be read in conjunction with
the annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1995, the results of operations for the three and six
months ended June 30, 1995 and 1994, cash flows for the six months ended June
30, 1995 and 1994 and the statement of changes in stockholder's deficit for the
six months ended June 30, 1995. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1994,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
A. During the first quarter of 1995, the Partnership sold three properties
as follows:
Date Adjusted Net Gain
of Selling Book on
Store Sale Price* Value Sale
Washington, NC 3/8/95 $ 619,944 $ 180,837 $ 439,107
Carlsbad, NM 3/31/95 728,684 240,175 488,509
Big Spring, TX 3/31/95 455,898 130,499 325,399
$1,804,526 $ 551,511 $1,253,015
*Purchase price of the property less estimated legal costs related
to the sale of the property.
B. On September 23, 1994, Burger King Limited Partnership I ("BK-I") notified
the Wisconsin Department of Natural Resources ("WDNR") that petroleum and
chlorinated compounds were discovered at one of BK-I's properties located in
Greenfield, Wisconsin (the "Greenfield Property"). The WDNR has indicated that
under Wisconsin state law, BK-I will be responsible for remediating the site.
BK-I has obtained a preliminary cost estimate to remediate the site from an
environmental consulting firm. Based on this estimate and in accordance with
BK-I's respective Partnership Agreement, BK-I set aside $300,000 from net cash
flow from operations to fund the potential environmental remediation costs. On
May 26, 1995, BK-I proposed site specific clean-up standards ("Clean-up
Standards") on the Greenfield Property for the WDNR's approval. Until the WDNR
approves the Clean-up Standards and the costs of the remediation can be
assessed, it is extremely difficult for GP-I to move forward with the sale
of BK-I's remaining 10 properties. As a result, there can be no assurance
that the properties will be sold during 1995. BK I Realty Inc.
(the "General Partner") currently anticipates that the cost of the environmental
remediation should be recovered from the proceeds to be received from the
eventual sale of the Greenfield Property.
BK II PROPERTIES INC.
Balance Sheets
June 30, December 31,
Assets 1995 1994
Investment in Burger King Limited
Partnership II $ (2,955) $ 28,304
Liabilities and Stockholder's Deficit
Liabilities:
Distributions payable $ 49,141 $ 82,576
Total Liabilities 49,141 82,576
Stockholder's Deficit:
Common Stock, $1.00 par value authorized,
issued and
outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 427,177 411,432
Accumulated deficit (480,273) (466,704)
Total Stockholder's Deficit (52,096) (54,272)
Total Liabilities and Stockholder's
Deficit $ (2,955) $ 28,304
BK II PROPERTIES INC.
Statement of Changes in Stockholder's Deficit
For the six months ended June 30, 1995
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Stockholder's deficit at
December 31, 1994 $ (54,272) $ 1,000 $ 411,432 $ (466,704)
Distributions (49,141) - - (49,141)
Capital contribution 15,745 - 15,745 -
Net income 35,572 - - 35,572
Stockholder's deficit at
June 30, 1995 $ (52,096) $ 1,000 $ 427,177 $ (480,273)
BK II PROPERTIES INC.
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Equity in earnings of Burger
King Limited Partnership II $ 27,485 $ 23,914 $ 51,317 $ 46,637
Income taxes 8,433 7,337 15,745 14,309
Net Income $ 19,052 $ 16,577 $ 35,572 $ 32,328
Per COP Unit (3,084 outstanding)$ 4.94 $ 4.30 $ 9.23 $ 8.39
BK II PROPERTIES INC.
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 35,572 $ 32,328
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited
Partnership II (51,317) (46,637)
Contributions to capital 15,745 14,309
Net cash provided by operating activities - -
Cash Flows from Financing Activities:
Distributions from Burger King Limited
Partnership II 82,576 80,363
Cash distributions paid (82,576) (80,363)
Net cash provided by financing activities - -
Net change in cash - -
Cash at beginning of period - -
Cash at end of period $ - $ -
BK II PROPERTIES INC.
Notes to the Financial Statements
The interim financial statements presented should be read in conjunction with
the annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1995, the results of operations for the three and six
months ended June 30, 1995 and 1994, cash flows for the six months ended June
30, 1995 and 1994 and the statement of changes in stockholder's deficit for the
six months ended June 30, 1995. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1994,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
A. During the second quarter of 1995, Burger King Limited Partnership II sold
one property as follows:
Date Adjusted Net Gain
of Selling Book on
Store Sale Price* Value Sale
Ferguson, MO 6/30/95 $ 151,691 $ 101,873 $ 49,818
*Purchase price of the property less estimated legal costs related to
the sale of the property.
BK III RESTAURANTS INC.
Balance Sheets
June 30, December 31,
Assets 1995 1994
Investment in Burger King Limited
Partnership III $ 22,112 $ 2,945
Liabilities and Stockholder's Deficit
Liabilities:
Distributions payable $ 44,499 $ 20,021
Total Liabilities 44,499 20,021
Stockholder's Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 313,593 301,570
Accumulated deficit (336,980) (319,646)
Total Stockholder's Deficit (22,387) (17,076)
Total Liabilities and Stockholder's
Deficit $ 22,112 $ 2,945
BK III RESTAURANTS INC.
Statement of Changes in Stockholder's Deficit
For the six months ended June 30, 1995
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Stockholder's deficit at
December 31, 1994 $ (17,076) $ 1,000 $ 301,570 $ (319,646)
Distributions (44,499) - - (44,499)
Capital contribution 12,023 - 12,023 -
Net income 27,165 - - 27,165
Stockholder's deficit at
June 30, 1995 $ (22,387) $ 1,000 $ 313,593 $ (336,980)
BK III RESTAURANTS INC.
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Equity in earnings of Burger
King Limited Partnership III $ 20,079 $ 19,344 $ 39,188 $ 37,446
Income taxes 6,160 5,935 12,023 11,489
Net Income $ 13,919 $ 13,409 $ 27,165 $ 25,957
Per COP Unit
(3,084 outstanding) $ 3.61 $ 3.48 $ 7.05 $ 6.73
BK III RESTAURANTS INC.
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 27,165 $ 25,957
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King
Limited Partnership III (39,188) (37,446)
Contributions to capital 12,023 11,489
Net cash provided by operating activities - -
Cash Flows from Financing Activities:
Distributions from Burger King Limited
Partnership III 20,021 44,472
Cash distributions paid (20,021) (44,472)
Net cash provided by financing activities - -
Net change in cash - -
Cash at beginning of period - -
Cash at end of period $ - $ -
BK III RESTAURANTS INC.
Notes to the Financial Statements
The interim financial statements presented should be read in conjunction with
the annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1995, the results of operations for the three and six
months ended June 30, 1995 and 1994, cash flows for the six months ended June
30, 1995 and 1994 and the statement of changes in stockholder's deficit for the
six months ended June 30, 1995. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, which would
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
Certificates of Participation ("COPs") represents an assignment by the issuing
General Partners of some, but not all, of the profits, losses and gains of and
distributions from Burger King Limited Partnership I ("BK-I"), Burger King
Limited Partnership II ("BK-II") and Burger King Limited Partnership III
("BK-III") (collectively, the "Partnerships"). Each of the Partnerships is a
New York Limited Partnership. The issuing General Partners and their
respective Partnerships are BK I Realty Inc. ("GP-I"), which is the General
Partner of BK-I; BK II Properties Inc. ("GP-II"), which is the General Partner
of BK-II; and BK III Restaurants Inc. ("GP-III"), which is the General Partner
of BK-III (collectively, the "General Partners"). Each of the General Partners
is a New York Corporation. Each COPs unit consists of one BK-I COPs unit, one
BK-II COPS unit and one BK-III COPs unit. COPs commenced operations on January
17, 1986 and the COPs units were assigned as of December 1, 1985.
The Partnerships were formed to acquire and hold Burger King restaurants (the
"Properties"), including the restaurant buildings and, in some cases, the
underlying land. The Properties are net leased on a long-term basis to
franchisees of Burger King Corporation ("BKC").
The General Partners do not engage in the sale of goods or services. Their
only assets are the investments in the Partnerships.
The Partnerships' prospectuses specify that BKC had the option to purchase any
or all of the Properties at fair market value, determined by an independent
appraisal, at any time during the eighth through tenth years following the date
of completion of the offering of limited partnership interests in each
Partnership. The offering of interests in the Partnerships occurred in 1982,
1983 and 1984, respectively. As of December 31, 1994, BKC's option to purchase
the Properties of the respective Partnerships had expired.
On September 23, 1994, BK-I notified the WDNR that petroleum and chlorinated
compounds were discovered at its Greenfield, Wisconsin Property. The WDNR has
indicated that under Wisconsin state law, BK-I will be responsible for
remediating the site. BK-I has obtained a preliminary cost estimate to
remediate the site from an environmental consulting firm. Based on this
estimate and in accordance with BK-I's partnership agreement, BK-I set aside
$300,000 from net cash flow from operations to fund the potential environmental
remediation costs. On May 26, 1995, BK-I proposed site specific clean-up
standards ("Clean-up Standards") on the Greenfield Property for the WDNR's
approval. Until the WDNR approves the Clean-up Standards and the related costs
of the remediation can be assessed, it is extremely difficult for GP-I to move
forward with the sale of BK-I's remaining 10 Properties. As a result, there
can be no assurance that the Properties will be sold during 1995. Until all of
the Properties are sold, BK-I will continue to operate and intends to make
distributions to the partners in accordance with the terms of BK-I's
partnership agreement.
In preparation for the sale of BK-II's remaining 28 restaurant Properties,
GP-II has been negotiating with BKC to purchase a property located in Ferguson,
Missouri (the "Ferguson Property"), which was declared economically abandoned
by BKC in 1991. In accordance with the Property Management Agreement (the
"Agreement"), if a Property is declared economically abandoned, BKC is required
to pay the Property's minimum base rent until it is sold. In addition, BK-II
is entitled to all sales proceeds once the Property is sold and BKC is required
to supplement proceeds to the extent such proceeds are less than the minimum
owner-lessor price set forth in the Agreement. Although prospective
third-party buyers attributed little or no value to the Property, BKC purchased
the Ferguson Property on June 30, 1995 for the owner-lessor price of $151,691.
BK-II's Marietta, Georgia property was also declared economically abandoned by
BKC on January 29, 1994. BKC allowed the franchisee to continue operating this
Property while it was marketed for sale. On May 15, 1995, BKC executed a sales
agreement with a third-party buyer with respect to this Property for a sales
price of $445,000. The sale is expected to close in either the third or fourth
quarter of 1995.
GP-II is aggressively marketing BK-II's remaining Properties for sale.
However, there can be no assurance that GP-II will be successful in selling any
or all of BK-II's Properties during 1995. Until BK-II completes the sale of
all of the Properties, those Properties which remain unsold 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 BK-II's partnership agreement.
BK-III is currently exploring the feasibility of selling its Properties. Until
all of BK-III's Properties are sold, BK-III will continue to operate and
intends to make distributions to the partners in accordance with the terms of
BK-III's partnership agreement.
At June 30, 1995, GP-I's investment in BK-I was $(55,566) and GP-II's
investment in BK-II was $(2,955), reflecting distributions in excess of net
income plus the initial investments. GP-III's investment in BK-III was $22,112
at June 30, 1995, compared to $2,945 at December 31, 1994, reflecting the
allocation of net income in excess of cash distributions for the first six
months of 1995.
Results of Operations
The results of operations for the three and six months ended June 30, 1995 and
1994, are primarily attributable to the General Partners' investments in BK-I,
BK-II and BK-III.
For the three and six months ended June 30, 1995, net income for GP-II and
GP-III was largely unchanged compared to the corresponding periods in 1994.
For the three and six months ended June 30, 1995, GP-I generated net income of
$6,761 and $22,786, respectively, compared to $11,599 and $23,545 for the
corresponding periods in 1994. The decrease for the three month period is
primarily attributable to a decrease in BK-I's rental income as a result of the
sale of 10 Properties during the third and fourth quarters of 1994 and three
Properties during the first quarter of 1995.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1995.
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.
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
BY: BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
Registrant
Date: August 11, 1995
BY: /s/Rocco Andriola
Name: Rocco Andriola
Title: Director, President and
Chief Financial Officer
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