United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 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 I.R.S. Employer
of Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285-2900
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
BK I REALTY INC.
Balance Sheets
At March 31, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership I $ (76,005) $ (62,210)
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 9,124 22,878
Total liabilities 9,124 22,878
Stockholders' Deficit :
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 412,486 409,699
Accumulated deficit (498,615) (495,787)
Total Stockholders' Deficit (85,129) (85,088)
Total Liabilities and Stockholders' Deficit $ (76,005) $ (62,210)
BK I REALTY INC.
Statement of Changes in Stockholders' Deficit
For the three months ended March 31, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $ (85,088) $ 1,000 $ 409,699 $ (495,787)
Distributions (9,124) --- --- (9,124)
Capital contribution 2,787 --- 2,787 ---
Net income 6,296 --- --- 6,296
Balance at March 31, 1996 $ (85,129) $ 1,000 $ 412,486 $ (498,615)
BK I REALTY INC.
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Equity in earnings of Burger King Limited Partnership I $ 9,083 $ 23,118
Income taxes (2,787) (7,093)
Net income $ 6,296 $ 16,025
Per COPs unit (3,084 outstanding) $1.63 $4.16
BK I REALTY INC.
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 6,296 $ 16,025
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership I (9,083) (23,118)
Contributions to capital 2,787 7,093
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership I 22,878 73,385
Cash distributions paid (22,878) (73,385)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK I REALTY INC.
Notes to the Financial Statements
These unaudited interim financial statements should be read in conjunction with
Certificates of Participation's ("COPs") annual 1995 audited financial
statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations, and cash flows
for the three months ended March 31, 1996 and 1995 and the statement of changes
in stockholders' deficit for the three months ended March 31, 1996. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
BK II PROPERTIES INC.
Balance Sheets
At March 31, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership II $ (35,702) $ 23,371
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 16,234 84,499
Total liabilities 16,234 84,499
Stockholders' Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 450,948 443,147
Accumulated deficit (503,884) (505,275)
Total Stockholders' Deficit (51,936) (61,128)
Total Liabilities and Stockholders' deficit $ (35,702) $ 23,371
BK II PROPERTIES INC.
Statement of Changes in Stockholders' Deficit
For the three months ended March 31, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $ (61,128) $ 1,000 $ 443,147 $ (505,275)
Distributions (16,234) --- --- (16,234)
Capital Contribution 7,801 --- 7,801 ---
Net income 17,625 --- --- 17,625
Balance at March 31, 1996 $ (51,936) $ 1,000 $ 450,948 $ (503,884)
BK II PROPERTIES INC.
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Equity in earnings of Burger King Limited Partnership II $ 25,426 $ 23,832
Income taxes (7,801) (7,312)
Net income $ 17,625 $ 16,520
Per COPs unit (3,084 outstanding) $4.57 $4.29
BK II PROPERTIES INC.
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 17,625 $ 16,520
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership II (25,426) (23,832)
Contributions to capital 7,801 7,312
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership II 84,499 82,576
Cash distributions paid (84,499) (82,576)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK II PROPERTIES INC.
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with COPs'
annual 1995 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 March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
stockholders' deficit for the three months ended March 31, 1996. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
The following significant events have occurred subsequent to fiscal year 1995,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Burger King Limited Partnership II ("BK-II") agreed, subject to the
satisfaction of certain conditions, to sell BK-II's remaining 29 restaurant
properties (the "Properties") to U.S. Restaurant Properties Operating L.P., a
Delaware limited partnership (the "Buyer"), pursuant to an Agreement of
Purchase and Sale, dated as of October 11, 1995, as amended by the First
Amendment to Agreement of Purchase and Sale dated as of January 9, 1996 and
the Second Amendment to Agreement of Purchase and Sale dated as of May 1,
1996 (as amended, the "Purchase Agreement"). Pursuant to the terms of the
Purchase Agreement, the Buyer agreed to acquire the Properties for
consideration in the amount of $17,325,000 in cash (the "Purchase Price"),
subject to adjustments and prorations for base and percentage rents as well
as certain other charges payable in respect of the Properties and adjustments
in respect of certain closing costs (the "Proposed Sale").
In connection with the Proposed Sale and in accordance with the terms of
BK-II's partnership agreement, a proxy statement (the "Proxy") was mailed to
limited partners of BK-II (the "BK- II Unitholders") on March 25, 1996,
describing the terms of the Proposed Sale and presenting the BK-II
Unitholders with the opportunity to call a meeting to consider whether to
disapprove the Proposed Sale. In order to effect a disapproval of the
Proposed Sale, BK-II Unitholders holding 10% or more in interest of BK-II's
outstanding limited partnership interests ("BK-II Units") were required to
submit written requests by April 30, 1996 to call for a meeting of BK- II
Unitholders to consider whether to disapprove the Proposed Sale. BK-II did
not receive written requests aggregating an amount equal to or in excess of
the required 10% in interest of the outstanding BK-II Units required to call
a meeting of the BK-II Unitholders to disapprove the Proposed Sale. As a
result, no meeting was convened and BK-II completed the Proposed Sale on May
10, 1996.
The general partner of BK-II intends to distribute to the BK- II Unitholders
the net proceeds from the Proposed Sale as a special distribution, which the
general partner of BK-II currently expects to occur during the second quarter
of 1996. Additionally, in accordance with the terms of COPs' partnership
agreement, a portion of the net proceeds of the Proposed Sale will be used to
make a special distribution to the limited partners of COPs ("COPs Holders").
This special distribution, which is projected to be approximately $140 per
Unit, is also expected to be paid to COPs Holders during the second quarter
of 1996. The general partner of BK-II then intends to liquidate BK-II in
1996 in accordance with the terms of BK-II's partnership agreement.
BK III RESTAURANTS INC.
Balance Sheets
At March 31, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership III $ (2,834) $ (2,424)
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 22,262 20,205
Total liabilities 22,262 20,205
Stockholders' Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 333,831 327,758
Accumulated deficit (359,927) (351,387)
Total Stockholders' Deficit (25,096) (22,629)
Total Liabilities and Stockholders' Deficit $ (2,834) $ (2,424)
BK III RESTAURANTS INC.
Statement of Changes in Stockholders' Deficit
For the three months ended March 31, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $ (22,629) $ 1,000 $ 327,758 $ (351,387)
Distributions (22,262) --- --- (22,262)
Capital Contribution 6,073 --- 6,073 ---
Net income 13,722 --- --- 13,722
Balance at March 31, 1996 $ (25,096) $ 1,000 $ 333,831 $ (359,927)
BK III RESTAURANTS INC.
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Equity in earnings of Burger King Limited Partnership III $ 19,795 $ 19,109
Income taxes (6,073) (5,863)
Net income $ 13,722 $ 13,246
Per COPs unit (3,084 outstanding) $3.56 $3.44
BK III RESTAURANTS INC.
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 13,722 $ 13,246
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership III (19,795) (19,109)
Contributions to capital 6,073 5,863
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership III 20,205 20,021
Cash distributions paid (20,205) (20,021)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK III RESTAURANTS INC.
Notes to the Financial Statements
These unaudited interim financial statements should be read in conjunction with
COPs' annual 1995 audited financial statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
stockholders' deficit for the three months ended March 31, 1996. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, 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.
GP-I has been pursuing efforts to market BK-I's remaining 10 Properties for
sale. While GP-I has had discussions with a number of institutions and other
third parties interested in purchasing BK-I's Properties, an environmental
issue at one of BK- I's Properties, located in Greenfield, Wisconsin (the
"Greenfield Property"), has delayed efforts to effect a sale. BK-I has
proposed site-specific clean-up standards to the Wisconsin Department of
Natural Resources ("WDNR") and is currently awaiting their response, which is
taking longer than originally anticipated. 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
Properties. Once the remediation issue is resolved, GP- I will attempt to sell
BK-I's remaining Properties and intends to distribute the net proceeds from the
sale of the Properties to the partners in accordance with the terms of BK-I's
partnership agreement.
BK-II agreed, subject to the satisfaction of certain conditions, to sell
BK-II's remaining 29 Properties to the Buyer, pursuant to the Purchase
Agreement. Pursuant to the terms of the Purchase Agreement, the Buyer agreed
to acquire the Properties for a Purchase Price of $17,325,000 in cash, subject
to adjustments and prorations for base and percentage rents as well as certain
other charges payable in respect of the Properties and adjustments in respect
of certain closing costs.
In connection with the Proposed Sale and in accordance with the terms of
BK-II's partnership agreement, the Proxy was mailed to the BK-II Unitholders on
March 25, 1996, describing the terms of the Proposed Sale and presenting the
BK-II Unitholders with the opportunity to call a meeting to consider whether to
disapprove the Proposed Sale. In order to effect a disapproval of the Proposed
Sale, BK-II Unitholders holding 10% or more in interest of BK-II Units were
required to submit written requests by April 30, 1996 to call for a meeting of
BK-II Unitholders to consider whether to disapprove the Proposed Sale. BK-II
did not receive written requests aggregating an amount equal to or in excess of
the required 10% in interest of the outstanding BK-II Units required to call a
meeting of the BK-II Unitholders to disapprove the Proposed Sale. As a result,
no meeting was convened and BK- II completed the Proposed Sale on May 10, 1996.
GP-II currently intends to distribute to the BK-II Unitholders the net proceeds
from the Proposed Sale as a special distribution, which GP-II currently expects
to occur during the second quarter of 1996. Additionally, in accordance with
the terms of COPs' partnership agreement, a portion of the net proceeds of the
Proposed Sale will be used to make a special distribution to COPs Holders. This
special distribution, which is projected to be approximately $140 per Unit, is
also expected to be paid to COPs Holders during the second quarter of 1996. GP-
II then intends to liquidate BK-II in 1996 in accordance with the terms of
BK-II's partnership agreement.
GP-III is currently evaluating market conditions to determine when BK-III's
remaining 24 Properties should be marketed for sale. Until all of BK-III's
Properties are sold, BK-III intends to continue operating the Properties and
distributing cash flow from operations to BK-III's partners in accordance with
the terms of BK-III's partnership agreement.
At March 31, 1996, GP-I's investment in BK-I was $(76,005), GP- II's investment
in BK-II was $(35,702) and GP-III's investment in BK-III was $(2,834),
reflecting distributions in excess of equity in earnings plus the initial
investments.
Results of Operations
The results of operations for the three months ended March 31, 1996 are
primarily attributable to the General Partners' respective investments in BK-I,
BK-II and BK-III.
For the three months ended March 31, 1996, net income for GP-II and GP-III was
largely unchanged, compared to the corresponding period in 1995. For the three
months ended March 31, 1996, GP-I generated net income of $6,296, compared to
$16,025 for the corresponding period in 1995. The decrease in net income is
primarily attributable to a decrease in BK-I's rental income as a result of the
sale of three of BK-I's 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 -
(27.1) Financial Data Schedule for BK I Realty Inc.
(27.2) Financial Data Schedule for BK II Properties Inc.
(27.3) Financial Data Schedule for BK III Restaurants Inc.
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended March 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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: May 13, 1996 BY: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: President, Director and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
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<PERIOD-END> Mar-31-1996
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0
0
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<CHANGES> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<S> <C>
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<PERIOD-END> Mar-31-1996
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0
0
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<CHANGES> 0
<NET-INCOME> 17,625
<EPS-PRIMARY> 4.57
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
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<RECEIVABLES> 0
<ALLOWANCES> 0
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