<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ 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 1-9079
U.S. RESTAURANT PROPERTIES MASTER LIMITED PARTNERSHIP
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1541631
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5310 Harvest Hill Rd., Ste. 270, LB 168, Dallas, Texas 75230
------------------------------------------------------------
(Address principal executive offices, including zip code)
214 / 387-1487
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(Registrant's telephone number, including area code)
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Former name, former address and former fiscal year,
if changed since last report
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
------------ ------------
Depository Units (representing Limited Partnership Interests) outstanding
at August 10, 1995: 4,635,000.
Page 1 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents $ 6,142 $ 680,646
Marketable securities --- 853,791
Receivables, net 1,023,250 715,202
Purchase deposits 60,000 ---
Prepaid expenses 146,930 122,962
Net investment in direct financing leases 20,327,048 21,237,432
Land 24,318,082 23,414,280
Buildings and leasehold improvements, net 2,606,849 1,548,375
Machines and equipment, net 6,180 ---
Intangibles, net 13,732,337 14,316,583
----------- -----------
$62,226,818 $62,889,271
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 378,252 $ 445,518
Notes payable 999,000 ---
Capitalized lease obligations 671,342 774,602
PARTNERS' CAPITAL 60,178,224 61,669,151
----------- -----------
$62,226,818 $62,889,271
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 2 of 11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
ended June 30, ended June 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES FROM LEASED PROPERTIES:
Rental Income $1,925,089 $1,677,644 $3,465,052 $3,031,179
Amortization of unearned
income on direct financing leases 569,729 619,669 1,152,386 1,250,121
---------- ---------- ---------- ----------
TOTAL REVENUES 2,494,818 2,297,313 4,617,438 4,281,300
EXPENSES:
Rent 348,153 333,356 684,649 656,816
Depreciation and amortization 349,077 320,902 685,653 639,510
Taxes, general, and administrative 382,167 310,811 751,835 546,304
Interest expense (income), net 8,428 (8,316) (1,822) (1,871)
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,087,825 956,753 2,120,315 1,840,759
---------- ---------- ---------- ----------
NET INCOME $1,406,993 $1,340,560 $2,497,123 $2,440,541
========== ========== ========== ==========
NET INCOME ALLOCABLE TO UNITHOLDERS $1,379,134 $1,313,749 $2,447,679 $2,391,730
========== ========== ========== ==========
AVERAGE NUMBER OF OUTSTANDING UNITS 4,635,000 4,635,000 4,635,000 4,635,000
========== ========== ========== ==========
NET INCOME PER UNIT $0.30 $0.28 $0.53 $0.52
========== ========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 3 of 11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1993 $1,357,447 $62,757,191 $64,114,638
Net income 98,653 4,834,017 4,932,670
Cash distributions (147,557) (7,230,600) (7,378,157)
---------- ----------- -----------
Balance at December 31, 1994 1,308,543 60,360,608 61,669,151
Special general partner interest (12,899) (3,101) (16,000)
transfer
Net income 49,444 2,447,679 2,497,123
Cash distributions (78,650) (3,893,400) (3,972,050)
---------- ----------- -----------
Balance at June 30, 1995 $1,266,438 $58,911,786 $60,178,224
========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 4 of 11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months ended June 30
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,497,123 $ 2,440,541
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 685,653 639,510
Net effect of changes in operating accounts:
Receivables, net (333,684) (211,662)
Prepaid expenses 1,668 (848)
Net investment in direct financing
leases 910,384 812,649
Accounts payable (67,266) 26,547
----------- -----------
1,196,755 1,266,196
----------- -----------
3,693,878 3,706,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of marketable securities 853,791 0
Purchase of property (2,063,683) 0
Purchase of machines and equipment (6,180) 0
Purchase deposits paid (60,000) 0
----------- -----------
(1,276,072) 0
CASH FLOWS USED IN FINANCING ACTIVITIES:
Reduction in capitalized lease obligations (103,260) (93,008)
Increase in notes payable 999,000 0
Cash distributions (3,972,050) (3,594,486)
Purchase special general partner interest (16,000) 0
----------- -----------
(3,092,310) (3,687,494)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (674,504) 19,243
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 680,646 1,260,103
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 6,142 $ 1,279,346
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 5 of 11
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
* ACCOUNTING POLICIES - A summary of accounting policies followed by the
Partnerships is included in the 1994 Annual Report. The Partnerships generally
follow these policies in preparation of interim reports.
The financial statements have been prepared in accordance with generally
accepted accounting principles (GAAP); however, this will not be the basis for
reporting taxable income to unitholders. The financial statements reflect the
consolidated accounts of the Partnership after elimination of all inter-
partnership transactions.
No federal and in most cases no state income taxes are reflected in the
financial statements because partnerships are not taxable entities. The
partners must report their allocable shares of taxable income or loss in their
individual income tax returns.
The accompanying consolidated financial statements have been prepared in
conformity with GAAP and should be read in conjunction with the Registrant's
annual report for the year ended December 31, 1994. The results of operations
for the six months ended June 30, 1995, are not necessarily indicative of the
results to be expected for the year ending December 31, 1995.
The consolidated balance sheet as of June 30, 1995 and the other consolidated
financial information for the six months ended June 30, 1995 and 1994, are
unaudited, but management of the Registrant believes that all adjustments
(consisting only of normal recurring accruals) necessary for a fair statement of
the Partnerships' financial position and result of operations for the periods
have been included.
* ORGANIZATION - U.S. Restaurant Properties Master L.P. (Partnership),
formerly Burger King Investors Master L.P., a Delaware limited partnership, was
formed on December 10, 1985. The Partnership, through its 99.01% limited
partnership interest in U.S. Restaurant Properties Operating L.P. (Operating
Partnership), also a Delaware Limited Partnership which was formerly Burger King
Operating Limited Partnership, acquired an interest in 128 restaurant properties
(Properties) owned or leased by Burger King Corporation (BKC) and leased or
subleased on net lease basis to BKC franchisees. (The Partnership is the sole
limited partner of the Operating Partnership and they are referred to
collectively as the "Partnerships".) U.S. Restaurant Properties, Inc. is the
managing general partner of the partnerships.
* RELATED PARTY TRANSACTIONS - The managing general partner, U.S. Restaurant
Properties, Inc., is responsible for managing the business and affairs of the
Partnerships. The Partnerships pay the managing general partner a non-
accountable annual allowance (adjusted to reflect increase in the Consumer Price
Index and additions to the property portfolio), plus reimbursement of out-of-
pocket costs incurred to other parties for service rendered to the Partnerships.
The allowance for the quarter ended June 30, 1995 was $142,359 compared to
$135,627 in the like quarter of 1994.
2. PROPERTY PURCHASES - At the end of the second quarter, the Company completed
the purchase of one property for cash. A high volume Burger King restaurant
operates on this property located
Page 6 of 11
<PAGE>
in Arlington, Texas. Allocation of the purchase price between land and building
has been made on a preliminary basis and will be finalized prior to year end.
In the normal course of business, the Company may sign purchase agreements to
acquire restaurant properties. Such agreements become binding obligations upon
the completion of a due diligence period ranging usually from 15 - 30 days.
Earnest money is generally refundable if the purchase is not completed.
Through July 30, 1995, the Company has signed purchase agreements to purchase an
additional four properties, including a Hardees property in Georgia, a Steak &
Ale property in Texas, and two Burger King properties in Arkansas. The purchase
agreements, with the exception of the Hardees deal, are for an aggregate
purchase price of $2,500,000 and are in the process of being consummated. The
tenant of the Burger King units in Arkansas will be a limited partnership whose
general partner is North American Restaurant Management Inc., a company
controlled by principals of U.S. Restaurant Properties M.L.P.'s Managing General
Partner, Mr. Fred Margolin and Mr. Robert Stetson. The franchisor, Burger King
Corporation, requires that individuals (as opposed to partnerships or
corporations) sign the franchise agreement and guarantee the payment of
royalties and advertising fees. Mr. Stetson and Mr. Margolin will meet these
obligations on behalf of Arkansas #10 Limited Partnership. It is contemplated
that the cash investors in the tenant/franchisee will be passive investors as
well as the Managing Director that is being retained to operate the franchise.
For its role in managing the franchise and for its principals guaranteeing the
franchise obligations to Burger King Corporation, North American Restaurant
Management Inc. will be reimbursed for expenses incurred plus a fee of up to 1%
of sales of the restaurants. U.S. Restaurant Properties M.L.P. may loan funds
to the tenant to complete improvements to the properties and to provide interim
financing until investors' funds have been obtained. A similar structure may be
used in the purchase of other restaurant properties.
3. REVOLVING CREDIT FACILITY - On June 12, 1995 U.S. Restaurant Properties
Master L.P. borrowed $700,000 against an already established line of credit with
Comerica Bank-Texas. From June 14, 1995 thru June 29, 1995, $520,000 was
repaid. On June 30, 1995 an additional $819,000 was borrowed.
On June 27, 1995, the $1,200,000 line of credit was replaced with a $10,000,000
revolving credit facility from Comerica Bank-Texas. This revolving credit
facility terminates on June 27, 1998. The interest rate is the lower of LIBOR
plus 180 basis points or the prime rate. An unused line fee of .25% per annum
on the average daily excess of the commitment amount over the aggregate unpaid
balance of the revolving loan is charged beginning August 27, 1995 and is
payable on a quarterly basis. The revolving credit facility is secured by
substantially all of the Company's assets. A default occurs upon failure to pay
interest due within three days of the date when such payment is due. In
addition to various reporting requirements mandated under the secured loan
agreement, the Company must also maintain a tangible net worth in excess of
$40,500,000; a debt to tangible net worth ratio of not more than .5 to 1 and a
cash flow coverage ratio of not less than (a) 2 to 1 based upon a Pro Forma Five
Year Bank Debt Amortization and (b) 3.75 to 1.0 based upon a Pro Forma Twenty
Year Bank Debt Amortization schedule.
4. OPTION AGREEMENT - In accordance with Section 5.05(a) of the Second Amended
and Restated Agreement of the Limited Partnership, the Partnership granted to
the Managing General Partner options (the "Options") to purchase 400,000 Units
at an exercise price of $15.50 per Unit. The Options will vest in full and
become exercisable on March 24, 1996 and will expire on March 24,
Page 7 of 11
<PAGE>
2006. The Options may be exercised in full or in part at any time during the 10
year period and any unexercised portion remains exercisable until the expiration
date. The effect of the Options issued and outstanding is nondilutive at this
point in time.
5. VALUATION / ALLOWANCE ACCOUNTS - Certain balance sheet captions appearing
in the Consolidated Balance Sheets for the Second Quarter of 1995 are comprised
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
============ ============
<S> <C> <C>
Receivables, net:
Other receivables $ 1,140,141 $ 832,093
Less allowance for doubtful accounts 116,891 116,891
----------- -----------
$ 1,023,250 $ 715,202
=========== ===========
Buildings, net:
Buildings and leasehold improvements $ 5,052,175 $ 3,892,294
Less accumulated depreciation 2,445,326 2,343,919
----------- -----------
$ 2,606,849 $ 1,548,375
=========== ===========
Intangibles, net:
Intangibles $26,415,567 $26,392,197
Less accumulated amortization 12,683,230 12,075,614
----------- -----------
$13,732,337 $14,316,583
=========== ===========
</TABLE>
6. SUBSEQUENT EVENTS - The board of directors has authorized the Company to
repurchase up to 300,000 shares of stock in the open market. No time limit was
imposed.
Page 8 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
REVENUES: For the Quarter ended June 30, 1995, rental revenues increased 9%
over the previous year. Comparable store sales growth was 9%. ("Comparable
store sales growth" is the increase in sales at those restaurants open for the
entire reporting period in both the current and prior year.) Management
believes the growth reflects improvements in the overall performance of the
Burger King system, and efforts with selected tenants to improve their
restaurant's sales. The table below compares revenue from leased properties
(GAAP) to restaurant sales on leased property and gross rental receipts.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
(unaudited)
Three months Six months
ended June 30, ended June 30,
------------------------- -------------------------
1995 1994 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales on leased property $34,572,811 $31,215,706 $64,230,293 $58,381,426
---------------------------------------------------------------------------------------------
Gross rental receipts $ 2,959,726 $ 2,709,029 $ 5,531,074 $ 5,093,949
---------------------------------------------------------------------------------------------
Revenues from
leased properties (GAAP) $ 2,494,818 $ 2,297,313 $ 4,617,438 $ 4,281,300
---------------------------------------------------------------------------------------------
</TABLE>
TAXES, GENERAL AND ADMINISTRATIVE EXPENSES: Expenses increased 23% over the
same period in 1994. Expenses in the second quarter of 1994 were $310,811
compared to $382,167 in 1995, an increase of $71,356. The increase for the
quarter was primarily due to the nonrecurring expenses relating to the proxy
process. Additionally, there was an increase in the management fee of $3,391
for the quarter as prescribed by the partnership agreement.
LIQUIDITY: For the six months ended June 30, 1995 cash flows from operating
activities equaled $3,693,878. A distribution of $3,972,050 and a purchase of
property for $2,063,683 accounted for a substantial portion of the use of cash.
At the end of the quarter, a property in Arlington, Texas on which a Burger King
restaurant operates was acquired for $835,284. The purchase was financed by a
loan of $819,000 against a Comerica Bank-Texas bank line of credit of $1,200,000
and the balance from cash.
On June 30, 1995, the balance available on the Comerica Bank-Texas $10,000,000
credit line facility equaled $9,001,000.
Page 9 of 11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership was named as a party to a law suit, in Montana District Court on
June 27, 1994, by a landlord on a leased property for abated rent lost by the
tenant due to a fire that occurred on a building before the Partnership took
ownership. The Managing General Partner believes the suit will not result in
any liability to the Partnership.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
During the quarter, the company retained Mr. David Pettijohn to find and
complete property purchases. Mr. Pettijohn has experience in retail real estate
origination. He is compensated by U.S. Restaurant Properties M.L.P. based on
commission basis on each property he originates, and during his start-up period,
a draw against future commissions.
The Partnership currently uses a CPA, White and Associates, for its accounting
and bookkeeping, Price Waterhouse LLP for its K-1 administration and Deloitte &
Touche LLP for its auditing. Also, excess liability coverage was purchased
which is in addition to coverage required to be carried by the franchisees.
ITEM 6. EXHIBITS
Not Applicable
Page 10 of 11
<PAGE>
SIGNATURE
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.
U.S. RESTAURANT PROPERTIES MASTER L.P.
By U.S. RESTAURANT PROPERTIES, INC.
Managing General Partner
Dated: August 10, 1995 By /s/ ROBERT J. STETSON
----------------------- --------------------------------------
Robert J. Stetson
President and C.E.O.
Principal Financial Officer
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,142
<SECURITIES> 0
<RECEIVABLES> 1,140,141
<ALLOWANCES> 116,890
<INVENTORY> 20,000
<CURRENT-ASSETS> 1,236,322
<PP&E> 29,376,437
<DEPRECIATION> 2,445,326
<TOTAL-ASSETS> 62,226,818
<CURRENT-LIABILITIES> 378,252
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 62,226,818
<SALES> 0
<TOTAL-REVENUES> 2,494,818
<CGS> 0
<TOTAL-COSTS> 1,087,825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,846
<INCOME-PRETAX> 1,427,319
<INCOME-TAX> 20,326
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,406,993
<EPS-PRIMARY> .297
<EPS-DILUTED> .297
</TABLE>
