<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 19, 1996.
U.S. RESTAURANT PROPERTIES MASTER L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-9079 41-1541631
(STATE OR OTHER JURISDICTION OF COMMISSION FILE NUMBER (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5310 Harvest Hill Rd.
Suite 270, LB 168
Dallas, Texas 75230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
214-387-1487
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)(3) Financial Statements of Burger King Limited Partnership II
Independent Auditors' Report
Balance Sheets at December 31, 1995 and 1994
Statements of Partners' Capital (Deficit) for the years ended December
31, 1995, 1994 and 1993
Statements of Operations for the years ended December 31, 1995, 1994
and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993
Notes to Financial Statements - December 31, 1995, 1994 and 1993
Schedule III - Real Estate and Accumulated Depreciation
Financial Statements of WW Services, Inc.
Independent Auditor's Report
Comparative Balance Sheet at September 30, 1995 and 1994
Comparative Statement of Income and Retained Earnings for the years
ended September 30, 1995 and 1994
Comparative Statement of Income and Retained Earnings for the years
ended September 30, 1995 and 1994
Comparative Statement of Cash Flows for the years ended September
30, 1995 and 1994
Notes to Financial Statements - September 30, 1995
Financial Statements of Wiggins Enterprises, Inc.
Independent Auditors' Report
Balance Sheet at September 30, 1995
Statement of Income for the nine months ended September 30, 1995
Statement of Retained Earnings for the nine months ended September
30, 1995
Statement of Cash Flows for the nine months ended September 30, 1995
Schedule of General and Administrative Expenses for the nine months
ended September 30, 1995
Notes to Audited Financial Statements - September 30, 1995
Financial Statements of Selected Properties of Fast Food Properties,
L.P., Fast Food Properties II, L.P., Ohio Properties, L.P., and Select
Properties, L.P. (Hirsh Acquisition)
Report of Independent Certified Public Accountants
Schedule of Rental Income and Direct Operating Expenses -- Year Ended
December 31, 1995
Notes to Schedule
Independent Auditors' Report on Supplemental Material
Schedule of Rental Income and Direct Operating Expenses -- By Location
Financial Statements of Motel Enterprises, Inc. (Dairy Queen
Acquisition)
Independent Auditors' Report
Statement of Direct Revenues and Operating Expenses -- Year Ended
December 31, 1995
Notes to Statement of Direct Revenues and Operating Expenses
(b) Pro Forma Financial Information
(c) Exhibits
23(a) Consent of KPMG Peat Marwick L.L.P.
23(b) Consent of Tanner & Long, P.C.
23(c) Consent of Thigpen & Lanier.
23(d) Consent of BDO Seidman, LLP
23(e) Consent of William C. Love
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: April 30, 1996 U.S. RESTAURANT PROPERTIES MASTER L.P.
By: U.S. RESTAURANT PROPERTIES, INC.,
its Managing General Partner
By: /s/ Robert J. Stetson
------------------------------------
Robert J. Stetson
President, Chief Executive Officer
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Partners
Burger King Limited Partnership II:
We have audited the accompanying balance sheets of Burger King Limited
Partnership II (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 and the related schedule. These financial statements and financial
statement schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule 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 II 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. Also in our opinion, the related 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
therin.
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 2, 1996, except as to Note 5,
which is as of March 25, 1996
1
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---------- -----------
<S> <C> <C>
Real estate at cost (Note 4):
Land $ - $ 3,576,544
Building - 5,431,714
Fixtures and equipment - 2,675,310
---------- -----------
- 11,683,568
Less accumulated depreciation - (5,762,960)
---------- -----------
- 5,920,608
Real estate held for sale (Notes 4 and 5) 5,617,793 -
Cash and cash equivalents 653,171 680,377
Rent receivable and other assets 232,047 121,417
---------- -----------
TOTAL ASSETS $6,503,011 $ 6,722,402
---------- -----------
---------- -----------
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Liabilities:
Accounts payable and accrued expenses $ 271,548 $ 44,073
Due to affiliates 1,300 1,397
Distributions payable (Note 8) 553,173 580,378
---------- -----------
Total Liabilities 826,021 625,848
---------- -----------
Partners' Capital (Deficit):
General Partner (61,128) (54,272)
Limited Partners (15,000 interests
outstanding) 5,738,118 6,150,826
---------- -----------
Total Partners' Capital 5,676,990 6,096,554
---------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $6,503,011 $ 6,722,402
---------- -----------
---------- -----------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
----------- --------- -----------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 6,669,624 $ (59,324) $ 6,610,300
Net income 1,561,823 94,704 1,656,527
Distributions to partners (Note 8) (1,819,297) (90,192) (1,909,489)
----------- --------- -----------
BALANCE AT DECEMBER 31, 1993 6,412,150 (54,812) 6,357,338
Net income 1,575,396 97,210 1,672,606
Distributions to partners (Note 8) (1,836,720) (96,670) (1,933,390)
----------- --------- -----------
BALANCE AT DECEMBER 31, 1994 6,150,826 (54,272) 6,096,554
Net income 1,627,390 94,130 1,721,520
Distributions to partners (Note 8) (2,040,098) (100,986) (2,141,084)
----------- --------- -----------
BALANCE AT DECEMBER 31, 1995 $ 5,738,118 $ (61,128) $ 5,676,990
----------- --------- -----------
----------- --------- -----------
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
INCOME 1995 1994 1993
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
Rental income (Note 4) $2,685,255 $2,611,183 $2,501,191
Interest income 32,828 19,959 14,934
Miscellaneous income 1,830 1,800 2,182
---------- ---------- ----------
Total Income 2,719,913 2,632,942 2,518,307
---------- ---------- ----------
EXPENSES
- --------
Depreciation 200,942 271,586 272,833
Ground lease rent (Note 4) 359,430 365,772 344,570
Management fee (Note 6) 232,571 224,540 215,660
General and administrative 255,268 98,438 72,824
---------- ---------- ----------
Total Expenses 1,048,211 960,336 905,887
---------- ---------- ----------
Income from operations 1,671,702 1,672,606 1,612,420
---------- ---------- ----------
OTHER INCOME
- ------------
Gain on sale of property (Notes 4 and 6) 49,818 44,107
---------- ---------- ----------
NET INCOME $1,721,520 $1,672,606 $1,656,527
---------- ---------- ----------
---------- ---------- ----------
NET INCOME ALLOCATED:
- ---------------------
To the General Partner $ 94,130 $ 97,210 $ 94,704
To the Limited Partners 1,627,390 1,575,396 1,561,823
---------- ---------- ----------
$1,721,520 $1,672,606 $1,656,527
---------- ---------- ----------
---------- ---------- ----------
PER LIMITED PARTNERSHIP INTEREST
(15,000 OUTSTANDING) $ 108.49 $ 105.03 $ 104.12
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994 1993
- ------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net income $ 1,721,520 $ 1,672,606 $ 1,656,527
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 200,942 271,586 272,833
Gain on sale of property (49,818) - (44,107)
Increase (decrease) in cash arising from
changes in operating assets and
liabilities:
Rent receivable and other assets (110,630) (5,899) (33,142)
Accounts payable and accrued expenses 227,475 (3,406) 5,979
Due to affiliates (97) (1,498) 1,295
----------- ----------- -----------
Net cash provided by operating activities 1,989,392 1,933,389 1,859,385
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sale of property 151,691 - 132,058
----------- ----------- -----------
Net cash provided by investing activities 151,691 - 132,058
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Cash distributions to partners (2,168,289) (1,879,872) (2,202,098)
----------- ----------- -----------
Net cash used for financing activities (2,168,289) (1,879,872) (2,202,098)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (27,206) 53,517 (210,655)
Cash and cash equivalents at beginning of year 680,377 626,860 837,515
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 653,171 $ 680,377 $ 626,860
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ORGANIZATION
Burger King Limited Partnership II (the "Partnership") was formed as a New
York limited partnership on August 23, 1982. 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 II Properties Inc. (the "General Partner"),
formerly Shearson/BK Properties, 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."
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. The
Partnership's Properties held for sale are recorded at the lower of amortized
cost or fair market value.
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 In accordance with the partnership agreement
dated August 23, 1982 (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 the year.
5
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
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 disposition 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, 88.89% to the
limited partners and 11.11% to the General Partner. Subsequent to Payout
gains shall be allocated to the General Partner until his capital account
equals 11.11% of the aggregate outstanding capital balances of all the
partners and any remaining gain shall be allocated 88.89% to the limited
partners and 11.11% 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
88.89% to the limited partners and 11.11% 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 1% to the
General Partner, with the remaining 4% distributed to the limited partners to
the extent that cash distributions to the limited partners for the
Partnership's fiscal year do not equal at least 12.5% of their remaining
invested capital and the remainder, if any, is distributed to the General
Partner. For the year ended December 31, 1995, distributions to the limited
partners were in excess of a 12.5% return on their remaining invested capital
as defined in the Partnership Agreement.
Distributions of net property disposition proceeds are made quarterly and are
allocated 99% to the limited partners and 1% to the General Partner until
Payout. After Payout, Burger King receives an additional management fee
equal to 10% of the net property disposition proceeds, and the remainder is
distributed 88.89% to the limited partners and 11.11% to the General Partner.
As of December 31, 1995, Payout had not occurred.
4. REAL ESTATE
As of December 31, 1995, the Partnership owned 29 Properties, and as of
December 31, 1994 and 1993, the Partnership owned 30 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 term of the
Leases and the related Ground Leases as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
MINIMUM GROUND
YEAR ENDING RENTAL LEASE
DECEMBER 31, INCOME OBLIGATION
------------ ----------- ----------
<S> <C> <C>
1996 $ 2,029,175 $ 355,992
1997 2,029,175 355,992
1998 2,043,609 373,417
1999 2,088,812 418,979
2000 2,092,366 422,757
Thereafter 5,557,306 1,160,619
----------- ----------
$15,840,443 $3,087,756
----------- ----------
----------- ----------
</TABLE>
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 the years ended December 31, 1995, 1994, and 1993 was $634,378,
$529,695 and $432,053, respectively.
6
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
During the year ended December 31, 1995, the Partnership sold the following
Property:
<TABLE>
<CAPTION>
DATE ADJUSTED NET GAIN
OF SELLING BOOK ON
STORE SALE PRICE VALUE SALE
- ----- ------- ---------- -------- -------
<S> <C> <C> <C> <C>
Ferguson, MO 6/30/95 $151,691 $101,873 $49,818
</TABLE>
5. PROPOSED SALE OF REAL ESTATE
The Partnership has agreed, subject to the satisfaction of certain
conditions, to sell 17 of the Partnership's Properties owned in fee simple
and to assign all of its rights in 11 of the Partnership's Properties subject
to ground leases (the "Leased 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 as
of January 9, 1996 (the "Purchase Agreement").
Pursuant to the terms of the Purchase Agreement, subject to the satisfaction
of certain conditions, the Buyer agreed to acquire the Properties for
consideration in the amount of $17,025,00 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"). The Purchase
Price is also subject to an increase of $200,000 to an aggregate of
$17,225,000 if the Partnership elects to include a restaurant located in
Marietta, Georgia (the "Marietta Property") in the Proposed Sale. The
General Partner is pursuing parties that may have an interest in purchasing
the Marietta Property for a price in excess of $200,000. If the General
Partner is unsuccessful in locating a potential purchaser, the Partnership
would, in all likelihood, include the Marietta Property in the Proposed Sale.
Pursuant to Section 8.3 of the Agreement of Limited Partnership dated as of
August 23, 1982, as amended as of October 19, 1982 (the "Partnership
Agreement"), the limited partners of the Partnership (the "Unitholders") have
the right to vote (assuming certain conditions described in the Partnership
Agreement are met) only upon certain matters and Unitholders voting a
majority in interest may, without the concurrence of the General Partner,
cause, among other things, the disapproval of any sale of all or
substantially all of the assets of the Partnership in a single sale. The
Proposed Sale would constitute a sale of all or substantially all of the
Partnership's assets. Accordingly, Unitholders have the right to disapprove
the Proposed Sale.
On March 25, 1996, a proxy statement was mailed to the Unitholders which
describes the terms of the Proposed Sale and presents the Unitholders with
the opportunity to call a meeting to consider whether to disapprove the
Proposed Sale. In order to effect a vote to disapprove the Proposed Sale,
Unitholders holding 10% or more in interest of the outstanding limited
partnership interests (the "Units") must submit written requests for a
meeting of the Unitholders pursuant to the Partnership Agreement. While the
General Partner may call a meeting of the Unitholders for any purpose, the
General Partner believes that the Proposed Sale is in the best interest of
the Unitholders and has, therefore, determined not to call a meeting for the
purpose of considering the disapproval of the Proposed Sale.
If the Partnership receives written requests from Unitholders holding 10% or
more in interest of the outstanding Units on or before April 30, 1996, the
General Partner will be required to call a meeting of the Unitholders to
consider the disapproval of the Proposed Sale. If a meeting of the
Unitholders is called, and the Proposed Sale is disapproved by a majority in
interest of the Unitholders, the Purchase Agreement will be terminated
pursuant to its terms, and the Partnership will continue to operate the
Properties and distribute the cash flow from operations to the Unitholders in
accordance with the Partnership Agreement. If, however, a meeting of the
Unitholders is called, and Unitholders holding less than a majority in
interest vote to disapprove the Proposed Sale, the Proposed Sale will be
consummated pursuant to the terms and subject to the conditions set forth in
the Purchase Agreement.
6. 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 the rents received by the Partnership from the Properties, as defined
in the Partnership Agreement. To the extent the annual rental income from
the Properties is less than 15% of the Partnership's investments in the
Properties, Burger King is required to refund all or a portion of such
management fee to provide the Partnership with a 15% return on funds invested
in the Properties. At December 31, 1995 and 1994, no such amounts were due
from Burger King.
Pursuant to an indemnity agreement, Burger King is obligated to contribute
minimum monthly rent payments in the event of a default under the Leases 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 $1,295,797. 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 1988
and subsequent years, the indemnity amount was decreased on an annual basis
by an amount equal to the greater of (1) payments made by Burger King
7
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
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 $518,396.
The Property located in Milan, Tennessee ceased operations on September 9,
1994 and re-opened on April 10, 1995. Burger King funded the minimum monthly
rent payments to the Partnership during the interim period in accordance with
the indemnity agreement.
During 1990, a Property located in Downey, California ceased operations and
subsequently defaulted on its minimum rent obligations. Burger King funded
minimum monthly rent payments to the Partnership in accordance with the
indemnity agreement, and in February 1993, the Partnership sold the Property
located in Downey, California to a third-party. The restaurant, at the date
of sale, had a net book value of $87,951, resulting in a gain on sale of
$44,107.
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 $5,805, $3,185 and $5,787, respectively, of which
$1,300 and $1,397 were 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. DISTRIBUTIONS
Distributions paid or payable to limited partners and the General Partner for
the years ended December 31, 1995, 1994 and 1993, aggregated:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Limited Partners
----------------
Cash flow from operations $1,889,924 $125.99 $1,836,720 $122.45 $1,688,559 $112.57
Net property disposition proceeds 150,174 10.01 - - 130,738 8.72
---------- ------- ---------- ------- ---------- -------
TOTAL LIMITED PARTNERS $2,040,098 $136.00 $1,836,720 $122.45 $1,819,297 $121.29
---------- ------- ---------- ------- ---------- -------
---------- ------- ---------- ------- ---------- -------
General Partner
---------------
Cash flow from operations $ 99,469 - $ 96,670 - $ 88,872 -
Net property disposition proceeds 1,517 - - - 1,320 -
---------- ------- ---------- ------- ---------- -------
TOTAL GENERAL PARTNER $ 100,986 - $ 96,670 - $ 90,192 -
---------- ------- ---------- ------- ---------- -------
---------- ------- ---------- ------- ---------- -------
</TABLE>
As of December 31, 1995, the Partnership had declared distributions of
$492,380, of which $467,761 ($31.18 per unit) was paid to limited partners
and $4,924 was paid to the General Partner on January 30, 1996. The
remaining portion in the amount of $19,695 was distributed to the General
Partner in accordance with the Partnership Agreement.
Pursuant to the terms of the Partnership Agreement, 80% of the General
Partner's quarterly distributions from operations are retained by the
Partnership, until it is determined that the Unitholders have received their
priority return as defined in the Partnership Agreement. For the year ended
December 31, 1995, the Unitholders had received their priority return, and
all amounts retained during 1995 were paid to the General Partner on January
30, 1996 in a distribution which amounted to $79,575, which included $19,695
for the fourth quarter of 1995.
8
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
9. 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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Financial statement net income $1,721,520 $1,672,606 $1,656,527
Tax basis depreciation over financial
statement depreciation (235,055) (264,175) (275,980)
Tax basis gain on sales of Properties
over financial statement gain on
sales of Properties 9,959 - 14,625
Other 61,962 - -
---------- ---------- ----------
FEDERAL INCOME TAX BASIS NET INCOME $1,558,386 $1,408,431 $1,395,172
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Reconciliation of financial statement basis partners' capital to federal
income tax basis partners' capital:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Financial statement basis
partners' capital $5,676,990 $6,096,554 $6,357,338
Current year financial statement
net income over federal income
tax basis net income (163,134) (264,175) (261,355)
Cumulative federal income tax
basis net income over cumulative
financial statement net income 1,005,129 1,269,304 1,530,659
---------- ---------- ----------
FEDERAL INCOME TAX BASIS
PARTNERS' CAPITAL $6,518,985 $7,101,683 $7,626,642
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
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.
9
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
(a New York limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COSTS TO ACQUISITION
-------------------------- --------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION (A) ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Redlands, CA $ - $ 230,000 $ 257,052 $ -
Garland, TX - 161,000 243,740 -
Nederland, TX - 300,000 342,229 -
St. Peters, MO - 215,000 301,636 -
Marietta, GA - 205,000 245,615 -
Corpus Christi, TX - 215,000 267,272 -
Pelham, AL - 144,444 262,154 -
Milan, TN - 117,000 258,015 -
Greenville, NC - 169,600 258,754 -
Phoenix, AZ - 225,000 249,631 -
Wilmington, NC - (B) 249,393 -
South Bend, IN - 240,000 262,797 -
Riverdale, GA - 230,000 263,130 -
Kansas City, KS - (B) 259,081 -
Erlanger, KY - (B) 222,691 -
Ceres, CA - 216,000 284,204 -
Orange, CA - (B) 229,192 -
Statesboro, GA - (B) 238,748 -
Plano, TX - (B) 258,457 -
Columbus, MS - 185,000 292,222 -
Marietta/Johnson, GA - 200,000 230,977 -
Vernon, CT - (B) 336,348 -
Hot Springs, AK - 200,000 318,240 -
Springfield, MA - (B) 284,487 -
Tucson, AZ - (B) 250,430 -
Glendale, AZ - (B) 252,736 -
Mount Clemens, MI - (B) 258,939 -
Rocky Mount, NC - 225,000 306,686 -
Greenville, MS - 98,500 294,186 -
----------------------------------------------------------
$ - $3,576,544 $7,779,042 $ -
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
F-2
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
(a New York limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST BASIS AT DECEMBER 31, 1995
------------------------------------------
BUILDINGS AND ACCUMULATED
DESCRIPTION (A) LAND IMPROVEMENTS TOTAL DEPRECIATION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Redlands, CA $ 230,000 $ 257,052 $ 487,052 $ 193,185
Garland, TX 161,000 243,740 404,740 182,501
Nederland, TX 300,000 342,229 642,229 256,244
St. Peters, MO 215,000 301,636 516,636 225,850
Marietta, GA 205,000 245,615 450,615 183,218
Corpus Christi, TX 215,000 267,272 482,272 199,373
Pelham, AL 144,444 262,154 406,598 195,556
Milan, TN 117,000 258,015 375,015 192,469
Greenville, NC 169,600 258,754 428,354 186,553
Phoenix, AZ 225,000 249,631 474,631 186,235
Wilmington, NC 249,393 249,393 186,037
South Bend, IN 240,000 262,797 502,797 196,036
Riverdale, GA 230,000 263,130 493,130 195,549
Kansas City, KS 259,081 259,081 193,263
Erlanger, KY 222,691 222,691 164,874
Ceres, CA 216,000 284,204 500,204 210,110
Orange, CA 229,192 229,192 169,688
Statesboro, GA 238,748 238,748 178,096
Plano, TX 258,457 258,457 189,941
Columbus, MS 185,000 292,222 477,222 213,117
Marietta/Johnson, GA 200,000 230,977 430,977 168,461
Vernon, CT 336,348 336,348 246,468
Hot Springs, AK 200,000 318,240 518,240 233,040
Springfield, MA 284,487 284,487 206,838
Tucson, AZ 250,430 250,430 180,518
Glendale, AZ 252,736 252,736 181,592
Mount Clemens, MI 258,939 258,939 184,555
Rocky Mount, NC 225,000 306,686 531,686 217,710
Greenville, MS 98,500 294,186 392,686 220,716
----------------------------------------------------------
$3,576,544 $7,779,042 $11,355,586(D) $5,737,793(C)
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
F-3
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
(a New York limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR OF DATE ESTIMATED
DESCRIPTION (A) CONSTRUCTION ACQUIRED USEFUL LIFE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Redlands, CA 1982 12/30/82 7 - 20 years
Garland, TX 1983 01/06/83 7 - 20 years
Nederland, TX 1983 01/21/83 7 - 20 years
St. Peters, MO 1983 02/16/83 7 - 20 years
Marietta, GA 1983 03/02/83 7 - 20 years
Corpus Christi, TX 1983 03/03/83 7 - 20 years
Pelham, AL 1983 03/08/83 7 - 20 years
Milan, TN 1983 03/10/83 7 - 20 years
Greenville, NC 1983 03/11/83 7 - 20 years
Phoenix, AZ 1983 03/11/83 7 - 20 years
Wilmington, NC 1983 03/25/83 7 - 20 years
South Bend, IN 1983 03/30/83 7 - 20 years
Riverdale, GA 1983 03/30/83 7 - 20 years
Kansas City, KS 1983 04/04/83 7 - 20 years
Erlanger, KY 1983 04/26/83 7 - 20 years
Ceres, CA 1983 15/13/83 7 - 20 years
Orange, CA 1983 05/09/83 7 - 20 years
Statesboro, GA 1983 05/18/83 7 - 20 years
Plano, TX 1983 07/05/83 7 - 20 years
Columbus, MS 1983 08/15/83 7 - 20 years
Marietta/Johnson, GA 1983 08/23/83 7 - 20 years
Vernon, CT 1983 08/24/83 7 - 20 years
Hot Springs, AK 1983 04/15/83 7 - 20 years
Springfield, MA 1983 08/23/83 7 - 20 years
Tucson, AZ 1983 09/29/83 7 - 20 years
Glendale, AZ 1983 12/20/83 7 - 20 years
Mount Clemens, MI 1984 04/13/84 7 - 20 years
Rocky Mount, NC 1984 02/29/84 7 - 20 years
Greenville, MS 1984 06/22/84 7 - 20 years
</TABLE>
(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 $11,355,586.
F-4
<PAGE>
BURGER KING LIMITED PARTNERSHIP II
(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:
<TABLE>
<CAPTION>
REAL ESTATE INVESTMENTS: 1995 1994 1993
- ----------------------- -----------------------------------------
<S> <C> <C> <C>
Beginning of year $11,683,568 $11,683,568 $11,941,245
Deduct: real estate sold 327,982 0 257,677
-----------------------------------------
End of year $11,355,586 $11,683,568 $11,683,568
-----------------------------------------
-----------------------------------------
ACCUMULATED DEPRECIATION:
- -------------------------
Beginning of year $ 5,762,960 $ 5,491,374 $5,388,267
Add: depreciation expense 200,942 271,586 272,833
Deduct: real estate sold 226,109 0 169,726
----------------------------------------
End of year $ 5,737,793 $ 5,762,960 $5,491,374
-----------------------------------------
-----------------------------------------
</TABLE>
F-5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
WW Services, Inc.
Baxley, GA 31513
We have audited the accompanying balance sheets of WW Services, Inc. (an "S"
corporation) as of September 30, 1995 and 1994, and the related statements of
income, retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company'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 WW Services, Inc. as of
September 20, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Tanner and Long, P.C.
- ---------------------------------
Baxley, Georgia
February 26, 1996
<PAGE>
WW SERVICES, INC.
COMPARATIVE BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash on Hand And In Banks $ 390,304 $ 767,414
Inventory 116,969 157,743
Prepaid Expenses 20,047 40,730
Workmen's Compensation Reserve
Account (Note 6) 87,535 67,824
Employee Advances 1,381 1,000
Notes Receivable - WW Foods, Inc. 0 92,834
Accrued Interest Receivable 0 3,039
--------- ----------
Total Current Assets 616,236 1,130,584
--------- ----------
FIXED ASSETS
Leasehold Improvements 118,571 108,400
Machinery & Equipment 433,741 425,317
Accumulated Depreciation (315,620) (234,630)
--------- ----------
Total Fixed Assets 236,692 299,087
--------- ----------
TOTAL ASSETS $ 852,928 $1,429,671
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 213,095 $ 276,057
Accrued Rent 87,506 109,192
Accrued Payroll Taxes 16,782 21,864
Accrued Sales Tax 59,365 65,315
Accrued Payroll 109,576 91,152
Accrued Garnishments (122) (23)
Note Payable - WW Foods, Inc. 11,380 49,287
--------- ----------
Total Current Liabilities 497,582 612,844
--------- ----------
Total Liabilities 497,582 612,844
--------- ----------
STOCKHOLDERS' EQUITY
Capital Stock, No Par, 25,000 Shares
Authorized, 1,000 Shares
Outstanding 146,000 146,000
Retained Earnings 209,346 670,827
--------- ----------
Total Stockholders' Equity 355,346 816,827
--------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 852,928 $1,429,671
--------- ----------
--------- ----------
</TABLE>
The accompanying notes to the financial statements
are an integral part of this statement.
<PAGE>
WW SERVICES, INC.
COMPARATIVE STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
SALES $12,957,986 $12,779,439
COST OF SALES 4,437,755 4,139,236
----------- -----------
GROSS PROFIT 8,520,231 8,640,203
----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries 3,493,695 3,198,026
Rent & Lease 1,563,915 1,554,141
Advertising 569,477 483,439
Management Fees 706,108 636,669
Royalties 479,940 504,977
Utilities & Telephone 528,011 483,561
Taxes & License 441,406 389,773
Insurance 208,813 136,293
Repairs & Maintenance 255,968 249,651
Legal & Accounting 34,035 74,487
Depreciation 80,989 93,162
Bank Service Charges 8,103 9,157
Dues & Subscriptions 1,979 2,290
Flowers & Gift Certificates 2,124 3,065
Freight 0 501
Gas & Oil 1,407 2,149
Linen & Laundry 14,314 13,102
Office Supplies & Postage 12,391 11,387
Pest Control 7,527 6,509
Supplies 44,187 47,454
Training 8,694 4,139
Uniforms 31,805 45,925
Travel & Lodging 2,758 1,839
Miscellaneous 5,137 12,344
Security 4,013 2,576
Casual Labor 1,362 533
----------- -----------
Total General & Administrative
Expenses 8,508,158 7,967,149
----------- -----------
INCOME FROM OPERATIONS 12,073 673,054
----------- -----------
OTHER INCOME (EXPENSE)
Advertising Income 542 23,095
Interest Expense (1,500) (1,558)
Interest Income 21,149 45,181
Vendors Compensation 15,817 14,375
Miscellaneous Income 6,660 8,476
Theft Loss 0 (6,091)
----------- -----------
Total Other Income (Expense) 42,668 83,478
----------- -----------
NET INCOME $ 54,741 $ 756,532
----------- -----------
</TABLE>
The accompanying notes to the financial statements
are an integral part of this statement.
<PAGE>
WW SERVICES, INC.
COMPARATIVE STATEMENT OF INCOME AND RETAINED EARNINGS
(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
NET INCOME $ 54,741 $ 756,532
BEGINNING RETAINED EARNINGS 670,827 978,308
Distribution Of Earnings (516,222) (1,064,013)
--------- -----------
ENDING RETAINED EARNINGS $ 209,346 $ 670,827
--------- -----------
--------- -----------
</TABLE>
The accompanying notes to the financial statements
are an integral part of this statement.
<PAGE>
WW SERVICES, INC.
COMPARATIVE STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 54,741 $ 756,532
Adjustments to Reconcile Net
Income to Net Cash Provided
By Operations:
Depreciation 80,989 93,162
Decrease (Increase) In:
Workmens Comp. Reserve (19,711) (18,452)
Inventory 40,774 (4,913)
Employee Advances (381) (650)
Prepaid Expenses 20,683 (15,195)
Accrued Interest Receivable 3,039 237
Increase (Decrease) In:
Accounts Payable (62,962) 4,692
Accrued Rent (21,686) 18,592
Accrued Payroll 18,424 21,463
Accrued Payroll Taxes (5,082) 4,791
Accrued Sales Taxes (5,950) 7,192
Accrued Garnishments (99) (1,119)
--------- -----------
Net Cash Provided by Operating
Activities 102,779 866,332
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Fixed Assets (18,594) (109,065)
Repayment on Notes Receivable 92,834 307,165
--------- -----------
Net Cash Provided by Investing
Activities 74,240 198,100
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment on Loans (37,907) 0
Loans - WW Foods, Inc. 0 24,287
Distributions to Shareholders (516,222) (1,064,013)
--------- -----------
Net Cash Used by Financing
Activities (554,129) (1,039,726)
--------- -----------
NET INCREASE (DECREASE) IN CASH (377,110) 24,706
CASH AT BEGINNING OF YEAR 767,414 742,708
--------- -----------
CASH AT END OF YEAR $ 390,304 $ 767,414
--------- -----------
--------- -----------
</TABLE>
The accompanying notes to the financial statements
are an integral part of this statement.
<PAGE>
WW SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of WW Services, Inc. (the
Company), is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
BUSINESS ACTIVITY
Through its thirteen franchised Hardee's restaurants, the Company sells food to
the general public in Georgia and South Carolina.
INVENTORIES
Inventories consist primarily of raw food and supplies and are stated at the
lower of cost (first-in, first-out) or market value.
FIXED ASSETS
Fixed Assets are carried at cost. Depreciation of fixed assets is provided
using straight-line and accelerated methods for financial reporting and tax
purposes at rates based on the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold Improvements 40
Machinery and Equipment 5-12
</TABLE>
Expenditures for major renewals and betterments that extend the useful lives of
fixed assets are capitalized. Expenditures for maintenance and repairs are
charged to expenses as incurred.
INCOME TAXES
The Corporation has elected to be taxed under provisions of the Internal Revenue
Code whereby income tax liability is passed to the stockholders on their
personal returns. Accordingly, no provision has been made for income taxes.
NOTE 2 - RELATED PARTY TRANSACTIONS
The following transactions occurred between the Company and other related
parties:
(A) The Company leases its real estate and a substantial portion of its
equipment from WW Foods, Inc. (a brother-sister corporation). Lease
expense on the facilities for the year amounted to $1,526,592 for 1995
and $1,549,907 for 1994. Accrued rent at September 30, 1995, was
$87,506.
1
<PAGE>
WW SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 2 - RELATED PARTY TRANSACTIONS (Continued)
The Company borrowed and loaned funds to WW Foods, Inc. during the
year. At September 30, 1995, notes receivable and payable were as
follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Notes Receivable $ 0 $92,834
------- -------
------- -------
Notes Payable $11,380 $49,287
------- -------
------- -------
</TABLE>
Interest is recorded at the applicable federal rate. Interest income
for the year ending September 30, 1994 was $3,039.
(B) A shareholder owning a substantial portion of the Company's stock owns
a business (sole-proprietorship) which provides management services to
the Company. The Company paid management fees amounting to $706,108
for 1995 and $636,669 for 1994. Accounts payable at September 30,
1995 and 1994, for management fees were $51,167 and $56,216
respectively.
NOTE 3 - LEASING ARRANGEMENTS
The Company conducts its operations from facilities that are leased under a one
year lease which is renewable in May of each year (see note 2A above). Future
minimum lease payments could vary with changes in the lessor's interest rate on
its adjusted rate notes to NationsBank of Georgia, N.A. Rentals under this
lease obligation were $1,526,592 for 1995 and $1,549,907 for 1994.
The Company is lessee for four lots of land on which four of its restaurant
operations are located.
(A) Lot in Bryan County, Georgia leased for $12,500 per year, in addition
to 1.5% of annual sales in excess of $833,333. The initial term of
this lease runs through 1998 and the tenant may renew the lease for
six periods of five years each (rental increases 10% each five-year
period).
(B) Lot in Garden City, Georgia leased for $3,950 per quarter, in addition
to 1% of annual sales in excess of $600,000. The initial term of this
lease runs through February, 1999, and may be renewed by tenant for
three periods of five years each.
(C) Lot in Brunswick, Georgia leased for $1,800 per month. This is a 20
year lease.
(D) Lot in Brunswick, Georgia leased $1,000 per month through July, 1995,
then reduces to $500 per month. This is a 20 year lease.
2
<PAGE>
WW SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 3 - LEASING ARRANGEMENTS (Continued)
The following is a schedule of future minimum rental payments required under the
above operating leases for 1996 through 2000:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30 AMOUNT
------------ -----------
<S> <C>
1996 $1,270,492
1997 1,270,492
1998 1,270,492
1999 1,271,742
2000 1,271,742
----------
Total $6,354,960
----------
----------
</TABLE>
NOTE 4 - CASH FLOW DISCLOSURES
Cash and cash equivalents consist of cash in the Company's various checking and
savings accounts as well as cash on hand. Interest expense paid in 1995 was
$1,500.
NOTE 5 - RETAINED EARNINGS
The balance of retained earnings consists of the following:
<TABLE>
<S> <C>
Accumulated Adjustments Account,
September 30, 1994 $ 670,827
Net Income for Year Ended
September 30, 1995 54,741
Distributions to Shareholders (516,222)
---------
Accumulated Adjustment Account,
September 30, 1995 $ 209,346
---------
---------
</TABLE>
NOTE 6 - CONTINGENT LIABILITIES
(A) SELF INSURANCE
The Company is self insured for Workmen's Compensation Insurance
through an indemnification agreement with the Georgia Self Insurers
Guaranty Trust Fund. Each restaurant deposits funds monthly into an
account specifically established for the purpose of paying expenses
and other claims under this agreement. At September 30, 1995, the
account balance was $87,535. The Company's maximum liability per
occurrence is $250,000.
(B) LETTER OF CREDIT
The Company has established an irrevocable letter of credit for up to
$250,000 with NationsBank for the benefit of the Georgia Self Insurers
Guaranty Trust Fund under the self-insurance agreement disclosed in
Note 6(A) above. This letter of credit is automatically extended each
3
<PAGE>
WW SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 6 - CONTINGENT LIABILITIES (Continued)
February for a one year period at the election of NationsBank and is
currently extended through February 1, 1996.
(C) CASH BALANCES
The Company maintains its cash balances at various financial
institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. At September 30, 1995,
the Company's uninsured cash balances totaled $59,875.
4
<PAGE>
THIGPEN & LANIER
CERTIFIED PUBLIC ACCOUNTANTS
201 SOUTH ZETTEROWER AVENUE
P. O. BOX 505
STATESBORO, GEORGIA 30458
(912) 489-8756
FAX 489-1243
Mr. Robert L. Wiggins, Sr.
Wiggins Enterprises, Inc.
Baxley, Georgia
We have audited the accompanying balance sheet of Wiggins Enterprises, Inc. (a
corporation) as of September 30, 1995 and the related statements of income,
retained earnings, and cash flows for the nine months then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 Wiggins Enterprises, Inc. as
of September 30, 1995, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule of General and Administrative
Expenses on Page 6 is presented for the purposes of additional analysis and is
not a required part of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
THIGPEN & LANIER, CPAs
/s/ Thigpen & Lanier
January 12, 1995
1
<PAGE>
EXHIBIT A
WIGGINS ENTERPRISES, INC.
BALANCE SHEET
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash 1,492,653
Note receivable 25,000
Notes receivable - related parties 13,889
Advances to employees 4,980
Inventory 120,450
Accrued interest receivable 2,327
Worker's compensation reserve 119,738
Prepaid income taxes 173,865
Investment in marketable securities 236,953
Allowance to reduce marketable securities
to market value (36,963)
--------
Total Current Asssets 2,152,892
PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements 16,530
Furniture and fixtures 12,217
Machinery and equipment 134,306
--------
Less accumulated depreciation 163,053
(27,122)
--------
Total Property, Plant and Equipment 135,931
OTHER ASSETS:
Deposits 14,932
Franchise fees 140,000
Goodwill 637,358
Loan costs 18,620
--------
810,910
Less accumulated amortization (173,061)
--------
Total Other Assets 637,849
-----------
TOTAL ASSETS $ 2,926,672
-----------
-----------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountants' Audit Report.
2
<PAGE>
EXHIBIT A
WIGGINS ENTERPRISES, INC.
BALANCE SHEET (cont'd)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 230,287
Accounts payable - related parties 12,707
Estimated liability from pending
litigation 7,500
Notes payable 36,314
Notes payable - related parties 159,873
Accrued interest payable 10,872
Sales tax payable 59,890
Accrued wages payable 100,917
Payroll taxes withheld and accrued 18,739
Garnishment 857
----------
Total Current Liabilities $ 637,956
LONG TERM LIABILITIES:
Notes payable 558,473
----------
TOTAL LIABILITIES 1,196,429
STOCKHOLDERS' EQUITY:
Common stock, $1 par value,
1,500,00 shares authorized,
1,111,599 shares issued and
outstanding 1,111,599
Retained earnings 618,644
----------
Total stockholders' equity 1,730,243
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,926,672
----------
----------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountants' Audit Report.
3
<PAGE>
EXHIBIT B
WIGGINS ENTERPRISES, INC.
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SALES $10,153,639
COST OF GOODS SOLD 2,983,899
-----------
GROSS PROFIT 7,169,740
LESS GENERAL AND ADMINISTRATIVE EXPENSES
Schedule 1 6,923,932
-----------
NET INCOME FROM OPERATIONS 245,808
OTHER INCOME:
Advertising 126,618
Intercompany management fees 547,342
Interest 71,079
Miscellaneous 2,009
Vendor's compensation 11,360
Unrealized gain on marketable
securities 1,013
-------
Total Other Income 759,421
OTHER EXPENSES:
Estimated loss from pending
litigation 1,869
Loss due to theft 3,581
-------
Total Other Expenses 5,450
-----------
NET INCOME BEFORE PROVISION
FOR INCOME TAXES 999,779
PROVISION FOR INCOME TAXES:
Federal income tax 323,907
State income tax 57,228
-------
Total provision for income taxes 381,135
-----------
NET INCOME $ 618,644
-----------
-----------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountant's Audit Report.
4
<PAGE>
EXHIBIT C
WIGGINS ENTERPRISES, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Retained Earnings at January 1, 1995 $ 0
Net Income 618,644
Retained Earnings at September 30, 1995 $618,644
--------
--------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountants' Audit Report.
5
<PAGE>
EXHIBIT D
WIGGINS ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 618,644
Adjustment to reconcile net income to net
cash provided by operating activities
Depreciation 27,122
Amortization 51,881
Unrealized gain on marketable securities (1,013)
Estimated loss on marketable securities 1,869
Loss due to theft 3,581
(Increase) Decrease in:
Advances to employees 865
Accrued interest receivable (2,327)
Inventory (4,611)
Worker's compensation reserve (28,967)
Prepaid expenses (165,474)
Deposits (8,307)
Increase (Decrease) in:
Accounts payable (75,162)
Accounts payable - related parties 12,707
Accrued interest payable 10,872
Accrued property taxes (7,360)
Sales tax payable (5,618)
Accrued wages payable (63,420)
Payroll taxes withheld and accrued 6,722
Garnishment and other withholdings
payable 541
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 372,545
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of leasehold improvements (16,530)
Purchase of furniture and fixtures (12,217)
Purchase of machinery and equipment (134,306)
Purchase of marketable securities (2,048)
--------
NET CASH USED BY INVESTING ACTIVITIES (165,101)
CASH FLOWS FROM FINANCING ACTIVITIES
Principle payments on long-term debt (20,410)
Loan Costs (9,259)
--------
NET CASH USED BY FINANCING ACTIVITIES (29,669)
----------
NET INCREASE IN CASH 177,775
BEGINNING CASH BALANCE, JANUARY 1, 1995 1,314,878
----------
ENDING CASH BALANCE, SEPTEMBER 30, 1995 $1,492,653
----------
----------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountants' Audit Report.
6
<PAGE>
SCHEDULE 1
WIGGINS ENTERPRISES, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
_______________________________________________________________________________
<S> <C>
Advertising $ 845,614
Auto 2,815
Amortization 51,881
Bank charges 5,057
Casual labor 1,505
Contracted services 4,124
Contributions 1,685
Depreciation 27,122
Dues and publications 4,207
Equipment rental 1,045
Flowers and gifts 3,750
Freight 1,070
Gas and oil 6,521
Gift certificates 1,109
Insurance 113,953
Interest 58,488
Legal and accounting 7,598
Licenses and permits 18,628
Linen and laundry 9,640
Management fees 547,342
Miscellaneous 5,373
Managers meetings 253
Office supplies 12,802
Pest control 7,310
Postage 4,113
Rent 806,225
Repairs and maintenance 142,269
Returned checks 125
Royalties 398,580
Salaries 3,032,899
Security 9,004
Shopper evaluations 5,903
Supplies 35,711
Taxes 296,089
Telephone 19,540
Training 2,746
Travel and entertainment 53,591
Utilities 361,199
Uniforms 17,046
------------
TOTAL $ 6,923,932
------------
------------
</TABLE>
The Notes to Financial Statements are an
integral part of this statement.
See Accountants' Audit Report.
7
<PAGE>
WIGGINS ENTERPRISES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
_______________________________________________________________________________
NOTE 1 - SIGNIFICANT ACCOUNT POLICIES
The Company's accounting policies reflect practices common to the
industry and conform to generally accepted accounting principles. The
more significant accounting policies are summarized below.
Accounting Basis - The accrual basis of accounting is used to record
income and expenses of the Company.
Property and equipment - Property and equipment are recorded at cost.
Depreciation is computed using the declining balance and the straight
line methods. The depreciation methods are designed to amortize the
cost of the assets over their useful lives. Expenditures for
maintenance and repairs are charged to expense as incurred.
Inventory - Inventory is stated at the FIFO lower-of-cost-or-market
basis, where cost is determined by actual purchase price and market
takes into account current values and spoilage.
Worker's Compensation Reserve - The Company is self-insured for
worker's compensation insurance purposes. The Company pays a monthly
premium to a bank account held specifically for worker's compensation
claims. The plan which governs the self-insurance status has a
deductible of $250,000 per incident; the Company is responsible for
all claims not covered by the plan. The worker's compensation reserve
represents the Company's total premiums paid into the account less
disbursements from the account for worker's compensation claims and
related expenses.
Cash - For the purposes of the statement of cash flows, cash is
defined as demand deposits at banks and cash held in highly liquid
mutual funds.
NOTE 2 - RELATED PARTY TRANSACTIONS
Robert L. Wiggins, Sr. owns ninety-one percent of the stock in Wiggins
Enterprises, Inc. and Robert L. Wiggins, Jr. and Keith Wiggins own
nine percent collectively.
Wiggins Enterprises, Inc. is comprised of the following restaurants:
Hardee's of Alma Hardee's of Kingsland
Hardee's of Beaufort Hardee's of Savannah, Hwy 17
Hardee's of Claxton Hardee's of Swainsboro
Hardee's of Glennville Hardee's of Vidalia
Hardee's of Hazlehurst Hardee's of Waycross
Hardee's of Hinesville Western Steer of Hazlehurst
Hardee's of Jesup
Wiggins Enterprises Management Company is also a component of the
corporation.
Robert L. Wiggins, Sr. is the sole shareholder of Hardee's of Baxley,
Inc.
8
<PAGE>
WIGGINS ENTERPRISES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
_______________________________________________________________________________
NOTE 2 - CONTINUED
Robert L. Wiggins, Sr. also owns sixty percent interests in
W.W. Services, Inc. and W.W. Foods, Inc. which are subchapter
S-corporations that operate the businesses and own the real estate of
the following fast food restaurants:
Hardee's of Garden city
Hardee's of Savannah - Mall Blvd.
Hardee's of Metter
Hardee's of Savannah - Oasis Village
Hardee's of Pooler
Hardee's of Richmond Hill
Hardee's of Rincon
Hardee's of St. Mary's
Hardee's of Statesboro
Hardee's of Wilmington Island
Hardee's of Ridgeland
Hardee's of Brunswick #1
Hardee's of Brunswick #2
Robert L. Wiggins, Sr. owns controlling interests in Bob's Wholesale
Supply of Baxley, Inc. and in Bob's Wholesale Supply of Statesboro,
Inc. and Southeast Waterworks, Inc.
Inventory is occasionally transferred between stores and is accounted
for by adjusting cost of goods sold and by recording a related party
receivable or payable for the amount transferred. As of September 30,
1995, Wiggins Enterprises, Inc. owed $12,707 to the related party
restaurants which are controlled by Robert L. Wiggins, Sr.
The following is a list of notes receivable and notes payable between
related parties:
NOTES RECEIVABLE:
Wiggins Enterprises, Inc. owns a note receivable from Robert L.
Wiggins, Jr. in the amount of $12,635. The note is payable on demand
and bears interest at the rate of eight percent per annum. Accrued
interest receivable on the note amounted to $756 at September 30,
1995.
Wiggins Enterprises, Inc. owns a note receivable from Southeast
Waterworks, Inc. in the amount of $1,254. The note is payable on
demand and bears interest at the rate of eight percent per annum.
Accrued interest receivable on the note amounted to $75 at
September 30, 1995.
NOTES PAYABLE:
The following related-party notes are owed by Wiggins Enterprises,
Inc.:
<TABLE>
<CAPTION>
Principle Accrued
Balance Interest
--------- --------
<S> <C> <C>
Hardee's of Baxley $101,067 $7,796
Bob's Wholesale Supply
of Baxley, Inc. 29,582 1,770
</TABLE>
9
<PAGE>
WIGGINS ENTERPRISES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
_______________________________________________________________________________
NOTE 2 - CONTINUED
All related party notes are unsecured and are payable on demand and
bear interest at eight percent annum.
Robert L. Wiggins, Sr. incorporated Wiggins Enterprises, Inc. as of
January 1, 1995. All real estate and fixed assets that were placed in
service before the date of incorporation were retained personally and
the corporation pays rent expense for the use of those assets.
NOTE 3 - NOTE RECEIVABLE
The Company owns an unsecured note receivable from Southern Computer
Hardee's of Vidalia 29,998 Company in the amount of $25,000. The
note is payable on demand and bears interest at the rate of eight
percent per annum. Accrued interest receivable on the note amounted
to $1,496 at September 30, 1995.
NOTE 4 - INVESTMENT IN MARKETABLE SECURITIES
The Company has invested in Merrill Lynch mutual funds. The
securities are carried at the lower-of-cost-or-market. Market values
and original cost of the securities at September 30, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Allowance
Market to Reduce
Value Cost to Market
------ ---- ---------
<S> <C> <C> <C>
Hardee's of Alma $29,998 $35,543 $5,545
Hardee's of Claxton 29,998 35,543 5,545
Hardee's of Hazlehurst 50,000 59,238 9,238
Hardee's of Hinesville 29,998 35,543 5,545
Hardee's of Swainsboro 29,998 35,543 5,545
Hardee's of Vidalia 29,998 35,543 5,545
-------- -------- -------
TOTAL $199,990 $236,953 $36,963
-------- -------- -------
-------- -------- -------
</TABLE>
NOTE 5 - NOTES PAYABLE
<TABLE>
<CAPTION>
Monthly
Payment
Including Interest Secured
Amount Interest Rate by
------ --------- ------- -------
<S> <C> <C> <C> <C>
First Union National Bank $266,018 $3,621 8.75% Company Assets
Maybeck, Inc. 328,769 4,450 12.00% Company Assets
--------
Total Debt $594,787
--------
--------
</TABLE>
10
<PAGE>
WIGGINS ENTERPRISES, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
_______________________________________________________________________________
NOTE 5 - CONTINUED
Schedule of debt Repayment (unrelated parties):
<TABLE>
<CAPTION>
Year 5
Year 1 Year 2 Year 3 Year 4 and after Total
------ ------ ------ ------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Totals $36,314 $38,251 $41,439 $43,905 $434,878 $594,787
------- ------- ------- ------- -------- --------
------- ------- ------- ------- -------- --------
</TABLE>
NOTE 6 - PROVISIONS FOR INCOME TAXES
Wiggins Enterprises, Inc. is a member of a controlled group of
corporations which also includes Hardee's of Baxley, Inc., Bob's
Wholesale Supply of Baxley, Inc., and Southeast Waterworks, Inc.
Wiggins Enterprises, Inc., and Bob's Wholesale Supply of Baxley, Inc.
have consented to apportion the corporate income tax brackets evenly,
as the other two corporations are subchapter - S entities. Federal
and state income taxes for the nine months ended September 30, 1995
were allocated to Wiggins Enterprises, Inc., as follows:
<TABLE>
<CAPTION>
Federal State
-------- -------
<S> <C> <C>
Current Income Tax $323,907 $57,228
Estimated Tax Payments 470,000 85,000
-------- -------
Prepaid Income Taxes
Applied to September 30,
1996 $146,093 $27,772
-------- -------
-------- -------
</TABLE>
NOTE 7 - STATEMENT OF CASH FLOWS SUPPLEMENTAL INFORMATION
Cash paid for interest and income taxes for the twelve months ended
September 30, 1995 were $58,488 and $381,135 respectively.
11
<PAGE>
[Letterhead of BDO]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
Selected Properties of Fast Food Properties, L.P.;
Fast Food Properties II, L.P.; Ohio Properties, L.P.;
and Select Properties, L.P. Sold to U.S. Restaurant
Properties Master L.P.
Conyngham, Pennsylvania
We have audited the accompanying schedule of rental income and direct
operating expenses for Selected Properties of Fast Food Properties, L.P.;
Fast Food Properties II, L.P.; Ohio Properties, L.P.; and Select Properties,
L.P. Sold to U.S. Restaurant Properties Master L.P. in January 1996 for the
year ended December 31, 1995. The schedule is the responsibility of the
Partnerships' management. Our responsibility is to express an opinion on
this schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the schedule is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the schedule. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall schedule presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the schedule referred to above presents fairly, in all
material respects, the rental income and direct operating expenses of
Selected Properties of Fast Food Properties, L.P.; Fast Food Properties II,
L.P., Ohio Properties, L.P.; and Select Properties, L.P. Sold to U.S.
Restaurant Properties Master L.P. for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
-------------------------
BDO Seidman, LLP
April 19, 1996
3
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES MASTER L.P.
SCHEDULE OF RENTAL INCOME AND DIRECT OPERATING EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
RENTAL INCOME (Notes 1 and 2)
Minimum $ 1,159,513
Percentage 240,282
Real estate taxes 159,612
- -------------------------------------------------------------------------------
TOTAL RENTAL INCOME 1,559,407
- -------------------------------------------------------------------------------
DIRECT EXPENSES
Real estate taxes 159,612
Ground leases (Note 3) 134,250
- -------------------------------------------------------------------------------
TOTAL DIRECT EXPENSES 293,862
- -------------------------------------------------------------------------------
NET RENTAL OPERATING INCOME $ 1,265,545
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO SCHEDULE.
4
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO SCHEDULE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SUMMARY OF NATURE OF OPERATIONS
SIGNIFICANT Selected properties of Fast Food Properties, L.P.; Fast
ACCOUNTING Food Properties II, L.P.; Ohio Properties, L.P.;
POLICIES and Select Properties, L.P., all Pennsylvania Limited
Partnerships ("Selected Partnership Properties"), sold to
U.S. Restaurant Properties Master L.P., a Delaware Limited
Partnership, in January 1996 are engaged in the business of
owning and leasing restaurant facilities in Florida, New
York, North Carolina, Ohio and Pennsylvania. The leases
provide for annual minimum rentals and contingent rentals
based on a percentage of gross sales. The leases are
accounted for as operating leases.
2. RENTAL All of the tenants currently operate food establishments.
INCOME All leases are "triple net" leases which require the lessee
to pay all taxes, assessments, insurance, maintenance costs,
and other charges related to maintenance, repair, and
operation of the properties. Certain information regarding
each property is set forth in the table below:
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Miami, FL $ 83,904 8.5% of sales in excess August 1999 plus
of $987,059 one ten-year renewal
Binghamton, NY 56,250 The greater of 8.5% of October 4, 2009,
plus 112.5% sales or the then plus four five-
of ground rent effective minimum year renewal
annual rental options
Canton, NC 102,000 8.5% of sales in February 19, 2010,
excess of $1,200,000 plus four five-year
renewal options
Durham, NC 98,750 8.5% of sales in August 30, 2010,
excess of $1,161,765 plus four five-year
renewal options
</TABLE>
5
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO SCHEDULE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Durham Triangle, NC $ 108,540 8.5% of sales in October 11, 2008
plus 113.5% excess of $1,300,000 plus four five-year
of ground rent renewal options
Mansfield, OH 48,125 The greater of 8.5% of March 31, 2010,
plus 112.5% sales or the then plus four five-year
of ground rent effective minimum renewal options
annual rental
Central Square, NY 113,125 The greater of 8.5% of December 31, 2011,
sales or the then plus five five-year
effective minimum renewal options
annual rental
Hazleton, PA 42,000 8% of gross sales August 31, 2012
in excess of $525,000
Canton, OH 90,000 8.5% of gross sales in October 31, 2009
excess of $1,058,824 plus four additional
five-year renewals
Clay, NY 56,797 8.5% of gross sales in March 31, 2011
plus 112.5% excess of $1,065,259
of ground rent
Nanticoke, PA 39,000 8% of sales in December 1996 plus
excess of $487,500 one fifteen or twenty-
year renewal option
Old Forge, PA 56,000 8 1/2% of sales in September 2008
excess of $658,823
West Hazleton, PA 49,200 8% of sales in May 1997 plus
excess of $615,000 one fifteen or twenty-
year renewal option
</TABLE>
6
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO SCHEDULE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTALS DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cincinnati, OH $ 65,664 8 1/2% of sales in December 1999 plus
excess of $772,518 one fifteen or twenty-
year renewal option
The following is a schedule of minimum rental income on noncancellable
leases as of December 31, 1995:
1996 $ 1,120,418
1997 1,057,218
1998 1,037,942
1999 1,017,565
2000 895,965
Thereafter 8,439,885
-----------------------------------------------------------------------
$ 13,568,993
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
7
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO SCHEDULE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. GROUND LEASES The ground leases are summarized as follows:
<TABLE>
<CAPTION>
LOCATION EXPIRATION RENTAL
- --------------------------------------------------------------------------------
<S> <C> <C>
Binghamton, NY 10/14/09 $42,550 per year through 9/15/99
$48,932 per year 9/16/99 through 9/15/04
$56,272 per year 9/16/04 through 10/14/09
Durham Triangle, NC 10/11/08 $28,750 per year through 9/30/98
$33,063 per year 10/7/98 through 9/30/03
$38,022 per year 10/1/03 through 9/30/08
Mansfield, OH 3/31/10 $32,500 per year through 3/31/00
$35,000 per year 4/1/00 through 3/31/05
$37,500 per year 4/1/05 through 3/31/10
Clay, NY 3/31/31 $30,000 per year through 8/31/96
$36,000 per year 9/1/96 through 8/31/01
$43,200 per year 9/1/01 through 8/31/06
$51,840 per year 9/1/06 through 8/31/11
$59,616 per year 9/1/11 through 8/31/16
$68,558 per year 9/1/16 through 8/31/21
$82,270 per year 9/1/21 through 8/31/26
$98,724 per year 9/1/26 through 3/31/31
The future minimum rental commitments as of December 31, 1995
are as follows:
1996 $ 135,800
1997 139,800
1998 140,878
1999 145,974
2000 152,370
Thereafter 3,052,507
----------------------------------------------
$3,767,329
----------------------------------------------
----------------------------------------------
</TABLE>
4. RELATED PARTY A General Partner of the selling partnerships is a
TRANSACTIONS shareholder of the entity which is the tenant of the
Old Forge, PA property.
8
<PAGE>
INDEPENDENT AUDITORS'
REPORT ON
SUPPLEMENTAL MATERIAL
Selected Properties of Fast Food Properties, L.P.; Fast
Food Properties II, L.P.; Ohio Properties, L.P.; and
Select Properties, L.P. Sold to U.S. Restaurant Properties
Master L.P.
Conyngham, Pennsylvania
Our audit of the basic schedule of rental income and direct operating
expenses included in the preceding section of this report was performed for
the purpose of forming an opinion on the schedule taken as a whole. The
supplemental material presentation in the following section of this report is
presented for purposes of additional analysis and is not a required part of
the schedule of rental income and direct operating expenses. Such
information has been subjected to the auditing procedures applied in the
audit of the basic schedule of rental income and direct operating expenses
and, in our opinion, is fairly stated in all material respects in relation to
the basic schedule taken as a whole.
/s/ BDO SEIDMAN, LLP
------------------------------
BDO Seidman, LLP
Accountants and Consultants
Philadelphia, Pennsylvania
April 19, 1996
9
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES M.L.P.
SCHEDULE OF RENTAL INCOME AND
DIRECT OPERATING EXPENSES - BY LOCATION
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------------
DURHAM
MIAMI BINGHAMTON MANSFIELD HAZLETON DURHAM TRIANGLE
TOTAL FL NY OH PA NC NC
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income
Minimum $1,159,513 $ 83,904 $104,119 $ 84,033 $42,000 $ 98,750 $141,171
Percentage 240,282 14,817 -- 34,906 20,591 -- --
Real estate tax 159,612 18,597 24,255 2,615 9,640 10,014 9,478
- -------------------------------------------------------------------------------------------------------------------------
Total rental income 1,559,407 117,318 128,374 121,554 72,231 108,764 150,649
- -------------------------------------------------------------------------------------------------------------------------
Direct expenses
Real estate taxes 159,612 18,597 24,255 2,615 9,640 10,014 9,478
Ground lease 134,250 -- 42,550 32,950 -- -- 28,750
- -------------------------------------------------------------------------------------------------------------------------
Total direct expenses 293,862 18,597 66,805 35,565 9,640 10,014 38,228
- -------------------------------------------------------------------------------------------------------------------------
NET RENTAL OPERATING INCOME $1,265,545 $ 98,721 $ 61,569 $ 85,989 $62,591 $ 98,750 $112,421
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SELECTED PARTNERSHIP PROPERTIES SOLD TO
U.S. RESTAURANT PROPERTIES M.L.P.
SCHEDULE OF RENTAL INCOME AND
DIRECT OPERATING EXPENSES - BY LOCATION (Continued)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995
- --------------------------------------------------------------------------------------------------------
CENTRAL OLD WEST
SQUARE CANTON CANTON CLAY CINCINNATI FORGE NANTICOKE HAZLETON
NY NC OH NY OH PA PA PA
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$113,125 $102,000 $90,000 $90,547 $65,664 $56,000 $39,000 $49,200
-- 29,345 8,656 20,239 22,290 31,325 50,022 8,091
25,385 3,805 3,442 11,394 7,500 11,176 13,211 9,100
- --------------------------------------------------------------------------------------------------------
138,510 135,150 102,098 122,180 95,454 98,501 102,233 66,391
- --------------------------------------------------------------------------------------------------------
25,385 3,805 3,442 11,394 7,500 11,176 13,211 9,100
-- -- -- 30,000 -- -- -- --
- --------------------------------------------------------------------------------------------------------
25,385 3,805 3,442 41,394 7,500 11,176 13,211 9,100
- --------------------------------------------------------------------------------------------------------
$113,125 $131,345 $98,656 $80,786 $87,954 $87,325 $89,022 $57,291
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Motel Enterprises, Inc.
We have audited the statement of direct revenues and operating expenses (defined
as being operating revenues less direct operating expenses) applicable to stores
to be acquired by U.S. Restaurant Properties Master, L.P. for the year ended
December 31, 1995. This financial statement is the responsibility of the
management of Motel Enterprises, Inc. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures of the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of direct revenues and operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties Master, L.P. As described in Note 1 to the accompanying
statement of direct revenues and operating expenses, such statement is not
intended to be a complete presentation of revenues and expenses of the stores.
In our opinion, such statement of direct revenues and operating expenses
presents fairly, in all material respects, the direct revenues and certain
expenses, as defined above, of the Applicable Stores to be acquired by U.S.
Restaurant Properties Master, L.P. for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ WILLIAM C. LOVE, CPA
- --------------------------------------
William C. Love, CPA
Austin, Texas
April 25, 1996
<PAGE>
MOTEL ENTERPRISES, INC.
STATEMENT OF DIRECT REVENUES AND OPERATING EXPENSES
APPLICABLE TO STORES TO BE ACQUIRED BY
U.S. RESTAURANT PROPERTIES MASTER, L.P. (UNAUDITED)
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Store Sales $13,577
Costs and Expenses:
Cost of Food (Note 2) 4,911
Labor 4,164
Advertising and Franchise Royalties 935
Utilities 828
Rent (Note 3) 587
Repairs and Maintenance 437
Insurance 162
Other Expenses 463
-------
Total Costs and Expenses 12,487
-------
Excess of Store Sales Over/Above
Direct Operating Expenses $ 1,090
-------
-------
</TABLE>
See accompanying notes to Statement of Direct Revenues and Operating Expenses.
<PAGE>
MOTEL ENTERPRISES, INC. PAGE 2
STATEMENT OF DIRECT REVENUES AND OPERATING EXPENSES
APPLICABLE TO STORES TO BE ACQUIRED BY
U.S. RESTAURANT PROPERTIES MASTER, L.P. (UNAUDITED)
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
1) BASIS OF PRESENTATION
The accompanying Statement of Direct Revenues and Operating Expenses
include only the thirty-nine (39) store locations being acquired by U.S.
Restaurant Properties Master L.P. The Statement does not include any
revenues or expenses related to the remaining fifteen (15) stores owned by
Motel Enterprises, Inc. (Motel). The accompanying Statement of Direct
Revenues and Operating Expenses represent only the stores being acquired
and do not include depreciation, interest expense, non-store income, and
allocated general and administrative expenses. The significant accounting
policies of Motel Enterprises, Inc. are as follows:
SALES
The accrual basis of accounting is used for recognition of all sales
as such sales are completed transactions at the point of sale.
FRANCHISE ROYALTIES
Royalties are based on a percentage of sales revenue in accordance
with the franchise agreements.
2) COST OF FOOD
The cost of food included a 4.5% premium charged by the supplier who is a
related party. In 1995, had Motel purchased its food from an independent
third party, food costs for these stores would have been reduced by
approximately $576,000.
3) RENT
This includes approximately $489,000 of rent expense allocated to the
stores by Motel. The stores are not rented from unrelated parties.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following December 31, 1995 unaudited Pro Forma Consolidated Balance
Sheet of U.S. Restaurant Properties, Master L.P. (the "Partnership") consists
of the Partnership's December 31, 1995 balance sheet adjusted on a pro forma
basis to reflect as of December 31, 1995: (a) the purchase of 27 properties
since January 1, 1996 and the acquisition of 105 properties under binding
contracts with the assumption of related ground leases (all of which are
treated as operating leases); (b) the issuance of 327,836 Units in connection
with the purchase of 27 properties since January 1, 1996; (c) the issuance
and sale by the Partnership in this Offering of 1,800,000 Units and the
application of the net proceeds therefrom; and (d) additional borrowings to
purchase the Acquisition Properties. The unaudited Pro Forma Consolidated
Balance Sheet is not necessarily indicative of what the actual financial
position of the Partnership would have been at December 31, 1995 had all of
these transactions occurred and it does not purport to represent the future
financial position of the Partnership.
The unaudited Pro Forma Condensed Consolidated Statement of Income for
the year ended December 31, 1995 is presented as if the following had
occurred as of January 1, 1995: (a) the purchase of 16 properties acquired on
various dates from March 1995 through December 1995; (b) the purchase of 27
properties completed since January 1, 1996 and the acquisition of 105
properties under contract with the assumption of related ground leases (all
of which are treated as operating leases); (c) the issuance and sale by the
Partnership in this Offering of 1,800,000 Units and the application of the
net proceeds therefrom; and (d) additional borrowings to purchase the
Acquisition Properties. The purchase and operations of the Acquisition
Properties are being included in the pro forma financial statements because
(a) 27 of such properties have already been acquired and (b) the proceeds of
the Offering are being used to acquire the 105 properties under contract and
the Partnership presently intends to consummate such acquisitions. The
unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations of the
Partnership would have been assuming the transactions described above had
been completed as of January 1, 1995 nor do they purport to represent the
results of operations for future periods.
These pro forma consolidated financial statements should be read in
conjunction with all of the financial statements and the notes thereto
contained elsewhere in this Prospectus. In management's opinion, all
adjustments necessary to properly reflect the above indicated transactions
have been made.
<PAGE>
U.S. RESTAURANT PROPERTIES, MASTER LP
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
ACQUISITIONS/
OFFERING PRO
HISTORICAL ADJUSTMENTS (a) FORMA
---------- --------------- --------
<S> <C> <C> <C>
Assets
Cash $ 7 $ $ 7
Receivables, net 951 951
Purchase deposits 1,792 (1,792)(b) 0
Prepaid expenses 315 315
Notes receivable 269 269
Net investment in direct financing leases 19,371 19,371
Land 27,493 28,460 (c) 55,953
Buildings and leasehold improvements, net 6,257 34,763 (c) 41,020
Machinery and equipment, net 224 3,468 (c) 3,692
Intangibles, net 14,804 6,144 (c) 20,948
------- ------- --------
$71,483 $71,043 $142,526
------- ------- --------
------- ------- --------
Liabilities and Partners' Capital
Accounts payable $ 677 $ $ 677
Line of credit 10,931 25,522 (d) 36,453
Capitalized lease obligations 562 0 562
General Partners' capital 1,241 1,241
Limited Partners' capital 58,072 45,521 (e) 103,593
------- ------- --------
$71,483 $71,043 $142,526
------- ------- --------
------- ------- --------
</TABLE>
____________________
(a) Reflects pro forma adjustments for acquisitions and related tenant and
ground leases on the preliminary assessment that all such leases represent
operating leases. Final determination of the proper classification of
leases is subject to the completion of the acquisition transactions.
(b) Application of $1,792 of purchase deposits to the purchase price of
27 properties purchased since January 1, 1996 and 105 properties under
binding contracts.
(c) Purchase price of 27 properties acquired since January 1, 1996, and for 105
properties under binding contracts.
(d) Increase in borrowings to finance the acquisition of 27 properties
completed since January 1, 1996 and for 105 properties under binding
contracts.
(e) Recording the issuance of 327,836 Units in connection with the acquisition
of certain properties since January 1, 1996 valued at approximately $20 per
Unit (the market price of the Units issued at the respective dates of
acquisition which approximates the guaranteed value of the Units discounted
to reflect the present value on the dates the Units were issued) and the
net proceeds relating to the issuance of 1,800,000 Units to be issued in
this Offering at an assumed market price of $23 per Unit, less
underwriters' discounts and commissions and offering costs.
<PAGE>
U.S. RESTAURANT PROPERTIES, MLP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(In thousands except for per unit data)
<TABLE>
<CAPTION>
ACQUISITIONS/
1995 OFFERING PRO
HISTORICAL ACQUISITIONS ADJUSTED ADJUSTMENTS(c) FORMA
---------- ------------ -------- -------------- -------
<S> <C> <C> <C> <C> <C>
Total Revenues $9,780 $1,280 (a) $11,060 $10,436 (d) $21,496
Rent 1,405 123 (a) 1,528 645 (d) 2,173
Depreciation and amortization 1,541 291 (a) 1,832 2,822 (d) 4,654
Taxes, general and administrative 1,419 114 (a) 1,533 716 (d) 2,249
Interest expense (income), net 192 687 (a) 879 1,807 (e) 2,686
------ ------ ------- ------- -------
Total expenses 4,557 1,215 5,772 5,990 11,762
Net income $5,223 $ 65 $ 5,288 $ 4,446 $ 9,734
------ ------ ------- ------- -------
------ ------ ------- ------- -------
Net income allocable to unitholders $5,119 $ 5,183 $ 9,541
------ ------- -------
------ ------- -------
Average number of units outstanding 4,638 54 (b) 4,680 2,128 (f) 6,808
------ ------ ------- ------- -------
------ ------ ------- ------- -------
Net income per unit $ 1.10 $ 1.11 $ 1.40
------ ------- -------
------ ------- -------
</TABLE>
____________________
(a) Revenues relating to 16 properties acquired on various dates from March
1995 through December 1995.
(b) In connection with the acquisition of three properties, 54,167 Units were
issued.
(c) Reflects pro forma adjustments for acquisitions and related tenant and
ground leases on the preliminary assessment that all such leases represent
operating leases. Final determination of the proper classification of
leases is subject to the completion of the acquisition transactions.
(d) Results of operations for the acquisition of 27 properties completed since
January 1, 1996, and for 105 properties under binding contracts.
(e) Adjustment for interest expense as a result of the proceeds of the Offering
and purchase of the Acquisition Properties. The $40 million line of credit
bears interest at 1.8 percentage points above LIBOR. For pro forma
purposes, the Partnership's average interest rate of 7.7% on the line of
credit for 1995 is used. The LIBOR rate as of April 16, 1996 approximates
5.5%.
(f) Reflects the 1,800,000 Units to be issued in the Offering and 327,836 Units
issued in conjunction with acquisitions completed since January 1, 1996.
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
The Partners
Burger King Limited Parntership II:
We consent to the inclusion of our report dated February 2, 1996, except as
to Note 5, which is as of March 25, 1996, relating to the balance sheets of
Burger King Limited Partnership II as of December 31, 1995 and 1994, and the
related statements of operations, changes in partners' capital (deficit) and
cash flows for each of the years in the three-year period ended December 31,
1995, and the related financial statement schedule, which report appears in
the Form 8-K of U.S. Restaurant Properties Master L.P. dated April 19, 1996.
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
April 18, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of U.S. Restaurant Properties Master
L.P. of our report dated February 26, 1996, on WW Services, Inc.
/s/ Tanner and Long, P.C.
Tanner and Long, P.C.
Baxley, Georgia
April 18, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of U.S. Restaurant
Properties Master L.P. of our report dated January 12, 1995, on
Wiggins Enterprises, Inc.
/s/ Thigpen & Lanier
Thigpen & Lanier
Statesboro, Georgia
April 18, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
U.S. Restaurant Properties Master L.P.
Dallas, Texas
We hereby consent to the incorporation by reference in the Registration
Statement No. 333-02675 of U.S. Restaurant Properties Master L.P. on Form S-3
of our report dated April 19, 1996 relating to the schedule of rental income
and direct operating expenses for Selected Partnership Properties Sold to
U.S. Restaurant Properties Master L.P. for the year ended December 31, 1995,
which report appears in the Form 8-K/A of U.S. Restaurant Properties Master
L.P., dated April 30, 1996.
/s/ BDO SEIDMAN, LLP
-------------------------
BDO Seidman, LLP
Philadelphia, Pennsylvania
April 30, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of U.S. Restaurant Properties Master,
L.P. of our report dated April 24, 1996, related to Motel Enterprises, Inc. and
the Applicable Stores to be acquired by U.S. Restaurant Properties Master, L.P.
and to the incorporation by reference of our report in the Registration
Statement of U.S. Restaurant Properties Master, L.P. on Form S-3.
William C. Love, CPA
Austin, TX
April 25, 1996
