UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1997
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to __________________
Commission File Number 1-9079
U.S. RESTAURANT PROPERTIES MASTER LIMITED PARTNERSHIP
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1541631
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5310 Harvest Hill Rd., Ste. 270, LB 168, Dallas, Texas 75230
------------------------------------------------------------
(Address principal executive offices, including zip code)
972 / 387-1487
--------------------------------------------------
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
Depository Units (representing Limited Partnership Interests) outstanding
at August 12, 1997: 8,354,354
Page 1 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER LIMITED PARTNERSHIP
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996........................ 3
Consolidated Statements of Income for the Three
months ended June 30, 1997 and 1996 (unaudited).......... 4
Consolidated Statements of Income for the Six months
ended June 30, 1997 and 1996 (unaudited)................. 4
Consolidated Statement of Partners' Capital for the Six months
ended June 30, 1997 (unaudited).......................... 5
Consolidated Statements of Cash Flows for the Six months
ended June 30, 1997 and 1996 (unaudited)................. 6
Notes to Consolidated Financial Statements (unaudited).......... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 15
Page 2 of 16
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED BALANCE SHEETS
($000's)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents $ 1,777 $ 381
Receivables, net
(includes $331 and $188 from related parties) 2,340 2,117
Deferred rent receivable 1,137 536
Purchase deposits and escrows 1,090 908
Prepaid expenses 924 403
Notes receivable 1,321 1,308
Notes receivable - related parties 3,411 2,738
Net investments in direct financing leases 15,679 17,105
Land 78,679 61,340
Buildings and leasehold improvements, net 139,298 75,339
Machines and equipment, net 3,743 2,980
Intangibles, net 12,116 12,263
------------ ------------
$ 261,515 $ 177,418
============ ============
Liabilities and Partners' Capital
Accounts payable $ 3,173 $ 2,642
(includes $593 and $416 due to the general
partner)
Deferred rent payable 88 55
Deferred gain on sale of property 590 590
Lines of credit 92,313 69,486
Notes payable 40,000 -
Capitalized lease obligations 263 362
General partner's capital 1,093 1,163
Limited partner's capital 123,995 103,120
------------ ------------
$ 261,515 $ 177,418
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 3 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF INCOME
($000's, except per unit data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues from leased properties:
Rental income $ 7,978 $ 3,805 $ 13,687 $ 6,238
Amortization of unearned income
on direct financing leases 413 504 857 1,026
----------- ----------- ----------- -----------
Total Revenues 8,391 4,309 14,544 7,264
Expenses:
Rent 600 486 1,189 897
Depreciation and amortization 1,800 841 3,366 1,375
Taxes, general, and administrative 1,225 481 1,987 851
Interest expense, net 2,141 639 3,425 957
----------- ----------- ----------- -----------
Total Expenses 5,766 2,447 9,967 4,080
----------- ----------- ----------- -----------
Income before unusual items 2,625 1,862 4,577 3,184
Gain on sale of property 266 0 266 0
REIT conversion costs (744) 0 (744) 0
----------- ----------- ----------- -----------
Net income $ 2,147 $ 1,862 $ 4,099 $ 3,184
=========== =========== =========== ===========
Net income allocable to unitholders $ 2,105 $ 1,825 $ 4,018 $ 3,121
=========== =========== =========== ===========
Average number of outstanding units 7,760 5,512 7,409 5,209
=========== =========== =========== ===========
Net income per unit $0.27 $0.33 $0.54 $0.60
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 4 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
($000's) (Unaudited)
<TABLE>
<CAPTION>
General Limited
Units Partner Partners Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 6,894 $ 1,163 $ 103,120 $ 104,283
Net income 81 4,018 4,099
Units issued for cash 833 0 21,025 21,025
Units issued for property 119 0 3,320 3,320
Cash distributions (151) (7,488) (7,639)
----------------------------------------------------
Balance at June 30, 1997 7,846 $ 1,093 $ 123,995 $ 125,088
====================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 5 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
1997 1996
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 4,099 $ 3,184
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 3,366 1,332
Amortization of deferred financing cost 145 42
Gain on sale of property (266) 0
Increase in receivables, net (223) (288)
Increase in deferred rent receivable (601) (157)
Increase in prepaid expenses (521) (73)
Reduction in net investment in direct financing leases 1,130 1,002
Increase in accounts payable 531 513
Increase in deferred rent payable 33 0
---------- -----------
3,594 2,371
---------- -----------
Cash provided by operating activities 7,693 5,555
Cash flows from investing activities:
Purchases deposits (paid) used (182) 1,683
Purchase of property (81,005) (60,483)
Purchase of machines and equipment (981) (2,716)
Proceeds from sale of property 1,171 72
Increase in notes receivable (686) (3,529)
---------- -----------
Cash used in investing activities (81,683) (64,973)
</TABLE>
continued on next page
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 6 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
($000's)
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
1997 1996
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Loan origination costs and other intangibles (728) (178)
Payments on capital lease obligations (99) (104)
Proceeds from line of credit 62,467 67,447
Repayments of line of credit (39,640) (43,313)
Proceeds from notes payable 40,000 0
Proceeds from issuance of stock 21,025 40,203
Cash distributions (7,639) (4,630)
---------- -----------
Cash provided by financing activities 75,386 59,425
---------- -----------
Increase in cash and equivalents 1,396 7
Cash and equivalents at beginning of year 381 7
---------- -----------
Cash and equivalents at end of the quarter $ 1,777 $ 14
========== ===========
Supplemental disclosure:
Interest paid during the quarter $ 3,267 $ 505
========== ===========
Non-cash investing activities:
Fair value of units issued for property $ 3,320 $ 6,596
========== ===========
Sale of Property on direct financing lease $ 0 $ 225
========== ===========
Deferred gain on sale of property $ 0 $ 590
========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Page 7 of 16
<PAGE>
U.S. RESTAURANT PROPERTIES MASTER L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Interim Unaudited Financial Information
* Organization - U.S. Restaurant Properties Master L.P. (Partnership), formerly
Burger King Investors Master L.P., a Delaware limited partnership, was formed on
December 10, 1985. The Partnership, through its 99.01% limited partnership
interest in U.S. Restaurant Properties Operating Limited Partnership (Operating
Partnership), also a Delaware limited partnership, acquired from Burger King
Corporation (BKC) for $94,592,000 in February 1986 an interest in 128 restaurant
properties owned or leased by BKC and leased or subleased on a net lease basis
to BKC franchisees. The Partnership is the sole limited partner of the Operating
Partnership, and they are referred to collectively as the "Partnerships" or the
"Partnership." QSV Properties, Inc. (QSV), formerly U.S. Restaurant Properties,
Inc., the managing general partner, and BKC, the special general partner, were
both indirectly wholly-owned subsidiaries of Grand Metropolitan PCC prior to May
17, 1994, at which time QSV was sold to the current owners. On January 20, 1995,
the Partnership paid Burger King Corporation $16,000 for its 0.02% interest in
the Operating and Master Limited Partnership.
The Partnership has established certain other wholly-owned operating entities
consisting of U.S. Restaurant Properties Business Trust I, U.S. Restaurant
Properties Business Trust II, Restaurant Acquisition Corporation, Restaurant
Renovations Partners L.P., U.S. Restaurant Properties West Virginia Partners
L.P., U.S. Restaurant Properties Carolina Ltd., U.S. Restaurant Properties
Lincoln, Ltd., and U.S. Restaurant Properties Norman, Ltd. USRP (Dee Dee), LLC.,
USRP (Sybra), LLC. and USRP (Minnesota), LLC. Collectively, these entities,
in addition to the Partnerships are referred to as the "Company." All of
these entities are included in the consolidated financial statements.
The Partnership may issue an unlimited number of units. The units outstanding as
of June 30, 1997 and December 31, 1996 totaled 7,846,254 and 6,894,003,
respectively.
QSV Properties, Inc. (formerly named U.S. Restaurant Properties, Inc.) is the
Managing General Partner of the Partnership.
* Accounting Policies - A summary of accounting policies followed by the Company
is included in the 1996 Annual Report. The Company follows such policies in the
preparation of their interim reports.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP); however, this is not the basis
for reporting taxable income to unitholders. The financial statements reflect
the consolidated accounts of the Company after elimination of significant
inter-entity transactions.
No federal and in most cases no state income taxes are reflected in the
consolidated financial statements because partnerships are not taxable entities.
The partners are responsible for reporting their allocable shares of taxable
income or loss in their individual income tax returns.
Page 8 of 16
<PAGE>
The accompanying unaudited consolidated financial statements have been prepared
in conformity with GAAP and should be read in conjunction with the Registrant's
annual report on Form 10-K for the year ended December 31, 1996. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the year ending December 31, 1997.
Certain classifications for the six month period ended June 30, 1996 were
changed to conform to the current period presentation.
The consolidated balance sheet as of June 30, 1997 and the other consolidated
financial statements for the three and six months ended June 30, 1997 and 1996,
are unaudited, but management of the Registrant believes that all adjustments
(consisting only of normal recurring accruals) necessary for a fair statement of
the Company's consolidated financial position and results of operations for the
periods have been included therein.
* Earnings Per Unit Calculation - Earnings per unit have been computed by
dividing net income allocable to unitholders by the weighted average number of
units or equivalents outstanding. Unit equivalents include the weighted average
number of assumed equivalent units outstanding from unit options and unit price
guarantees if dilutive using the treasury stock method.
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which is effective for periods ending after December 15, 1997, requires
that companies disclose basic earnings per share using only the weighted average
number of common shares outstanding during a period. Currently unit equivalents
are included in this computation if they are material. Fully diluted earnings
per unit will continue to be calculated in a manner similar to the current
calculation. Compliance with SFAS No. 128 would result in earnings per unit for
the three months ended June 30, 1997 and 1996 to be $0.28 and $0.34,
respectively. The earnings per unit for the six months ended June 30, 1997 and
1996 would be $0.55 and $0.61, respectively.
* Related Party Transactions - The managing general partner, QSV Properties,
Inc., is responsible for managing the business and affairs of the Company. The
Company pays the managing general partner a non-accountable annual allowance
(adjusted to reflect increases in the Consumer Price Index and additions to the
property portfolio), plus reimbursement of out-of-pocket costs incurred by other
parties for services rendered to the Partnerships. The allowance for the quarter
ended June 30, 1997 was $593,000 compared to $259,000 for the quarter ended June
30, 1996 and the allowance for the six months ended June 30, 1997 was $973,000
compared to $458,000 for the six months ended June 30, 1996. The Company's
accounts payable balance includes $593,000 and $416,000 for this allowance as of
June 30, 1997 and December 31, 1996, respectively. The managing general partner
also receives a 1% finders fee on all acquisitions, which amounted to $621,000
for the quarter ended June 30, 1997 compared to $522,000 in the quarter ended
June 30, 1996. For the six months ended June 30, 1997 the 1% finders fee
amounted to $820,000 compared to $676,000 for the six months ended June 30,
1996.
A note receivable of $255,000 is due from Arkansas Restaurants #10 L.P. at June
30, 1997. The note receivable is due on September 30, 1997, and has an interest
rate of 9.0% per annum. The managing general partner of Arkansas Restaurants #10
L.P. is owned by an officer of the managing general partner.
A notes receivable of $920,000 is due from Southeast Fast-Food Partners, L.P.
(SFF). The notes receivable is due on July 1, 1998 ($57,000) and July 1, 1999
($863,000) and has an interest rate of 9.0% per annum. In addition, a note
receivable of $136,000 is due from the owners of SFF. This note is due
Page 9 of 16
<PAGE>
on July 1, 1999, and has an interest rate of 9.0% per annum. The managing
general partner of Southeast Fast-Food Partners, L.P., is owned by an officer
of the Partnership's managing general partner.
During 1996, the Company agreed to make available to USRP Development Company a
revolving line of credit in the principal amount of $5,000,000, to be used
solely for paying for the acquisition and development of restaurant properties
which will be purchased by the Company upon completion of development. The line
of credit is secured by certain development properties and bears interest at an
annual rate of 9.0%. The line of credit is payable in monthly installments
beginning July 1997 and matures in October 2001. At June 30, 1997, the
outstanding balance was $2,090,000 and is included in Notes Receivable - related
parties.
2. Property Purchases - During the quarter ended June 30, 1997, the Company
completed the purchase of 99 restaurant properties for an aggregate purchase
price of $63,704,000. The restaurant properties were purchased with only cash.
The 99 restaurant properties include 75 Arby's, five Schlotzsky's, four Pizza
Hut's, two Popeye's, two Carlos O'Kelly's, and 11 regional restaurant
properties. Allocation of the cost of the properties has been done on a
preliminary basis and will be finalized at year end. The Carlos O'Kelly's
restaurant properties were acquired from Carlos O'Kelly's, Inc. Carlos
O'Kelly's, Inc. is owned by a director of the Managing General Partner.
During the quarter ended March 31, 1997, the Company completed the purchase of
32 restaurant properties for an aggregate purchase price of $20,757,000,
including the value of 118,579 Partnership Units issued as part of the aggregate
purchase price. The 118,579 Partnership units have a guaranteed market value of
$25.30 on the second anniversary date of the closing. The Partnership Units'
market value on the closing date equaled $28.00 per Partnership Unit. Sixteen
restaurant properties were purchased with a combination of cash and Partnership
Units; and 16 restaurant properties were purchased with only cash. The 32
restaurant properties include 16 Bruegger's Bagel's, four Pizza Hut's, three
Schlotzsky's, two Arby's, and seven regional restaurant properties.
On April 29, 1997, a restaurant property located in Forest Park, OH was sold for
$1,171,000, net of closing costs at a gain of $266,000.
In the normal course of business, the Partnership may sign purchase agreements
to acquire restaurant properties. Such agreements become binding obligations
upon the completion of a due diligence period ranging usually from 15 - 30 days.
On June 30, 1997, earnest money purchase deposits amounting to $1,090,000 were
on deposit for the purchase of five Hardee's restaurants, five Taco Cabana
restaurants, three Wendy's restaurants, two Pizza Hut restaurants, and 29 other
regional chain restaurants.
3. Revolving Credit Facility - During the quarter ended June 30, 1997 the
Company's line of credit was increased to $110 million which matures on June 27,
1999. The interest rate on this debt floats at 180 basis percentage points above
LIBOR. The effective interest rate at June 30, 1997 was 7.5812%. There is an
unused line of credit fee of 0.25% per annum on the average daily excess of the
commitment amount over the aggregate unpaid balance of the revolving loan which
is charged and is payable on a quarterly basis. In addition to various reporting
requirements mandated under the secured loan agreement, the Company must also
maintain a tangible net worth, as defined in the loan document, in excess of
$85,000,000; maintain a combined GAAP Partner's Capital, as defined in the loan
document, of not less than $100,000,000; maintain a cash flow coverage ratio of
not less than 1 to 1 based upon a proforma eight year bank debt amortization;
and maintain certain other financial covenants as defined in
Page 10 of 16
<PAGE>
the loan agreement. The Company's management believes it is in compliance with
all loan provisions. On June 30, 1997, the outstanding balance was $92,313,000
and the available borrowing balance was $17,287,000.
4. Notes Payable - On February 26, 1997, the Company issued $40,000,000 in
privately placed debt which consists of $12,500,000 Series A Senior Secured
Guaranteed Notes with a 8.06% interest rate, due date of January 31, 2000; and
$27,500,000 Series B Senior Secured Guaranteed Notes with a 8.30% interest rate,
due date of January 31, 2002. The debt and the revolving credit facility is
collateralized by substantially all the assets of the Company.
5. REIT Conversion - On June 27, 1997 the limited partners voted in favor of a
conversion from a Master Limited Partnership to a self-advised REIT (Real Estate
Investment Trust). The actual conversion is expected to occur before the end of
the third quarter. During the quarter ended June 30, 1997 a one-time charge was
made for these expenses which totaled $744,000.
6. Subsequent events - On July 2, 1997, five Taco Cabana restaurant properties
and one regional chain restaurant property were purchased for a total purchase
price of $6,472,000 in two separate transactions. These purchase prices are
exclusive of the 1% paid to the managing general partner and other closing
costs.
On July 25, 1997, one El Chico restaurant property was purchased for $1,250,000.
This purchase price is exclusive of the 1% paid to the managing general partner
and other closing costs.
On July 28, 1997, a distribution of $0.525 per partnership unit was declared.
The record date for such distribution is September 5, 1997 and the distribution
date is September 12, 1997.
On July 30, 1997, the Partnership sold 172,882 units in one private placement
for net proceeds of $4,750,000. The issuance was to a single investor with a
private placement agreement to purchase $19,000,000 in partnership units over a
one year period. This purchase represented the fulfillment of that commitment.
On July 31, 1997, 14 Burger King restaurants properties, three Pizza Hut
restaurants properties, two Wendy's restaurants properties, two Hardee's
restaurants properties and 14 other regional chain restaurants properties were
purchased in three separate transactions for a total purchase price of
$23,492,000, including the value of 335,218 partnership units issued as part of
the total purchase price. The partnership units issued are guaranteed to have a
market value of $36.00 per unit two years from the transaction date. These
purchase prices are exclusive of the 1% paid to the managing general partner and
other closing costs.
On August 7, 1997, one Burger King restaurant property was sold for $640,000 in
cash.
Page 11 of 16
<PAGE>
7. Pro Forma (unaudited) - Since January 1, 1996, the Company has acquired 315
properties. The pro forma operating results assuming these properties were
purchased as of January 1, 1996 is as follows.
The pro forma information was prepared by adjusting the actual consolidated
results of the Partnerships for the six month period ended June 30, 1997 and
1996 for the effects of the 1996 and 1997 acquisitions as if all acquisitions
and related financing transactions including the sale of limited partnership
units occurred on January 1, 1996.
These pro forma operating results are not necessarily indicative of what the
actual results of operations of the Company would have been assuming all of the
properties were acquired as of January 1, 1996 and do not purport to represent
the results of operations for future periods.
<TABLE>
<CAPTION>
Six Months ended June 30,
-------------------------------
1997 1996
---------------- -------------
<S> <C> <C>
Revenues from leased properties:
Rental income $ 16,770 $ 16,795
Amortization of unearned income on direct
financing leases 857 1,026
---------- ----------
Total Revenues 17,627 17,821
Expenses:
Rent 1,189 1,132
Depreciation and amortization 4,432 4,432
Taxes, general and administrative 2,236 1,664
Interest expense, net 4,549 4,860
---------- ----------
Total Expenses 12,406 12,088
---------- ----------
Income before unusual items 5,221 5,733
Gain on sale of property 266 0
REIT conversion costs (744) 0
---------- ----------
Net income $ 4,743 $ 5,733
========== ==========
Net income allocable to unitholders $ 4,649 $ 5,619
========== ==========
Average number of outstanding units (Primary) 7,985 7,985
========== ==========
Net income per unit $0.58 $0.70
========== ==========
</TABLE>
Page 12 of 16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations.
Revenues for the three months ended June 30, 1997 totaled $8,391,000, an
increase of 95 percent from the $4,309,000 recorded for the three months ended
June 30, 1996. Such revenues for the six months ended June 30, 1997 totaled
$14,544,000, an increase of 100 percent from the $7,264,000 recorded for the six
months ended June 30, 1996. The increase in revenues is primarily due to an
increase in the number of the Company's restaurant properties. Since January 1,
1996 the Company has purchased 315 new restaurant properties. In addition,
straight-lining of escalating rent for the six months ended June 30, 1997
contributed to a 4 percent increase in total revenue as compared to a 2 percent
contribution for the six months ended June 30, 1996.
Net income for the three months ended June 30, 1997 totaled $2,147,000, an
increase of 15 percent from the $1,862,000 recorded for the three months ended
June 30, 1996. Net income for the six months ended June 30, 1997 totaled
$4,099,000, an increase of 29 percent from the $3,184,000 recorded for the six
months ended June 30, 1996. Net income for the three months ended June 30, 1997
was affected by two unusual items. These include a gain from the sale of one
property of $266,000 that partially offset the one-time expense of $744,000
associated with the conversion to a self-advised REIT (Real Estate Investment
Trust).
Taxes, general and administrative expenses for the three months ended June 30,
1997 increased $744,000 as compared to the three months ended June 30 1996. Such
expenses for the six months ended June 30, 1997 increased $1,136,000 as compared
to the six months ended June 30, 1996. The primary reason for the increase is
the fee paid to the managing general partner. The fee paid to the managing
general partner increased $344,000 for the three months ended June 30, 1997 and
$515,000 for the six months ended June 30, 1997 as compared to the same periods
in 1996. Other expense increases relate to an increase in the number of
employees and other costs associated with the increase in properties under
contract and the growth of the company.
Depreciation and amortization expenses for the three months ended June 30, 1997
totaled $1,800,000, an increase of 114 percent from the $841,000 recorded for
the same period in 1996. Such depreciation and amortization expense for the six
months ended June 30, 1997 totaled $3,366,000, an increase of 145 percent from
the $1,375,000 recorded for the six months ended June 30, 1996. These increases
directly correlate to the property acquisitions made since June 30, 1996.
Rent expense for the three months ended June 30, 1997 totaled $600,000, an
increase of 23 percent from the $486,000 recorded for the three months ended
June 30, 1996. Such rent expense for the six months ended June 30, 1997 totaled
$1,189,000, an increase of 33 percent from the $897,000 recorded for the six
months ended June 30, 1996. The increase in rent expense directly correlates to
the property acquisitions.
Interest expense, net of interest income of $166,000, for the three months ended
June 30, 1997 totaled $2,141,000 compared to $639,000, net of interest income of
$39,000 for the three months ended June 30, 1996. Such interest expense, net of
interest income of $278,000, for the six months ended June 30, 1997 totaled
$3,425,000 compared to $957,000, net of interest income of $53,000, recorded for
the six months ended June 30, 1996. The increase in interest expense directly
correlates to the additional debt associated with the property acquisitions.
Page 13 of 16
<PAGE>
Liquidity and Capital Resources.
For the six months ended June 30, 1997 cash flows from operating activities
equaled $7,693,000, the Company's net borrowings under its line of credit and
long-term debt amounted to $62,827,000 and the Company received $21,025,000 from
the sale of the Company's partnership units. These cash proceeds were used
primarily to fund cash distributions of $7,639,000 and to pay the $81,005,000
cash portion of the property acquisitions for the six months ended June 30,
1997. At this time the Company believes it has adequate liquidity for operations
as well as to fund additional property purchases.
On June 30, 1997 the balance available on the Company's $110,000,000 credit line
facility equaled $17,287,000.
Page 14 of 16
<PAGE>
Part II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K
a) A report on Form 8-K/A dated March 31, 1997 was filed with the
Securities and Exchange Commission on May 30, 1997, reporting
financial information regarding the acquisition of restaurant
properties.
b) 10.1 Note Purchase Agreement of U.S. Restaurant Properties Operating
L.P. dated as of January 31, 1997, filed as Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1996 and incorporated herein by reference.
c) 11.1 Computation of Net Income per Unit
Page 15 of 16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. RESTAURANT PROPERTIES MASTER L.P.
By QSV PROPERTIES, INC.
Managing General Partner
Dated: August 12, 1997 By /s/ Robert J. Stetson
--------------------------------
Robert J. Stetson
President, Chief Executive Officer
Page 16 of 16
Exhibit 11.1
U.S. RESTAURANT PROPERTIES MASTER L.P.
COMPUTATION OF NET INCOME PER UNIT
($000's, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------- -----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 2,147 $ 1,862 $ 4,099 $ 3,184
Net income applicable to general partner (42) (37) (81) (63)
--------- --------- --------- ---------
Net income applicable to unitholders (1) $ 2,105 $ 1,825 $ 4,018 $ 3,121
========= ========= ========= =========
Net income per unit - Primary $ 0.27 $ 0.33 $ 0.54 $ 0.60
========= ========= ========= =========
Net income per unit - Fully Diluted (2) $ 0.27 $ 0.33 $ 0.54 $ 0.59
========= ========= ========= =========
Weighted average number of units outstanding
Primary:
Weighted average number of units, excluding
equivalents 7,623 5,363 7,270 5,095
Dilutive effect of outstanding options 137 149 139 114
--------- --------- --------- ---------
Primary weighted average units outstanding 7,760 5,512 7,409 5,209
========= ========= ========= =========
Fully Diluted (2):
Weighted average units outstanding, excluding
equivalents 7,623 5,363 7,270 5,095
Dilutive effect of outstanding options 143 164 149 164
--------- --------- --------- ---------
Fully diluted weighted average units outstanding 7,766 5,527 7,419 5,259
========= ========= ========= =========
</TABLE>
(1) Income allocable to unitholders represents 98.02 % of net income
(2) This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083, although not required by APB Opinion No. 15,
because it results in dilution of less than three percent.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,777
<SECURITIES> 0
<RECEIVABLES> 2,480
<ALLOWANCES> 140
<INVENTORY> 0
<CURRENT-ASSETS> 7,268
<PP&E> 151,297
<DEPRECIATION> 8,256
<TOTAL-ASSETS> 261,515
<CURRENT-LIABILITIES> 3,261
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 261,515
<SALES> 0
<TOTAL-REVENUES> 14,544
<CGS> 0
<TOTAL-COSTS> 1,189
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,425
<INCOME-PRETAX> 4,869
<INCOME-TAX> 26
<INCOME-CONTINUING> 4,843
<DISCONTINUED> 0
<EXTRAORDINARY> 744
<CHANGES> 0
<NET-INCOME> 4,099
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
