UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
-------------------------------------------------
[ ] 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
0-16720
PARTICIPATING INCOME PROPERTIES 1986, L.P.
and
FFCA INVESTOR SERVICES CORPORATION 86-B
- --------------------------------------------------------------------------------
(Exact Name of Co-Registrants as Specified in Their
Organizational Documents)
Delaware 86-0570015
- --------------------------------------------------------------------------------
(Partnership State of Organization) (Partnership I.R.S. Employer
Identification Number)
Delaware 86-0557949
- --------------------------------------------------------------------------------
(Corporation State of Incorporation) (Corporation I.R.S. Employer
Identification Number)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Co-Registrants' telephone number including area code (602) 585-4500
----------------------------
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
----- -----
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item l. Financial Statements.
------ --------------------
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
------
CASH AND CASH EQUIVALENTS $ 5,786,675 $ 2,402,680
RECEIVABLES FROM LESSEES 151,608 161,608
SECURED NOTES RECEIVABLE 92,390 100,569
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land 5,766,190 6,773,272
Buildings 28,456,079 29,669,322
Equipment 626,781 626,781
------------ ------------
34,849,050 37,069,375
Less - Accumulated depreciation 11,994,561 12,253,903
------------ ------------
22,854,489 24,815,472
------------ ------------
Total assets $ 28,885,162 $ 27,480,329
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 4,730,901 $ 1,366,497
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 53,707 52,297
PAYABLE TO GENERAL PARTNER (Note 1) 101,574 --
RENTAL DEPOSITS 114,400 114,400
------------ ------------
Total liabilities 5,000,582 1,533,194
------------ ------------
MINORITY INTEREST (14,815) (16,239)
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (157,986) (171,205)
Limited partners 24,057,381 26,134,579
------------ ------------
Total partners' capital 23,899,395 25,963,374
------------ ------------
Total liabilities and partners' capital $ 28,885,162 $ 27,480,329
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
---------- ----------
REVENUES:
Rental $1,037,825 $1,072,247
Participating rentals 460,326 413,241
Interest and other 47,544 26,152
Gain on sale of property 1,725,741 --
---------- ----------
3,271,436 1,511,640
---------- ----------
EXPENSES:
General partner fees (Note 1) 235,910 131,523
Depreciation 300,940 329,134
Operating 51,537 48,777
---------- ----------
588,387 509,434
---------- ----------
MINORITY INTEREST IN INCOME 2,957 1,168
---------- ----------
NET INCOME $2,680,092 $1,001,038
========== ==========
NET INCOME ALLOCATED TO:
General partner $ 26,801 $ 10,010
Limited partners 2,653,291 991,028
---------- ----------
$2,680,092 $1,001,038
========== ==========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(based on 51,687 units held by limited partners) $ 51.33 $ 19.17
========== ==========
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
General ---------------------------
Partner Number Total
Amount of Units Amount Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ (171,205) 51,687 $ 26,134,579 $ 25,963,374
Net income 26,801 -- 2,653,291 2,680,092
Distribution to partners,
cash from operations (13,582) -- (1,344,705) (1,358,287)
Return of capital to
limited partners -- -- (3,385,784) (3,385,784)
------------ ------------ ------------ ------------
BALANCE, March 3l, 1998 $ (157,986) 51,687 $ 24,057,381 $ 23,899,395
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,680,092 $ 1,001,038
Adjustments to net income:
Depreciation 300,940 329,134
Gain on sale of property (1,725,741) --
Minority interest in income 2,957 1,168
Change in assets and liabilities:
Decrease in receivables from lessees 10,000 5,106
Increase in payable to general partner 101,574 4,517
Increase (decrease) in accounts payable
and accrued liabilities 1,410 (2,086)
----------- -----------
Net cash provided by operating activities 1,371,232 1,338,877
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 3,385,784 --
Principal collections on secured notes receivable 8,179 7,403
----------- -----------
Net cash provided by investing activities 3,393,963 7,403
----------- -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (1,358,287) (1,329,843)
Return of capital to limited partners declared (3,385,784) --
Increase (decrease) in distribution payable 3,364,404 (4,575)
Distribution to minority interest (1,533) (1,497)
----------- -----------
Net cash used in financing activities (1,381,200) (1,335,915)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,383,995 10,365
CASH AND CASH EQUIVALENTS, beginning of period 2,402,680 2,346,371
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 5,786,675 $ 2,356,736
=========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
--------------------------------------------------------
Note to Consolidated Financial Statements
-----------------------------------------
March 31, 1998
--------------
1) TRANSACTIONS WITH RELATED PARTIES:
---------------------------------
A subordinated real estate disposition fee equal to three percent of
the selling price on the disposition of any real property (subject to certain
limitations) is payable to FFCA Management Company Limited Partnership (the
general partner of Participating Income Properties 1986, L.P. (the Partnership))
only after the limited partners have received an amount equal to their Adjusted
Capital Contribution, as defined, and a cumulative, non-compounded return of 10%
per annum on their Adjusted Capital Contribution. A subordinated real estate
disposition fee amounting to $101,574 has been accrued by the Partnership
representing three percent of the selling price of the Boise Idaho travel plaza,
which was sold in February 1998 for a cash sales price of $3,385,784.
<PAGE>
PART I - FINANCIAL INFORMATION
- --------------------------------
Item 2. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations
---------------------------------------------
As of March 31, 1998, Participating Income Properties 1986, L.P., a
Delaware limited partnership, (the Registrant), had received $51,687,000
in gross proceeds from its offering of Units. Net funds available for
investment, after payment of sales commissions, organization costs and
acquisition fees, amounted to $45,232,790. The offering of Units is the
Registrant's sole source of capital, and since the final closing of
limited partnership units was held on April 16, 1987, the Registrant will
not receive additional funds from the offering. The Registrant was fully
invested in eleven travel plaza properties by September 1988 and does not
anticipate any further capital expenditures.
On February 2, 1998, the Registrant entered into a letter of intent with
Flying J. Inc. to sell substantially all of the Registrant's assets for
cash of approximately $52 million. The sale is subject to certain
conditions specified in the letter of intent, including the negotiation
and execution of definitive sale and financing agreements with respect to
the assets of the Registrant and the approval, by vote, of a majority of
the limited partner interests. In accordance with the partnership
agreement, sale of substantially all of the assets will result in
dissolution of the Registrant and liquidation of remaining Registrant
assets, net of liabilities. There can be no assurance as to the final
terms of the proposed transaction, that the conditions will be satisfied
or that the proposed transaction will be consummated. The limited partners
will receive a proxy statement containing a complete description of the
transaction when the sale and financing agreements are finalized.
In February 1998, the Registrant sold the Boise, Idaho travel plaza (the
Boise Plaza) to CFJ Properties for a cash sales price of $3,385,784. The
above-negotiated sale price of approximately $52 million originally
included the Boise Plaza and since this travel plaza was sold, the $52
million sale price will be reduced by approximately $3.4 million. Proceeds
from the Boise Plaza sale were $65.50 per limited partnership unit and
will be distributed to the limited partners in April 1998 as a partial
return of their adjusted capital contribution. The Registrant accrued a
subordinated real estate disposition fee equal to three percent of the
selling price of the Boise, Idaho travel plaza (amounting to $101,574)
payable to the general partner of the Registrant.
The Registrant also declared a cash distribution from operations to the
limited partners of $1,344,705 for the quarter ended March 31, 1998 (the
period). During the period, all net proceeds not invested in real estate
were invested in Government Agency discount notes and bank repurchase
agreements (which are secured by United States Treasury and Government
obligations).
Total revenues during the period increased $1,759,796 primarily due to the
gain on the sale of the Boise, Idaho travel plaza of $1,725,741. Proceeds
from the sale generated a higher average cash balance during the period
which resulted in an increase in interest and other income of $21,392 over
the comparable period in 1997. During the period, base rental revenue from
the travel plaza leases decreased to $1,037,825 from the prior period
amount of $1,072,247 due to the February 1998 sale of the Boise, Idaho
travel plaza. The Registrant received or accrued participating rentals of
$460,326 for the period representing an increase over participating
rentals of $413,241 for the comparable period of the prior year. On June
1, 1996, CFJ Properties (a lessee of the Registrant's travel plazas)
curtailed its relationship with a large third party billing company for
the trucking industry. The billing company requested changes to its
contract that were unacceptable to CFJ Properties' management due to the
significant long-term ramifications of the proposed change on CFJ
Properties' future business. This resulted in reduced volume and margins,
which contributed to low participating rental revenues in the quarter
ended March 31, 1997 as compared to the quarter ended March 31, 1998. For
the quarter ended March 31, 1998, total expenses increased by $78,953
primarily due to the accrual of the general partner's subordinated
disposition fee described above, offset by a decrease in depreciation
expense related to the sale of travel plaza property.
<PAGE>
The increase in total assets reflected in the Registrant's financial
statements filed with this Report is mainly attributable to the cash
proceeds received from the sale of the Boise, Idaho travel plaza (in
excess if its depreciated cost) being held in temporary investment
securities pending distribution to the limited partners.
In the opinion of management, the financial information included in this
report reflects all adjustments necessary for fair presentation. All such
adjustments are of a normal recurring nature.
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 86-B
---------------------------------------
BALANCE SHEET - MARCH 31, 1998
------------------------------
ASSETS
Cash $100
Investment in Participating Income Properties 1986, L.P., at cost 100
----
Total Assets $200
====
LIABILITY
Payable to Parent $100
----
STOCKHOLDER'S EQUITY
Common Stock; $l par value; 100 shares authorized,
issued and outstanding 100
----
Liability and Stockholder's Equity $200
====
Note: FFCA Investor Services Corporation 86-B (86-B) was organized on June 23,
1986 to act as the assignor limited partner in Participating Income Properties
1986, L.P. (PIP-86).
The assignor limited partner is the owner of record of the limited
partnership units of PIP-86. All rights and powers of 86-B have been assigned to
the holders, who are the registered and beneficial owners of the units. Other
than to serve as assignor limited partner, 86-B has no other business purpose
and will not engage in any other activity or incur any debt.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
PARTICIPATING INCOME PROPERTIES 1986, L.P.
By FFCA MANAGEMENT COMPANY LIMITED
PARTNERSHIP
General Partner
By PERIMETER CENTER MANAGEMENT COMPANY
Corporate General Partner
Date: May 11, 1998 By /s/ John Barravecchia
--------------------------------------------------
John Barravecchia, Chief Financial Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FFCA INVESTOR SERVICES CORPORATION 86-B
Date: May 11, 1998 By /s/ John Barravecchia
-----------------------------------------------------
John Barravecchia, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND THE STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 797977
<NAME> PARTICIPATING INCOME PROPERTIES 1986, L.P.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 5,786,675
<SECURITIES> 0
<RECEIVABLES> 243,998
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 34,849,050
<DEPRECIATION> 11,994,561
<TOTAL-ASSETS> 28,885,162
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,000,969
<TOTAL-LIABILITY-AND-EQUITY> 28,885,162
<SALES> 0
<TOTAL-REVENUES> 3,271,436
<CGS> 0
<TOTAL-COSTS> 486,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,781,666
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,781,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,781,666
<EPS-PRIMARY> 53.28
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
BALANCE SHEET.
</LEGEND>
<CIK> 797978
<NAME> FFCA INVESTOR SERVICES CORPORATION 86-B
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 200
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
