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 September 30, 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
Commission file number 0-16721
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 1. FINANCIAL STATEMENTS.
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 2,230,931 $ 2,402,680
RECEIVABLES FROM LESSEES 172,000 161,608
SECURED NOTES RECEIVABLE 78,232 100,569
DEFERRED COSTS 161,123 --
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 12,588,015 12,253,903
------------ ------------
22,261,035 24,815,472
------------ ------------
Total assets $ 24,903,321 $ 27,480,329
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 1,367,549 $ 1,366,497
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 28,673 52,297
PAYABLE TO GENERAL PARTNER (Note 1) 101,574 --
RENTAL DEPOSITS 114,400 114,400
------------ ------------
Total liabilities 1,612,196 1,533,194
------------ ------------
MINORITY INTEREST (15,408) (16,239)
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (163,915) (171,205)
Limited partners 23,470,448 26,134,579
------------ ------------
Total partners' capital 23,306,533 25,963,374
------------ ------------
Total liabilities and partners' capital $ 24,903,321 $ 27,480,329
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/98 9/30/97 9/30/98 9/30/97
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental $ 994,099 $ 1,072,248 $ 3,026,024 $ 3,216,742
Participating rentals 531,026 529,171 1,476,536 1,421,282
Interest and other 29,444 28,033 111,884 82,666
Gain on sale of property -- -- 1,725,741 --
------------ ------------ ----------- -----------
1,554,569 1,629,452 6,340,185 4,720,690
------------ ------------ ----------- -----------
EXPENSES:
General partner fees 136,570 142,900 504,251 412,855
Depreciation 296,727 329,133 894,394 987,401
Operating 35,593 40,058 135,670 128,734
------------ ------------ ----------- -----------
468,890 512,091 1,534,315 1,528,990
------------ ------------ ----------- -----------
MINORITY INTEREST
IN INCOME 1,239 1,285 5,411 3,685
------------ ------------ ----------- -----------
NET INCOME $ 1,084,440 $ 1,116,076 $ 4,800,459 $ 3,188,015
============ ============ =========== ===========
NET INCOME ALLOCATED TO:
General partner $ 10,844 $ 11,161 $ 48,005 $ 31,880
Limited partners 1,073,596 1,104,915 4,752,454 3,156,135
------------ ------------ ----------- -----------
$ 1,084,440 $ 1,116,076 $ 4,800,459 $ 3,188,015
============ ============ =========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
51,687 units held by limited partners) $ 20.77 $ 21.38 $ 91.95 $ 61.06
============ ============ =========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 48,005 -- 4,752,454 4,800,459
Return of capital -- -- (3,385,784) (3,385,784)
Distributions to partners (40,715) -- (4,030,801) (4,071,516)
------------ ------------ ------------ ------------
BALANCE, September 30, 1998 $ (163,915) 51,687 $ 23,470,448 $ 23,306,533
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,800,459 $ 3,188,015
Adjustments to net income:
Depreciation 894,394 987,401
Gain on sale of property (1,725,741) --
Minority interest in income 5,411 3,685
Change in assets and liabilities:
Increase in receivables from lessees (10,392) (28,915)
Increase in deferred costs (161,123) --
Increase (decrease) in payable to general partner 101,574 (10,304)
Decrease in accounts payable and
accrued liabilities (23,624) (44)
----------- -----------
Net cash provided by operating activities 3,880,958 4,139,838
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 3,385,784 --
Principal collections on secured notes receivable 22,337 22,776
----------- -----------
Net cash provided by investing activities 3,408,121 22,776
----------- -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (4,071,516) (4,174,427)
Return of capital to limited partners declared (3,385,784) --
Increase in distribution payable 1,052 109,367
Distributions to minority interest (4,580) (4,673)
----------- -----------
Net cash used in financing activities (7,460,828) (4,069,733)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (171,749) 92,881
CASH AND CASH EQUIVALENTS, beginning of period 2,402,680 2,346,371
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,230,931 $ 2,439,252
=========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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
---------------------------------------------
On February 2, 1998, Participating Income Properties 1986, L.P. a Delaware
limited partnership, (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. Subsequently, the Registrant
entered into purchase agreements with respect thereto on September 4,
1998. In accordance with the partnership agreement, sale of substantially
all of the assets would result in dissolution of the partnership and
liquidation of the Registrant's remaining assets, net of liabilities. The
limited partners have received a proxy statement describing the proposed
transaction and were asked to consent to the proposed transaction by
October 26, 1998. The following is a summary of the results of the voting:
32,591 units For, 4,124 units Against, 1,354 units Abstain. An affirmative
vote of limited partners holding a majority of the partnership units was
achieved. In addition to the majority vote, certain other conditions and
contingencies must now be satisfied prior to the consummation of the sale
transaction as set forth in the letter of intent between the Registrant
and Flying J. Inc. Among these conditions are the finalization of
financing arrangements by Flying J. Inc. in order for it to complete the
purchase of the assets of the Registrant. The sale and subsequent
liquidation of the Registrant will occur as soon as practical if, and to
the extent that, all conditions and contingencies have been satisfied or
waived. There can be no assurance as to whether or when the transaction
will be consummated.
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
were 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 $1,367,062 for the quarter ended September 30, 1998
(the period), which, combined with the first and second quarter
distributions of $2,663,739 amounts to $4,030,801 year-to-date. 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).
During the quarter ended September 30, 1998, base rental revenue from the
travel plaza leases decreased to $994,099 from the prior period amount of
$1,072,248 due to the February 1998 sale of the Boise, Idaho travel plaza
(base rental revenue for the nine month period was similarly affected).
The Registrant received or accrued participating rentals of $531,026 for
the period representing a slight increase over participating rentals of
$529,171 for the comparable period of the prior year. Participating rental
revenue increased, despite the sale of the Boise, Idaho travel plaza in
February 1998, due to increased volume at the remaining travel plaza
properties. Participating rentals for the corresponding year-to-date
periods were
<PAGE>
similarly affected. Total revenues during the nine months ended September
30, 1998 increased by $1,619,495 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 nine month period which
resulted in an increase in interest and other income of $29,218 over the
comparable nine month period in 1997. For the quarter ended September 30,
1998, total expenses decreased by $43,201 due to a decrease in
depreciation expense related to the sale of travel plaza property.
Year-to-date total expenses increased by $5,325 primarily due to the
accrual of the general partner's subordinated disposition fee described
above, mostly offset by a decrease in depreciation expense related to the
sale of travel plaza property.
The decrease in total assets reflected in the Registrant's financial
statements filed with this Report is mainly attributable to the sale of
the Boise, Idaho travel plaza and the distribution to the limited partners
of the cash proceeds from the sale, and also to the depreciation
allowance, which is deducted for accounting purposes from the cost of the
assets on the Registrant's books.
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 - SEPTEMBER 30, 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: October 30, 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: October 30, 1998 By /s/ John Barravecchia
------------------------------------------
John Barravecchia, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND
THE STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,230,931
<SECURITIES> 0
<RECEIVABLES> 250,232
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 34,849,050
<DEPRECIATION> 12,588,015
<TOTAL-ASSETS> 24,903,321
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,306,533
<TOTAL-LIABILITY-AND-EQUITY> 24,903,321
<SALES> 0
<TOTAL-REVENUES> 6,340,185
<CGS> 0
<TOTAL-COSTS> 1,534,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,800,459
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,800,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,800,459
<EPS-PRIMARY> 91.95
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<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>
