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 June 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 l. Financial Statements.
------- ---------------------
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
------
CASH AND CASH EQUIVALENTS $ 2,354,699 $ 2,402,680
RECEIVABLES FROM LESSEES 157,000 161,608
SECURED NOTES RECEIVABLE 84,729 100,569
DEFERRED COSTS 13,146 --
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 12,291,288 12,253,903
------------ ------------
22,557,762 24,815,472
------------ ------------
Total assets $ 25,167,336 $ 27,480,329
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 1,319,539 $ 1,366,497
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 43,969 52,297
PAYABLE TO GENERAL PARTNER (Note 1) 101,574 --
RENTAL DEPOSITS 114,400 114,400
------------ ------------
Total liabilities 1,579,482 1,533,194
------------ ------------
MINORITY INTEREST (15,112) (16,239)
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (160,949) (171,205)
Limited partners 23,763,915 26,134,579
------------ ------------
Total partners' capital 23,602,966 25,963,374
------------ ------------
Total liabilities and partners' capital $ 25,167,336 $ 27,480,329
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
6/30/98 6/30/97 6/30/98 6/30/97
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Rental $ 994,100 $1,072,248 $2,031,925 $2,144,495
Participating rentals 485,184 478,870 945,510 892,111
Interest and other 34,896 28,480 82,440 54,632
Gain on sale of property -- -- 1,725,741 --
---------- ---------- ---------- ----------
1,514,180 1,579,598 4,785,616 3,091,238
---------- ---------- ---------- ----------
EXPENSES:
General partner fees 131,771 138,432 367,681 269,955
Depreciation 296,727 329,134 597,667 658,268
Operating 48,540 39,899 100,077 88,676
---------- ---------- ---------- ----------
477,038 507,465 1,065,425 1,016,899
---------- ---------- ---------- ----------
MINORITY INTEREST
IN INCOME 1,215 1,232 4,172 2,400
---------- ---------- ---------- ----------
NET INCOME $1,035,927 $1,070,901 $3,716,019 $2,071,939
========== ========== ========== ==========
NET INCOME ALLOCATED TO:
General partner $ 10,359 $ 10,709 $ 37,160 $ 20,719
Limited partners 1,025,568 1,060,192 3,678,859 2,051,220
---------- ---------- ---------- ----------
$1,035,927 $1,070,901 $3,716,019 $2,071,939
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
51,687 units held by limited partners) $ 19.84 $ 20.51 $ 71.18 $ 39.69
========== ========== ========== ==========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 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 37,160 -- 3,678,859 3,716,019
Distribution to partners,
cash from operations (26,904) -- (2,663,739) (2,690,643)
Return of capital to
limited partners -- -- (3,385,784) (3,385,784)
------------ ------------ ------------ ------------
BALANCE, June 30, 1998 $ (160,949) 51,687 $ 23,763,915 $ 23,602,966
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,716,019 $ 2,071,939
Adjustments to net income:
Depreciation 597,667 658,268
Gain on sale of property (1,725,741) --
Minority interest in income 4,172 2,400
Change in assets and liabilities:
Decrease (increase) in receivables from lessees 4,608 (15,594)
Increase in deferred costs (13,146) --
Increase (decrease) in payable to general partner 101,574 (10,304)
Decrease in accounts payable and
accrued liabilities (8,328) (4,953)
----------- -----------
Net cash provided by operating activities 2,676,825 2,701,756
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 3,385,784 --
Principal collections on secured notes receivable 15,840 14,994
----------- -----------
Net cash provided by investing activities 3,401,624 14,994
----------- -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (2,690,643) (2,729,546)
Return of capital to limited partners declared (3,385,784) --
Increase (decrease) in distribution payable (46,958) 64,663
Distributions to minority interest (3,045) (3,058)
----------- -----------
Net cash used in financing activities (6,126,430) (2,667,941)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (47,981) 48,809
CASH AND CASH EQUIVALENTS, beginning of period 2,402,680 2,346,371
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,354,699 $ 2,395,180
=========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE
--------------------------------------------------------
Note to Consolidated Financial Statements
-----------------------------------------
June 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
---------------------------------------------
As of June 30, 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 the Registrant's
remaining 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 proposed transaction.
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 $1,319,034 for the quarter ended June 30, 1998 (the
period), which, combined with the first quarter distribution of $1,344,705
amounts to $2,663,739 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).
Total revenues during the six months ended June 30, 1998 increased
$1,694,378 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 six month period which resulted in an
increase in interest and other income of $27,808 over the comparable six
month period in 1997. During the quarter ended June 30, 1998, base rental
revenue from the travel plaza leases decreased to $994,100 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 six month period was
similarly affected). The Registrant received or accrued participating
rentals of $485,184 for the period representing an increase over
participating rentals of $478,870 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 June 30, 1997 as compared to the quarter ended June 30, 1998.
Participating rentals for the corresponding year-to-date periods were
similarly affected, although to a greater extent. For the quarter ended
June 30,
<PAGE>
1998, total expenses decreased by $30,427 due to a decrease in
depreciation expense related to the sale of travel plaza property.
Year-to-date total expenses increased by $48,526 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.
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.
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 - JUNE 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: August 3, 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: August 3, 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
JUNE 30, 1998 AND THE STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,354,699
<SECURITIES> 0
<RECEIVABLES> 241,729
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 34,849,050
<DEPRECIATION> 12,291,288
<TOTAL-ASSETS> 25,167,336
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,602,966
<TOTAL-LIABILITY-AND-EQUITY> 25,167,336
<SALES> 0
<TOTAL-REVENUES> 4,785,616
<CGS> 0
<TOTAL-COSTS> 1,065,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,716,019
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,716,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,716,019
<EPS-PRIMARY> 71.18
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF
JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-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>
