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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 0-18504
Commission file number 0-18512
PARTICIPATING INCOME PROPERTIES II, L.P.
and
FFCA INVESTOR SERVICES CORPORATION 88-C
- --------------------------------------------------------------------------------
(Exact Name of Co-Registrants as Specified in Their
Organizational Documents)
Delaware 86-0588505
- --------------------------------------------------------------------------------
(Partnership State of Organization) (Partnership I.R.S. Employer
Identification Number)
Delaware 86-0588507
- --------------------------------------------------------------------------------
(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 II, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 3,844,492 $ 3,984,265
RECEIVABLES FROM LESSEES 215,000 197,300
DEFERRED COSTS 169,880 --
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land 11,709,570 11,709,570
Buildings 54,004,577 54,004,577
Equipment 3,832,921 3,832,921
------------ ------------
69,547,068 69,547,068
Less - Accumulated depreciation 22,596,287 20,814,945
------------ ------------
46,950,781 48,732,123
------------ ------------
Total assets $ 51,180,153 $ 52,913,688
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 2,215,092 $ 2,132,357
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 37,078 72,006
DEFERRED INCOME 388,586 594,251
------------ ------------
Total liabilities 2,640,756 2,798,614
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partners (233,184) (217,427)
Limited partners 48,772,581 50,332,501
------------ ------------
Total partners' capital 48,539,397 50,115,074
------------ ------------
Total liabilities and partners' capital $ 51,180,153 $ 52,913,688
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
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 $ 1,865,905 $ 1,865,905 $ 5,597,715 $ 5,597,715
Participating rentals 663,497 610,885 1,867,999 1,761,110
Interest and other 44,400 43,892 133,885 142,650
Gain on sale of equipment -- 27,350 -- 29,488
------------ ------------ ----------- -----------
2,573,802 2,548,032 7,599,599 7,530,963
------------ ------------ ----------- -----------
EXPENSES:
General partner and
affiliate fees 221,223 216,424 650,829 642,774
Depreciation 573,268 739,229 1,781,342 2,261,768
Operating 47,214 47,421 162,504 153,879
------------ ------------ ----------- -----------
841,705 1,003,074 2,594,675 3,058,421
------------ ------------ ----------- -----------
NET INCOME $ 1,732,097 $ 1,544,958 $ 5,004,924 $ 4,472,542
============ ============ =========== ===========
NET INCOME ALLOCATED TO:
General partners $ 17,321 $ 15,450 $ 50,049 $ 44,725
Limited partners 1,714,776 1,529,508 4,954,875 4,427,817
------------ ------------ ----------- -----------
$ 1,732,097 $ 1,544,958 $ 5,004,924 $ 4,472,542
============ ============ =========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
82,834 units held by limited partners) $ 20.70 $ 18.46 $ 59.82 $ 53.45
============ ============ =========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
General ---------------------------
Partners Number Total
Amount of Units Amount Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ (217,427) 82,834 $ 50,332,501 $ 50,115,074
Net income 50,049 -- 4,954,875 5,004,924
Distributions to partners (65,806) -- (6,514,795) (6,580,601)
------------ ------------ ------------ ------------
BALANCE, September 30, 1998 $ (233,184) 82,834 $ 48,772,581 $ 48,539,397
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
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 $ 5,004,924 $ 4,472,542
Adjustments to net income:
Depreciation 1,781,342 2,261,768
Gain on sale of equipment -- (29,488)
Change in assets and liabilities:
Increase in receivables from lessees (17,700) (29,172)
Increase in deferred costs (169,880) --
Decrease in payable to general partners -- (18,239)
Increase (decrease) in accounts payable and
accrued liabilities (34,928) 1,812
Decrease in deferred income (205,665) (205,665)
----------- -----------
Net cash provided by operating activities 6,358,093 6,453,558
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment -- 179,500
CASH FLOWS FOR FINANCING ACTIVITIES:
Distributions to partners (6,497,866) (6,407,591)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (139,773) 225,467
CASH AND CASH EQUIVALENTS, beginning of period 3,984,265 3,790,885
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 3,844,492 $ 4,016,352
=========== ===========
</TABLE>
<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 II, 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 $80 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:
46,619 units For, 4,679 units Against, 1,942 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.
The Registrant declared a cash distribution to the limited partners of
$2,214,442 for the quarter ended September 30, 1998 (the period) which,
combined with the first and second quarter distributions of $4,300,353,
amounts to $6,514,795 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 period, the Registrant received base rental revenue pursuant to
its lease arrangements in the amount of $1,865,905, unchanged from the
comparable period of the prior year (year-to-date base rental revenues are
similarly unchanged). Base rental revenue for the period includes the
recognition of approximately $69,000 of income previously deferred. In
addition, the Registrant received or accrued participating rentals of
$663,497 for the period representing an increase over participating
rentals of $610,885 for the comparable period in 1997. The increase was
due to increased volumes at the travel plaza properties. Participating
rentals for the corresponding year-to-date periods were similarly
affected. Total expenses decreased by $161,369 during the period ($463,746
year-to-date) as compared to the prior periods due to a decrease in
depreciation expense related to the sale of travel plaza equipment in the
last twelve months.
The decrease in total assets reflected in the Registrant's financial
statements filed with this report is mainly attributable 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 88-C
BALANCE SHEET - SEPTEMBER 30, 1998
ASSETS
Cash $100
Investment in Participating Income Properties II, 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 88-C (88-C) was organized on August 11,
1987 to act as the assignor limited partner in Participating Income Properties
II, L.P. (PIP-II).
The assignor limited partner is the owner of record of the limited
partnership units of PIP-II. All rights and powers of 88-C have been assigned to
the holders, who are the registered and beneficial owners of the units. Other
than to serve as assignor limited partner, 88-C 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 II, L.P.
By FRANCHISE FINANCE CORPORATION OF AMERICA II
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 88-C
Date: October 30, 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 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> 820806
<NAME> PARTICIPATING INCOME PROPERTIES II, 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> 3,844,492
<SECURITIES> 0
<RECEIVABLES> 215,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 69,547,068
<DEPRECIATION> 22,596,287
<TOTAL-ASSETS> 51,180,153
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 48,539,397
<TOTAL-LIABILITY-AND-EQUITY> 51,180,153
<SALES> 0
<TOTAL-REVENUES> 7,599,599
<CGS> 0
<TOTAL-COSTS> 2,594,675
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,004,924
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,004,924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,004,924
<EPS-PRIMARY> 59.82
<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> 820807
<NAME> FFCA INVESTOR SERVICES CORPORATION 88-C
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<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>
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