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 0-18504
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 l. Financial Statements.
------- ---------------------
PARTICIPATING INCOME PROPERTIES II, L.P.
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 $ 4,009,516 $ 3,984,265
RECEIVABLES FROM LESSEES 202,300 197,300
DEFERRED COSTS 9,531 --
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 22,023,018 20,814,945
------------ ------------
47,524,050 48,732,123
------------ ------------
Total assets $ 51,745,397 $ 52,913,688
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 2,188,296 $ 2,132,357
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 55,850 72,006
DEFERRED INCOME 457,141 594,251
------------ ------------
Total liabilities 2,701,287 2,798,614
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partners (228,137) (217,427)
Limited partners 49,272,247 50,332,501
------------ ------------
Total partners' capital 49,044,110 50,115,074
------------ ------------
Total liabilities and partners' capital $ 51,745,397 $ 52,913,688
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
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 $1,865,905 $1,865,905 $3,731,810 $3,731,810
Participating rentals 639,277 618,708 1,204,502 1,150,225
Interest and other 44,273 43,061 89,484 98,758
Gain on sale of equipment -- -- -- 2,138
---------- ---------- ---------- ----------
2,549,455 2,527,674 5,025,796 4,982,931
---------- ---------- ---------- ----------
EXPENSES:
General partner fees 218,570 217,249 429,606 426,350
Depreciation 594,840 756,141 1,208,073 1,522,539
Operating 52,345 45,246 115,290 106,458
---------- ---------- ---------- ----------
865,755 1,018,636 1,752,969 2,055,347
---------- ---------- ---------- ----------
NET INCOME $1,683,700 $1,509,038 $3,272,827 $2,927,584
========== ========== ========== ==========
NET INCOME ALLOCATED TO:
General partners $ 16,837 $ 15,090 $ 32,728 $ 29,276
Limited partners 1,666,863 1,493,948 3,240,099 2,898,308
---------- ---------- ---------- ----------
$1,683,700 $1,509,038 $3,272,827 $2,927,584
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
82,834 units held by limited partners) $ 20.12 $ 18.04 $ 39.12 $ 34.99
========== ========== ========== ==========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 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 32,728 -- 3,240,099 3,272,827
Distribution to partners (43,438) -- (4,300,353) (4,343,791)
------------ ------------ ------------ ------------
BALANCE, June 30, 1998 $ (228,137) 82,834 $ 49,272,247 $ 49,044,110
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
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 $ 3,272,827 $ 2,927,584
Adjustments to net income:
Depreciation 1,208,073 1,522,539
Gain on sale of equipment -- (2,138)
Change in assets and liabilities:
Increase in receivables from lessees (5,000) (27,218)
Increase in deferred costs (9,531) --
Decrease in payable to general partner -- (18,239)
Decrease in accounts payable
and accrued expenses (16,156) (5,000)
Decrease in deferred income (137,110) (137,109)
----------- -----------
Net cash provided by operating activities 4,313,103 4,260,419
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property -- 42,750
----------- -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (4,343,791) (4,310,875)
Increase in distribution payable to limited partners 55,939 99,559
----------- -----------
Net cash used in financing activities (4,287,852) (4,211,316)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,251 91,853
CASH AND CASH EQUIVALENTS, beginning of period 3,984,265 3,790,885
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,009,516 $ 3,882,738
=========== ===========
</TABLE>
<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 II, L.P., a Delaware
limited partnership, (the Registrant), had received $82,834,000 in gross
proceeds from its offering of Units. Net funds available for investment,
after payment of sales commissions, organizational costs and acquisition
costs, amounted to $71,956,541. The offering of Units is the Registrant's
sole source of capital, and since the final closing of limited partnership
units was held on December 11, 1989, the Registrant will not receive
additional funds from the offering. The Registrant was fully invested in
thirteen travel plaza properties by June 1991 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 $80 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 partnership 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.
The Registrant declared a cash distribution to the limited partners of
$2,187,885 for the quarter ended June 30, 1998 (the period) which,
combined with the first quarter distribution of $2,112,468, amounts to
$4,300,353 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
$639,277 for the period representing an increase over participating
rentals of $618,708 for the comparable period in 1997. On June 1, 1996,
CFJ Properties (the Registrant's only lessee) 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. Total expenses
decreased by $152,881 during the period ($302,378 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 - JUNE 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: 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 88-C
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> 820806
<NAME> PARTICIPATING INCOME PROPERTIES II, 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> 4,009,516
<SECURITIES> 0
<RECEIVABLES> 202,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 69,547,068
<DEPRECIATION> 22,023,018
<TOTAL-ASSETS> 51,745,397
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 49,044,110
<TOTAL-LIABILITY-AND-EQUITY> 51,745,397
<SALES> 0
<TOTAL-REVENUES> 5,025,796
<CGS> 0
<TOTAL-COSTS> 1,752,969
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,272,827
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,272,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,272,827
<EPS-PRIMARY> 39.51
<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> 820807
<NAME> FFCA INVESTOR SERVICES CORPORATION 88-C
<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>
