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, 1999
--------------------------
[ ] 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 (480) 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 I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PARTICIPATING INCOME PROPERTIES II, L.P.
BALANCE SHEETS (Note 1)
MARCH 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
ASSETS
CASH AND CASH EQUIVALENTS $ 84,117,472 $ 3,852,514
RECEIVABLES FROM LESSEES 124,036 193,794
DEFERRED COSTS -- 236,461
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land -- 11,709,570
Buildings -- 54,004,577
Equipment -- 3,832,921
------------ ------------
-- 69,547,068
Less - Accumulated depreciation -- 23,169,556
------------ ------------
-- 46,377,512
------------ ------------
Total assets $ 84,241,508 $ 50,660,281
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 1,974,738 $ 2,145,202
PAYABLE TO GENERAL PARTNERS -- 133,462
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 230,741 26,903
DEFERRED INCOME (Note 2) -- 320,031
------------ ------------
Total liabilities 2,205,479 2,625,598
------------ ------------
PARTNERS' CAPITAL (DEFICIT) (Note 1):
General partners (241,478) (238,231)
Limited partners 82,277,507 48,272,914
------------ ------------
Total partners' capital 82,036,029 48,034,683
------------ ------------
Total liabilities and partners' capital $ 84,241,508 $ 50,660,281
============ ============
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
STATEMENTS OF INCOME (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations) AND MARCH 31, 1998
(Unaudited)
1999 1998
----------- ----------
REVENUES:
Rental (Note 2) $ 1,924,118 $1,865,905
Participating rentals 510,703 565,225
Interest and other 130,441 45,211
Gain on sale of property (Note 1) 34,325,990 --
----------- ----------
36,891,252 2,476,341
----------- ----------
EXPENSES:
General partner fees 197,213 211,036
Depreciation 382,179 613,233
Operating 53,970 62,945
----------- ----------
633,362 887,214
----------- ----------
OPERATING INCOME 36,257,890 1,589,127
LIQUIDATION COSTS (Note 1) 262,496 --
----------- ----------
NET INCOME $35,995,394 $1,589,127
=========== ==========
NET INCOME ALLOCATED TO (Note 1):
General partners $ 16,694 $ 15,891
Limited partners 35,978,700 1,573,236
----------- ----------
$35,995,394 $1,589,127
=========== ==========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(based on 82,834 units held by limited
partners) (Note 1) $ 434.35 $ 18.99
=========== ==========
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations)
(Unaudited)
Limited Partners
General ----------------------
Partners Number Total
Amount of Units Amount Amount
------ -------- ------ ------
BALANCE, December 31, 1998 $(238,231) 82,834 $ 48,272,914 $ 48,034,683
Net income 16,694 -- 35,978,700 35,995,394
Distribution to partners,
cash from operations (19,941) -- (1,974,107) (1,994,048)
--------- ------ ------------ ------------
BALANCE, March 31, 1999 $(241,478) 82,834 $ 82,277,507 $ 82,036,029
========= ====== ============ ============
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations) AND MARCH 31, 1998
(Unaudited)
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,995,394 $ 1,589,127
Adjustments to net income:
Depreciation 382,179 613,233
Gain on sale of property (34,325,990) --
Change in assets and liabilities:
Decrease in receivables from lessees 69,758 10,000
Decrease in deferred costs 236,461 --
Decrease in payable to general partner (133,462) --
Increase (decrease) in accounts payable
and accrued liabilities 203,838 (506)
Decrease in deferred income (320,031) (68,555)
------------ -----------
Net cash provided by operating activities 2,108,147 2,143,299
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property 80,321,323 --
------------ -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (1,994,048) (2,133,806)
Decrease in distribution payable to
limited partners (170,464) (19,678)
------------ -----------
Net cash used in financing activities (2,164,512) (2,153,484)
------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 80,264,958 (10,185)
CASH AND CASH EQUIVALENTS, beginning of period 3,852,514 3,984,265
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 84,117,472 $ 3,974,080
============ ===========
<PAGE>
PARTICIPATING INCOME PROPERTIES II, L.P.
Notes to Financial Statements
March 31, 1999
1) PARTNERSHIP LIQUIDATION:
On March 22, 1999, Participating Income Properties II, L.P. (the Partnership)
sold substantially all of the Partnership's assets (those assets comprising the
travel plazas) and recognized a gain of approximately $34.3 million on the sale.
The sale of the travel plazas represents the disposition of substantially all of
the Partnership's assets and the Partnership has no further liability in
connection with any of the travel plazas. In accordance with the partnership
agreement, all sale proceeds have been allocated to the limited partners.
In April 1999, the Managing General Partner began the Partnership liquidation
process, which includes the distribution of assets to the limited partners in
accordance with the partnership agreement. The liquidation of the Partnership is
expected to be completed in June 1999 and an estimate of the cost of the
liquidation has been included in the Partnership's statement of operations. The
net amount ultimately available for distribution to the limited partners depends
on various factors, such as the actual cost of the liquidation and the amount of
interest income from temporary investments received by the Partnership until
completely liquidated. The Managing General Partner estimates that the
liquidating distribution will range from approximately $982 to $1,015 per
limited partnership unit, of which approximately $6 per unit will be deposited
in a trust (the Trust Fund) with a bank. The Trust Fund, including interest
income, would be available to satisfy claims made directly or indirectly with
respect to the liquidation of the Partnership for a period of up to 24 months
following the effective date of the trust agreement, at which time, as long as
there are no unresolved claims, the remaining balance of the Trust Fund will be
disbursed to the limited partners.
2) DEFERRED INCOME:
In March 1999, the Partnership recognized approximately $320,000 of income
previously deferred (rental enhancement income) in connection with the sale of
the travel plaza properties. This revenue is included in rental revenue in the
Partnership's 1999 statement of operations.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Participating Income Properties II, L.P., a Delaware limited partnership, (the
Registrant) entered into purchase agreements with Flying J Inc. on September 4,
1998 to sell substantially all of the Registrant's assets (those assets
comprising the travel plazas) for cash of $80,460,000. The limited partners
received a consent solicitation statement describing the proposed transaction
and an affirmative vote of the limited partners holding a majority of the
partnership units was achieved on October 26, 1998. The sale transaction was
completed on March 22, 1999 and the Registrant recognized a gain of
approximately $34.3 million on the sale. The net cash proceeds from this sale
are being held in U.S. government securities pending distribution to the limited
partners. The sale of the travel plazas represents the disposition of
substantially all of the Registrant's assets and the Registrant has no further
liability in connection with any of the travel plazas. In April 1999, the
Managing General Partner began the Registrant liquidation process that includes
the distribution of assets to the limited partners in accordance with the
partnership agreement. The liquidation of the Registrant is expected to be
completed in June 1999 and an estimate of the cost of the liquidation has been
included in the Registrant's statement of operations.
The net amount ultimately available for distribution to the limited partners
depends on various factors, such as the actual cost of the liquidation and the
amount of interest income from temporary investments received by the Registrant
until completely liquidated. The Managing General Partner estimates that the
liquidating distribution will range from approximately $982 to $1,015 per
limited partnership unit, of which approximately $6 per unit will be deposited
in a trust (the Trust Fund) with a bank. The Trust Fund, including interest
income, would be available to satisfy claims made directly or indirectly with
respect to the liquidation of the Registrant for a period of up to 24 months
following the effective date of the trust agreement, at which time, as long as
there are no unresolved claims, the remaining balance of the Trust Fund will be
disbursed to the limited partners.
The Registrant declared a cash distribution to the limited partners of
$1,974,107 for the quarter ended March 31, 1999 (the period) representing travel
plaza operations through the date of the sale of the travel plazas on March 22,
1999. During the period, all net proceeds not invested in travel plaza property
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
travel plaza lease arrangements in the amount of $1,604,087. Base rental revenue
was lower in 1999 because the travel plazas were sold prior to the end of the
quarter. Overall rental revenue for the period also includes the recognition of
approximately $320,000 of income previously deferred (rental enhancement income)
that was recognized during the period. The amount recognized in the comparable
period was approximately $69,000, with the increase resulting from the
recognition of the remaining amount of deferred rental enhancement income in
conjunction with the sale of the travel plaza properties. In addition, the
Registrant received or accrued participating rentals of $510,703 for the period
representing a decrease from participating rentals of $565,225 for the
comparable period in 1998, primarily related to the sale of the travel plaza
properties prior to the end of the quarter.
Operating expenses for the quarter ended March 31, 1999 decreased by $253,852
from the comparable period of the prior year primarily due to a decrease in
depreciation expense. Depreciation expense was lower this period due to the sale
of travel plaza property.
The increase in total assets reflected in the Registrant's financial statements
filed with this report is attributable to the cash proceeds received from the
sale of travel plaza property (prior to distribution of the proceeds 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, except those adjustments related to the
liquidation and dissolution of the Registrant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The financial instruments held by the Registrant at March 31, 1999 consist of
cash equivalents (primarily investments in U.S. Treasury securities or
repurchase agreements that are collateralized by U.S. Treasury and government
obligations) and receivables from lessees that are short-term in nature and do
not subject the Registrant to a material exposure to changes in interest rates.
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 88-C
BALANCE SHEET - MARCH 31, 1999
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: May 5, 1999 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: May 5, 1999 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, 1999 AND THE STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1999 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 84,117,472
<SECURITIES> 0
<RECEIVABLES> 124,036
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,241,508
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 82,036,029
<TOTAL-LIABILITY-AND-EQUITY> 84,241,508
<SALES> 0
<TOTAL-REVENUES> 36,891,252
<CGS> 0
<TOTAL-COSTS> 633,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,995,394
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,995,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,995,394
<EPS-PRIMARY> 434.35
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE
</LEGEND>
<CIK> 820807
<NAME> FFCA INVESTOR SERVICES CORPORATION 88-C
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<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
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
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</TABLE>
