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 0-20151
Commission file number 33-35868-01
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
and
FFCA/PIP III INVESTOR SERVICES CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Co-Registrants as Specified in Their
Organizational Documents)
Delaware 86-0665681
- --------------------------------------------------------------------------------
(Partnership State of Organization) (Partnership I.R.S. Employer
Identification Number)
Delaware 86-0555605
- --------------------------------------------------------------------------------
(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 III LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
ASSETS
CASH AND CASH EQUIVALENTS $ 478,090 $ 635,446
RECEIVABLES FROM LESSEES 55,000 44,000
MORTGAGE LOAN INTEREST RECEIVABLE 45,208 45,208
DEFERRED COSTS 140,588 --
MORTGAGE LOAN RECEIVABLE 7,750,000 7,750,000
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land 2,684,138 2,684,138
Buildings 11,010,862 11,010,862
Equipment 947,838 947,838
------------ ------------
14,642,838 14,642,838
Less - Accumulated depreciation 2,832,378 2,496,576
------------ ------------
11,810,460 12,146,262
------------ ------------
Total assets $ 20,279,346 $ 20,620,916
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 579,620 $ 579,590
RENTAL DEPOSITS AND OTHER 247,470 253,269
------------ ------------
Total liabilities 827,090 832,859
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (25,045) (21,687)
Limited partners 19,477,301 19,809,744
------------ ------------
Total partners' capital 19,452,256 19,788,057
------------ ------------
Total liabilities and partners' capital $ 20,279,346 $ 20,620,916
============ ============
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
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 $ 394,870 $ 394,870 $1,184,610 $1,184,610
Participating rentals 167,629 153,436 442,157 401,758
Mortgage loan interest 135,625 135,625 406,875 406,875
Interest and other 5,196 5,524 17,578 16,867
---------- ---------- ---------- ----------
703,320 689,455 2,051,220 2,010,110
---------- ---------- ---------- ----------
EXPENSES:
General partner fees 91,170 83,110 207,709 185,627
Depreciation 111,934 111,934 335,802 335,801
Operating 26,876 21,073 87,699 68,663
---------- ---------- ---------- ----------
229,980 216,117 631,210 590,091
---------- ---------- ---------- ----------
NET INCOME $ 473,340 $ 473,338 $1,420,010 $1,420,019
========== ========== ========== ==========
NET INCOME ALLOCATED TO:
General partner $ 4,733 $ 4,733 $ 14,200 $ 14,200
Limited partners 468,607 468,605 1,405,810 1,405,819
---------- ---------- ---------- ----------
$ 473,340 $ 473,338 $1,420,010 $1,420,019
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
26,709 units held by limited partners) $ 17.54 $ 17.54 $ 52.63 $ 52.63
========== ========== ========== ==========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
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 $ (21,687) 26,709 $ 19,809,744 $ 19,788,057
Net income 14,200 -- 1,405,810 1,420,010
Distributions to partners (17,558) -- (1,738,253) (1,755,811)
---------- -------- ------------ ------------
BALANCE, September 30, 1998 $ (25,045) 26,709 $ 19,477,301 $ 19,452,256
========== ======== ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,420,010 $ 1,420,019
Adjustments to net income:
Depreciation 335,802 335,801
Change in assets and liabilities:
Increase in receivables from lessees (11,000) (12,000)
Increase in deferred costs (140,588) --
Decrease in payable to general partner -- (7,720)
Decrease in rental deposits and other (5,799) (5,281)
----------- -----------
Net cash provided by operating
activities 1,598,425 1,730,819
CASH FLOWS FOR FINANCING ACTIVITIES:
Distributions to partners (1,755,781) (1,755,779)
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (157,356) (24,960)
CASH AND CASH EQUIVALENTS, beginning of period 635,446 651,261
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 478,090 $ 626,301
=========== ===========
<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 III Limited
Partnership, 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 $27 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: 16,193 units For, 1,470 units
Against, 377 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
$579,421 for the quarter ended September 30, 1998 (the period) which,
combined with the first and second quarter distributions of $1,158,832,
amounts to $1,738,253 year-to-date. During the period, all net proceeds
not invested in travel plaza property and the mortgage loan 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 and
mortgage loan interest income pursuant to its travel plaza lease and loan
arrangements in the amount of $530,495, which remains unchanged from the
prior period (year-to-date base rental revenue and mortgage loan interest
income are similarly unchanged). In addition, the Registrant received or
accrued participating rentals of $167,629 for the quarter ended September
30, 1998, representing an increase over participating rentals of $153,436
for the comparable period in 1997. The increase was due to increased
volume at the travel plaza properties. Participating rentals for the
corresponding year-to-date periods were similarly affected.
Total expenses for the quarter ended September 30, 1998 increased $13,863
over the comparable period of the prior year due to an increase in general
partner fees and operating expenses. As described more fully in the
Registrant's partnership agreement, the general partner's management fee
is based on the Registrant's disbursable cash (generally, cash receipts
from operations less cash operating expenses) and is subordinated to a 9%
return to the limited partners on their Adjusted Capital Contribution, as
defined. The increase in the general partner's management fee of $8,060
during the period resulted directly from the increase in the Registrant's
disbursable cash due to the increase in participating rental revenues.
Operating expenses increased $5,803 during the period due to an increase
in administrative expenses related to the proposed transaction. Expenses
for the corresponding year-to-date periods were similarly affected. Net
income for the three- and nine-month periods ended September 30, 1998
remained relatively unchanged from the comparable periods in 1997.
<PAGE>
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/PIP III INVESTOR SERVICES CORPORATION
BALANCE SHEET - SEPTEMBER 30, 1998
ASSETS
Cash $100
Investment in Participating Income Properties III Limited
Partnership, 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/PIP III Investor Services Corporation (the Corporation) was
incorporated on December 5, 1988, and amended on July 9, 1990 to act as the
assignor limited partner in Participating Income Properties III Limited
Partnership (PIP III).
The assignor limited partner is the owner of record of the limited
partnership units of PIP III. All rights and powers of the Corporation have been
assigned to the holders, who are the registered and beneficial owners of the
units. Other than to serve as assignor limited partner, the Corporation 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 III LIMITED
PARTNERSHIP
By FFCA PARTICIPATING MANAGEMENT COMPANY
LIMITED PARTNERSHIP
Managing General Partner
By FRANCHISE FINANCE CORPORATION OF AMERICA III
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/PIP III INVESTOR SERVICES CORPORATION
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> 865828
<NAME> PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 478,090
<SECURITIES> 0
<RECEIVABLES> 100,208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,642,838
<DEPRECIATION> 2,832,378
<TOTAL-ASSETS> 20,279,346
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,452,256
<TOTAL-LIABILITY-AND-EQUITY> 20,279,346
<SALES> 0
<TOTAL-REVENUES> 2,051,220
<CGS> 0
<TOTAL-COSTS> 631,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,420,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,420,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,420,010
<EPS-PRIMARY> 52.63
<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> 865829
<NAME> FFCA/PIP III INVESTOR SERVICES CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<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>
