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, 1996
-------------------------------------------------
[ ] 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
1-13116
FRANCHISE FINANCE CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0736091
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
- --------------------------------------------------------------------------------
(Address of principal executive offices)
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
----- -----
Number of shares outstanding of each of the issuer's classes of common stock as
of November 1, 1996:
Common Stock, $0.01 par value 40,511,639
----------------------------- ----------
Class Number of Shares
<PAGE>
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Item l. Financial Statements.
---------------------
FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Amounts in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
------
Investments:
Investments in Real Estate, at cost:
Land $ 338,439 $ 304,641
Buildings and Improvements 484,440 448,427
Equipment 35,161 41,512
--------- ---------
858,040 794,580
Less-Accumulated Depreciation 176,785 176,232
--------- ---------
Net Real Estate Investments 681,255 618,348
Mortgage Loans Receivable 38,464 199,486
Mortgage Loans Held for Sale (Notes 3 and 4) 59,563 --
Investment Securities (Note 1) 30,139 --
--------- ---------
Total Investments 809,421 817,834
Cash and Cash Equivalents 15,189 2,067
Notes and Accounts Receivable, net of allowances
of $2,300 in 1996 and $2,000 in 1995 23,570 6,820
Other Assets 16,973 16,783
--------- ---------
Total Assets $ 865,153 $ 843,504
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 11,159 $ 5,608
Dividends Payable 18,229 18,133
Senior Unsecured Notes due 2000 - 2005 198,892 198,702
Other Unsecured Notes Payable (Note 2) 59,688 --
Unsecured Notes Payable to Bank 63,500 110,000
Mortgage Payable to Affiliate 8,500 8,500
Rent Deposits and Other Liabilities 9,970 8,744
--------- ---------
Total Liabilities 369,938 349,687
--------- ---------
Shareholders' Equity:
Common Stock, par value $.01 per share, authorized 200 million
shares, issued and outstanding 40,508,740 shares in 1996 and
40,294,822 shares in 1995 405 403
Capital in excess of par value 551,963 547,478
Cumulative Net Income 112,172 60,670
Cumulative Dividends (169,325) (114,734)
--------- ---------
Total Shareholders' Equity 495,215 493,817
--------- ---------
Total Liabilities and Shareholders' Equity $ 865,153 $ 843,504
========= =========
</TABLE>
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/96 9/30/95 9/30/96 9/30/95
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental $ 24,540 $ 21,915 $ 71,148 $ 64,055
Mortgage Loan Interest 1,923 4,120 14,956 8,981
Investment Income and Other 2,598 489 3,832 1,573
----------- ----------- ----------- -----------
29,061 26,524 89,936 74,609
----------- ----------- ----------- -----------
EXPENSES:
Depreciation and Amortization 5,188 5,299 15,419 15,795
Operating, General and
Administrative 2,600 2,405 9,477 8,005
Property Costs 427 1,024 1,646 1,824
Interest 5,715 4,497 19,199 9,826
Related Party Interest 244 241 730 721
----------- ----------- ----------- -----------
14,174 13,466 46,471 36,171
----------- ----------- ----------- -----------
Income Before Gain on Sale of Property 14,887 13,058 43,465 38,438
Gain on Sale of Property (Note 1) 944 637 8,037 1,851
----------- ----------- ----------- -----------
Net Income $ 15,831 $ 13,695 $ 51,502 $ 40,289
=========== =========== =========== ===========
Net Income Per Share $ .39 $ .34 $ 1.27 $ 1.00
=========== =========== =========== ===========
Weighted Average Common and
Common Equivalent Shares
Outstanding 40,683,324 40,250,719 40,527,447 40,250,719
=========== =========== =========== ===========
</TABLE>
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Capital in
Common Excess of Cumulative Cumulative
Stock Par Value Net Income Dividends Total
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 $ 403 $ 547,478 $ 60,670 $(114,734) $ 493,817
Capital contributions 2 4,485 -- -- 4,487
Net income -- -- 51,502 -- 51,502
Dividends declared -
$1.35 per share -- -- -- (54,591) (54,591)
--------- --------- --------- --------- ---------
BALANCE, September 30, 1996 $ 405 $ 551,963 $ 112,172 $(169,325) $ 495,215
========= ========= ========= ========= =========
</TABLE>
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 51,502 $ 40,289
Adjustments to net income:
Depreciation and amortization 15,419 15,795
Gain on sale of property (8,037) (1,851)
Provision for uncollectible mortgages and notes 1,424 --
Other 4,961 1,987
--------- ---------
Net cash provided by operating activities 65,269 56,220
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (99,152) (102,792)
Investment in mortgage loans (76,764) (91,564)
Investment in notes receivable (17,280) (1,200)
Improvement of property (386) (42)
Proceeds from securitization transaction (Note 1) 151,720 --
Proceeds from sale of property 18,615 8,369
Receipt of mortgage payoffs 5,138 489
Collection of mortgage principal 4,487 2,313
--------- ---------
Net cash used in investing activities (13,622) (184,427)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (54,495) (54,338)
Capital contributions 4,487 --
Proceeds from bank borrowings 129,000 176,000
Repayment of bank borrowings and loan fees (177,172) --
Proceeds from issuance of other unsecured notes 59,655 --
--------- ---------
Net cash provided by (used in) financing activities (38,525) 121,662
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 13,122 (6,545)
CASH AND CASH EQUIVALENTS, beginning of period 2,067 12,095
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 15,189 $ 5,550
========= =========
Supplemental Disclosure of Noncash Activities:
Investment in securities resulting from securitization (Note 1) $ 30,763 $ --
========= =========
Mortgage loan obtained as part of property sale proceeds,
net of deferred gain $ 2,918 $ 5,542
========= =========
</TABLE>
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1996
------------------
(1) MORTGAGE LOAN SECURITIZATION:
-----------------------------
Certain mortgage loans originated by FFCA and its predecessors totaling
$178.8 million were securitized and Secured Franchise Loan Pass-Through
Certificates (the "Certificates") were sold to investors on June 27, 1996. The
servicing rights on these mortgage loans have been retained by FFCA. Upon sale,
the mortgage loans receivable were removed from the balance sheet and a gain on
the sale was recognized for the difference between the carrying amount of the
mortgage loans and the adjusted sales price. FFCA retained certain interests in
approximately 12.5% of the aggregate mortgage loan principal balance through the
purchase of subordinated investment securities of the securitization trust, and,
in addition, purchased the interest-only certificate. These investment
securities, totaling $30.1 million at September 30, 1996, were recorded by
allocating the previous carrying amount of the mortgages between the assets sold
and the retained interests, based on their relative fair values, as adjusted.
The adjustment is based on the present value estimate of future cash flows to be
received over the terms of the mortgage loans based on estimates of prepayments,
defaults, normal servicing fees, servicing expenses and other factors. The gain
on the sale of the mortgage loans was reduced by establishing a reserve for
estimated probable losses under the subordination provisions of the
securitization. These securities are classified as available for sale with an
aggregate fair value approximating their carrying amount.
(2) OTHER UNSECURED NOTES:
----------------------
In February 1996, FFCA issued unsecured notes consisting of $30 million
of 6.78% notes due February 20, 2002 and $30 million of 7.02% notes due February
20, 2003. Interest on the notes is payable semi-annually in arrears on each May
30 and November 30 with principal due at maturity. The proceeds of the unsecured
notes were used to pay down FFCA's revolving acquisition line of credit. The
notes may not be redeemed prior to their respective maturities.
(3) MORTGAGE LOANS HELD FOR SALE:
-----------------------------
At September 30, 1996, FFCA's portfolio included mortgage loans
originated during 1996 which are held for sale. These loans represent first
mortgages on the land and/or buildings and/or equipment of approximately 80
restaurants. The estimated fair value of FFCA's mortgage loans held for sale at
September 30, 1996 approximates carrying value based on the current rates at
which similar individual loans would be made to borrowers with similar credit
and for the same remaining maturities.
(4) RELATED PARTY TRANSACTION:
--------------------------
During 1996, FFCA created a wholly-owned qualified REIT subsidiary FFCA
Mortgage Corporation ("Mortgage Corporation") to originate fixed rate mortgage
loans for the purpose of future securitization transactions. Effective on
September 1, 1996, FFCA entered into an agreement to exchange all of its voting
common stock of Mortgage Corporation for 100 shares of newly-issued non-voting
preferred stock of Mortgage Corporation, which represents all of the issued and
outstanding stock of such class; and Mortgage Corporation became a non-qualified
REIT subsidiary of FFCA. The preferred stock entitles FFCA to 95% of any
dividends declared by Mortgage Corporation. In addition, the Chief Executive
Officer and Chairman of the Board of FFCA agreed to purchase all of the common
stock of Mortgage Corporation for $500,000. The accompanying financial
statements include the assets and liabilities of Mortgage Corporation and
related results of operations. All intercompany transactions are eliminated in
consolidation.
<PAGE>
Part II -- Financial Information
- --------------------------------
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
General
- -------
Franchise Finance Corporation of America (FFCA) is a fully integrated and
self-administered real estate investment trust (REIT) which invests in chain
restaurant real estate throughout the United States. FFCA provides financing to
chain restaurant operators with experienced management in established restaurant
chains principally through sale and leaseback transactions and mortgage loans.
FFCA's portfolio of properties is diversified by tenant, restaurant concept and
geographic location. At September 30, 1996, FFCA's portfolio included 1,418
restaurant properties represented by investments in real estate and mortgage
loans receivable, and 243 restaurant properties represented by securitized
mortgage loans in which FFCA holds a residual interest. These restaurants are
operated by approximately 400 restaurant operators in over 35 chains in 46
states.
Liquidity and Capital Resources
- -------------------------------
Rental and mortgage loan interest revenue generated by this portfolio of
properties has, and will continue to, comprise the majority of the cash
generated from operations. Net cash provided by operations for the nine months
ended September 30, 1996 was $65.3 million as compared to $56.2 million in 1995,
with the increase resulting from the growth of the real estate portfolio. Cash
generated from operations is held in temporary investment securities pending
distribution to the shareholders in the form of quarterly dividends. This cash
also may be used to fund investments in portfolio properties.
During the quarter ended September 30, 1996, FFCA acquired or financed 106
restaurant properties totaling approximately $105 million. These portfolio
properties were initially funded by cash generated from operations, proceeds
from the securitization transaction in June 1996 and proceeds from bank
borrowings. Also during the quarter, FFCA sold 15 properties and related
equipment, seven of which represented the lessees' exercise of their purchase
option on the properties. An additional six purchase options exercised by
lessees were financed by FFCA as mortgage loans. Cash proceeds from these sales,
the collection of mortgage loan principal payments and the receipt of mortgage
loan payoffs, approximating $10 million in total, were used to partially fund
new portfolio investments during the quarter.
FFCA's primary source of funding for new investments is a $250 million unsecured
acquisition loan facility obtained from NationsBank in December 1995. This
two-year revolving credit facility bears annual interest (payable monthly) at
LIBOR (London Interbank Offered Rate) plus 1.5%, as compared to the prior loan
facility's original rate of LIBOR plus 2.25% during 1995. The interest rate in
effect at September 30, 1996 was 7.125%. This variable rate acquisition loan
facility is periodically paid down through the issuance of fixed rate debt, such
as the unsecured notes recently issued by FFCA.
On November 12, 1996, FFCA issued $40 million in unsecured notes at 7.1% due
November 30, 2026, which are repayable at par, at the option of the note holder,
on November 30, 2004. Interest on these fixed rate notes is payable
semi-annually in arrears on each May 30 and November 30, commencing November 30,
1996, with principal due at maturity. The proceeds of the unsecured notes were
used to pay down the revolving credit facility and fund additional portfolio
properties and mortgage loans.
At September 30, 1996, FFCA had cash and cash equivalents totaling $15.2 million
and $186.5 million available on its revolving credit facility. On October 4,
1996, FFCA used $13 million of this cash on hand to fund twenty-one Burger King
restaurant properties under a sale and leaseback arrangement. In addition to
this October transaction, FFCA's anticipated investments include commitments
made to several restaurant
<PAGE>
operators of Arby's, Fuddruckers, Applebee's, Burger King and Wendy's
restaurants to acquire or finance (subject to FFCA's customary underwriting and
real estate due diligence procedures) approximately 360 restaurant properties
over the next twelve months. These commitments totaled approximately $275
million as of September 30, 1996. FFCA anticipates funding these specific
commitments, and other investments in restaurant properties, through amounts
available on its revolving credit facility, issuance of additional unsecured
debt or issuance of additional equity securities of FFCA.
Securitization transactions, such as the transaction completed in June 1996,
will provide FFCA with another means of raising capital to continue its growth
through chain restaurant investments. In 1996, FFCA created a subsidiary, FFCA
Mortgage Corporation, to originate fixed rate mortgage loans for the purpose of
future securitization transactions. Under this structure, mortgage loans that
are originated are held until a sufficiently large and diversified pool of
mortgage loans has been accumulated. Once these loans are securitized, the
resulting investment grade securities are sold (at a relatively low rate
compared to the average rate on the mortgage loans sold) and FFCA retains the
higher-yielding non-investment grade and interest-only securities. The
non-investment grade securities are the last of the securities to be repaid, so
that if any of the underlying mortgage loans default, these securities take the
first loss. In effect, FFCA would incur some of the risks of increased leverage
(even though it would not incur additional debt on its balance sheet) because
any future credit losses in the securitized loan pool would be concentrated in
the non-investment grade securities retained by FFCA. FFCA originates and
services mortgage loans and has the infrastructure in place to deal with
potential defaults on the securitized portfolio as it does with the mortgage
loans it holds for investment.
FFCA declared a third quarter dividend of $.45 per share, or $1.80 per share on
an annualized basis, payable on November 20, 1996 to shareholders of record on
November 8, 1996. Management of FFCA believes that cash generated from
operations will be sufficient to meet operating requirements and provide the
level of shareholder dividends required to maintain its status as a REIT.
Results of Operations
- ---------------------
Total revenues for the quarter ended September 30, 1996 rose to $29.1 million
from $26.5 million for the comparable quarter of 1995. Portfolio investments
were the primary source of revenue increases, despite the sale of fifty-nine
properties in the past twelve months. Portfolio investments in the third quarter
of 1996, totaling $105 million ($193 million year to date), are represented by
$38 million in mortgage loans, $54 million in property subject to operating
leases and $13 million in notes receivable. Since these investments occurred
throughout the quarter, their weighted average balance in the third quarter is
equivalent to approximately $62 million of investments and the impact of these
1996 investments on rental revenue and mortgage interest income will not be
fully reflected until the fourth quarter of 1996. Lease and fixed loan base
rates on new investments during the quarter ranged from approximately 10% to
11%, with a weighted average rate of 10.75%. FFCA also provided $23 million in
variable rate mortgage financing during the quarter.
The mortgages sold in the securitization transaction would have generated $4.8
million in mortgage loan interest income during the quarter ended September 30,
1996. As a result, FFCA's mortgage interest income for the third quarter of 1996
was lower than the second quarter of 1996. This decrease in mortgage interest
income was mostly offset by an increase in investment income represented by
interest income on the residual interests held in these mortgages of $1.4
million and mortgage servicing income of $110,000, and a decrease in interest
expense of $2.6 million due to the paydown of debt with proceeds from the
securitization. Also offsetting the decrease in mortgage loan interest income is
approximately $356,000 received by FFCA during the quarter which is recorded as
a principal reduction in the investment securities retained by FFCA. Interest
income on notes receivable increased approximately $535,000 this quarter as
compared to the same quarter in 1995 due to the addition of $17.3 million in new
notes in 1996 funded in conjunction with investments in restaurant properties.
<PAGE>
The restaurant leases generally provide that lessees make monthly payments equal
to the greater of a fixed base rate or a percentage of the gross sales of the
restaurants (percentage rentals). Mortgage loans held for investment generally
have similar participations; however, a majority of the mortgage loans
originated in 1996 and held for sale do not provide for such participations.
Percentage rentals approximated $1.3 million for the third quarter of 1996 as
compared to $858,000 for the third quarter of 1995. A majority of the increase
relates to one lessee, Foodmaker, Inc., whose increased Jack in the Box
restaurant sales resulted in higher percentage rentals of approximately $315,000
over 1995 amounts. The remaining increase reflected in 1996 relates to lessees
whose sales levels have, for the first time, exceeded the threshold where
percentage rent is due and to increases in individual restaurant-level sales
volumes related to lessees who have previously exceeded the percentage rent
threshold.
Rental revenues include both rental payments received from lessees and rent
guaranty insurance payments. Rental revenue collected under the rent guaranty
insurance policies for the third quarter of 1996 decreased to $422,000 from
$812,000 in the third quarter of 1995 due to expiring rent insurance policies.
Rent guaranty insurance policies covering FFCA's properties will continue to
expire at various dates through 1998; therefore, rental revenue from rent
guaranty insurance for the remainder of 1996 is expected to be lower than in
1995.
The increase in interest expense from $4.7 million for the quarter ended
September 30, 1995 to $6.0 million for the quarter ended September 30, 1996 is
due to the use of borrowings in the last twelve months for investment in
restaurant properties. FFCA's cost of borrowings was 7.1% for the quarter as
compared to 7.7% for the third quarter of 1995 and is expected to continue to be
lower in 1996 than in 1995. Property operating costs decreased approximately
$600,000 during the period from the same quarter in 1995 due to a higher number
of underperforming properties in 1995. At September 30, 1996, vacant properties
held for sale represent less than .5% of FFCA's real estate investments.
Income before gain on the sale of property rose to $14.9 million in 1996 from
$13.1 million in 1995 primarily due to the growth of FFCA's portfolio in the
preceding twelve months. Gains on the sale of fourteen restaurant properties
during the quarter totaling $2 million were offset by impairment losses of $1.1
million recognized during the quarter on six properties. FFCA reported net
income of $15.8 million, or $.39 per share for the quarter ended September 30,
1996 as compared to $13.7 million, or $.34 per share for the quarter ended
September 30, 1995.
Tenant Concentration
- --------------------
During the nine months ended September 30, 1996 and 1995, one lessee, Foodmaker,
Inc. ("Foodmaker"), accounted for approximately 11% and 13%, respectively, of
total rental and mortgage loan interest revenues of FFCA. Foodmaker operates and
franchises Jack In The Box restaurants. The relative decrease in the percentage
of FFCA's revenue from Foodmaker between 1995 and 1996 is due to the fact that
FFCA's portfolio has grown and Foodmaker has become a relatively smaller portion
of the entire portfolio. This decrease is expected to continue; however, the
rate of decrease is dependent upon FFCA's overall acquisition rate and revenue
growth. The following table represents selected financial data of Foodmaker,
Inc. and Subsidiaries as reported by Foodmaker in its July 7, 1996 Form 10-Q.
<PAGE>
Foodmaker, Inc. and Subsidiaries
Selected Financial Data (unaudited)
(in thousands except per share data)
<TABLE>
Unaudited Consolidated Balance Sheet Data:
<CAPTION>
July 7, 1996 October 1, 1995
------------ ---------------
<S> <C> <C>
Current Assets $ 87,302 $ 97,889
Noncurrent Assets 554,699 564,785
Current Liabilities 141,601 132,017
Noncurrent Liabilities 454,883 499,404
</TABLE>
<TABLE>
Unaudited Consolidated Statements of Operations Data:
<CAPTION>
Forty Weeks Ended
--------------------------------------
July 7, 1996 July 9, 1995
------------ ------------
<S> <C> <C>
Gross Revenues $ 823,752 $ 767,416
Costs and Expenses (including taxes) 809,534 840,231
---------- --------
Net Earnings (Loss) $ 14,218 $ (72,815)
========== =========
Net earnings (loss ) per share - primary and fully diluted $ .36 $ (1.88)
========== =========
</TABLE>
The following discussion is based on information reported by Foodmaker for the
forty-week period ended July 7, 1996 as compared to the forty-week period ended
July 9, 1995.
Foodmaker revenues increased $56.4 million, or 7.3%, to $823.8 million in 1996
from $767.4 million in 1995 principally due to an increase in restaurant sales,
offset in part by a decline in distribution sales.
Sales by Foodmaker-operated Jack In The Box restaurants increased $74.9 million
reflecting increases in both per store average sales and in the average number
of restaurants. Per store average sales for comparable restaurants which
increased 8.2% continued to improve under Foodmaker's marketing program which
features a new advertising campaign, new product introductions and aggressive
value-priced product alternatives. The average number of Foodmaker-operated
restaurants increased to 867 in 1996 from 832 in 1995, reflecting the addition
of new restaurants and the acquisition of restaurants from franchisees.
Distribution sales of food and supplies declined approximately $21.1 million
primarily due to a decline in sales to franchisees of $9.8 million. Jack In The
Box franchisees have formed a purchasing cooperative and contracted with another
supplier for distribution services. Foodmaker indicates that the loss of these
low profit margin sales is not expected to have a material effect on its
profits. Distribution sales to Family Restaurants, Inc. (FRI) and others also
declined $11.3 million in 1996 compared to the same period in 1995.
Foodmaker recorded a loss in 1995 relating to its equity in FRI of $57.2
million, resulting from the complete write-down of its investment in FRI due to
the write-off by FRI of the goodwill attributable to its Chi-Chi's Mexican
restaurant chain. Restaurant costs of sales increased $17.7 million to $187.5
million principally due to the costs related to increased restaurant sales.
Restaurant operating costs for Jack In The Box increased $25.4 million primarily
due to the increase in average number of Foodmaker-operated restaurants and
variable costs associated with increased sales. These costs declined as a
percentage of sales in 1996 in comparison to the similar period in 1995 due to
lower percentages of restaurant labor, operations administrative costs and fixed
expenses. Costs of distribution sales declined $20.5 million to $115.2 million,
consistent with the decline in distribution sales. Selling, general and
administrative expenses for Jack In The Box increased $2.4 million. Advertising
and promotion costs increased $12.3 million in comparison to the similar period
in 1995 due to costs of aggressive promotions and increased advertising related
to higher sales in 1996.
Foodmaker indicates that it expects that sufficient cash flow will be generated
from operations so that, combined with other financing alternatives available to
it, Foodmaker will be able to meet all of its debt service requirements, as well
as its capital expenditures and working capital requirements.
* * * * * *
In the opinion of management, the FFCA financial information included in this
report reflects all adjustments necessary for fair presentation. All adjustments
are of a normal recurring nature.
<PAGE>
Part II -- Other Information
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For electronic filing purposes only, this report contains the following
exhibits filed as part of this Form 10-Q with the Securities and Exchange
Commission. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
27 Financial Data Schedule
(b) During the quarter covered by this report, FFCA did not file any reports on
Form 8-K.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRANCHISE FINANCE CORPORATION OF AMERICA
Date: November 12, 1996 By /s/ John R. Barravecchia
---------------------------------------------
John R. Barravecchia, Chief Financial Officer
and Treasurer
Date: November 12, 1996 By /s/ Catherine F. Long
---------------------------------------------
Catherine F. Long, Vice President Finance
and Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
For electronic filing purposes only, this report contains Exhibit 27, Financial
Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 15,189
<SECURITIES> 30,139
<RECEIVABLES> 25,870
<ALLOWANCES> 2,300
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 858,040
<DEPRECIATION> 176,785
<TOTAL-ASSETS> 865,153
<CURRENT-LIABILITIES> 0
<BONDS> 330,580
0
0
<COMMON> 405
<OTHER-SE> 494,810
<TOTAL-LIABILITY-AND-EQUITY> 865,153
<SALES> 0
<TOTAL-REVENUES> 89,936
<CGS> 0
<TOTAL-COSTS> 1,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,929
<INCOME-PRETAX> 51,502
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,502
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 0
</TABLE>
