UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q-A
[x] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the period ended March 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
---------------- ----------------
Commission File Number 0-15802
QSR Income Properties, Ltd., a California Limited Partnership
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4084042
- ---------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2394
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Indicate by check mark whether the registrant (1) had 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
--- ---
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Balance Sheets at March 31, 1997
and December 31, 1996 2
Condensed Statements of Operations for the three
months ended March 31, 1997 and 1996 3
Condensed Statement of Partners' Equity for the
three months ended March 31, 1997 4
Condensed Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION 9
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED BALANCE SHEETS
March 31, December 31,
1997 1996
--------------------------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 326,000 $ 1,816,000
Rent and other receivables - 1,000
Notes receivable 189,000 202,000
Facilities, at net realizable value 7,335,000 7,335,000
Other assets 119,000 46,000
--------------------------------------
Total assets $ 7,969,000 $ 9,400,000
======================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 154,000 $ 157,000
Partners' equity:
Limited partners' equity, $500 per
unit, 52,004 units authorized,
issued and outstanding 7,761,000 9,174,000
General partner's equity 54,000 69,000
--------------------------------------
Total partners' equity 7,815,000 9,243,000
--------------------------------------
Total liabilities and partners' equity $ 7,969,000 $ 9,400,000
======================================
See accompanying notes to Condensed Financial Statements.
2
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------------
1997 1996
---------------------------------
REVENUE:
Lease income $293,000 $288,000
Interest income 16,000 25,000
---------------------------------
309,000 313,000
---------------------------------
COSTS AND EXPENSES:
Cost of operations 35,000 36,000
Depreciation and amortization - 58,000
Idle facility costs 5,000 8,000
Partnership administrative expenses 27,000 26,000
---------------------------------
67,000 128,000
---------------------------------
NET INCOME $242,000 $185,000
=================================
Allocation of net income
Limited partners $108,000 $169,000
General partner 134,000 16,000
---------------------------------
$242,000 $185,000
=================================
Limited partners' allocation per unit $ 2.08 $ 3.25
=================================
See accompanying notes to Condensed Financial Statements.
3
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
Limited General
Partners Partners Total
-----------------------------------------------------------
Balance at December 31, 1996 $9,174,000 $ 69,000 $9,243,000
Net income 108,000 134,000 242,000
Distributions (1,521,000) (149,000) (1,670,000)
-----------------------------------------------------------
Balance at March 31, 1997 $7,761,000 $ 54,000 $7,815,000
===========================================================
See accompanying notes to Condensed Financial Statements.
4
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
---------------------------------------
1997 1996
---------------------------------------
Cash flows from operating activities:
Net income $ 242,000 $ 185,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization - 58,000
Increase in other assets (73,000) -
Decrease in accounts receivable 1,000 7,000
Decrease in accounts payable (3,000) (1,000)
---------------------------------------
Total adjustments (75,000) 64,000
---------------------------------------
Net cash provided by operating activities 167,000 249,000
---------------------------------------
Cash flows from financing activities:
Proceeds from notes receivable 13,000 3,000
Distributions paid to partners (1,670,000) (185,000)
---------------------------------------
Net cash used in financing activities (1,657,000) (182,000)
---------------------------------------
Net (decrease) increase in cash and cash equivalents (1,490,000) 67,000
Cash and cash equivalents at the beginning of the period 1,816,000 1,630,000
---------------------------------------
Cash and cash equivalents at the end of the period $ 326,000 $ 1,697,000
=======================================
See accompanying notes to Condensed Financial Statments.
5
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures contained herein are adequate to make the information presented
not misleading. These unaudited condensed financial statements should be
read in conjunction with the financial statements and related notes
appearing in the Partnership's Form 10-K for the year ended December 31,
1996.
2. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
accruals, necessary to present fairly the Partnership's financial position
at March 31, 1997 and December 31, 1996, the results of its operations for
the three months ended March 31, 1997 and 1996 and its cash flows for the
three months then ended.
3. The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results expected for the full year.
4. In November 1995, the general partner decided to place the facility assets
for sale and hired an investment banker to determine the valuation of the
assets and solicit offers. Based on offers to buy the assets received, the
general partner determined that the carrying value of the assets needed to
be reduced by $2,350,000 to present the value of such assets at their net
realizable value. Such valuation assumes costs to be incurred in the
ordinary course of sale.
On September 16, 1996, the general partner entered into a purchase and sale
agreement with US Restaurants Properties Master LP ("USRPMLP"), a Delaware
limited partnership and US Restaurants Properties Operating LP ("USRPOLP"),
a Delaware limited partnership whereby the Partnership would sell its
restaurant assets to USRPOLP for $7,571,234 and certain of its notes
receivable at a price which provides USRPOLP with a 13.5% yield. USRPOLP
will pay for the purchase of the assets with limited partnership units of
USRPMLP. USRPMLP is a New York Stock Exchange traded master limited
partnership traded under the symbol "USV."
The transaction which is subject to certain contingencies, including
approval by the limited partners of the Partnership is expected to close in
the first half of 1997. The transaction is expected to be tax-free for most
limited partners. After the sale of the Partnership's assets, the
Partnership expects to liquidate, distributing to the Unitholders the
limited partnership interests in USRPMLP and any cash reserves.
6
QSR INCOME PROPERTIES, LTD.,
a California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1997
The Partnership was formed to acquire and operate pizza restaurants. All
twenty-three of the Partnership's restaurants were closed because of
disappointing operating results. Of the twenty-three restaurants closed, four
have been sold, three lease commitments have been terminated and sixteen
facilities have been leased to unaffiliated third parties.
Results of Operations
- ---------------------
The Partnership's net income of $242,000 and $185,000 for the three months
ended March 31, 1997 and 1996, respectively, represent an increase in income of
$57,000. This increase is primarily attributable to a decrease in depreciation
expense related to the valuation of the Partnership's facility assets at their
net realizable value.
Lease income for the three months ended March 30, 1997 increased $5,000
over the same period in 1996 as the result of one additional facility being
leased in 1997 compared to the same period in 1996. Included in lease income for
each of the three month periods ended March 31, 1997 and 1996 is approximately
$17,000 of additional lease income under a percentage rent feature with respect
to incremental sales above specified levels.
Idle facility costs decreased $3,000 for the three months ended March 31,
1997 compared to the same period in 1996. The decrease was primarily
attributable to decreases in utilities and property tax expenses associated with
the Partnership's final restaurant facility redeployed in December 1996.
Depreciation expense decreased $58,000 for the three months ended March 31,
1997 compared to the same period in 1995. The decrease is the result of the
Partnership's presentation of its properties at net realizable value and the
discontinuation of provisions for depreciation.
Liquidity and capital resources
- -------------------------------
For the three months ended March 31, 1997, the Partnership's activities
generated cash flow of $167,000. This represents an $82,000 decrease compared to
the cash flow of $249,000 generated by the Partnership for the three months
ended March 31, 1996. The decrease is primarily attributable to capitalized
costs related to the proposed sale of the Partnership's properties. Such costs
are reflected in other assets. Cash flow from the Partnership's operations has
been sufficient to meet all current obligations of the Company.
For the three months ended March 31, 1997, the Partnership's distribution
increased to $29.25 from $3.25 per Partnership unit for the three months ended
March 31, 1996. Included in the distribution for the three months ended March
31, 1997 was a special distribution of $26.00 per Partnership unit.
In November 1995, the general partner decided to place the facility assets
for sale and hired an investment banker to determine the valuation of the assets
and solicit offers. Based on offers to buy the assets received, the general
7
partner determined that the carrying value of the assets needed to be reduced by
$2,350,000 to present the value of such assets at their net realizable value.
Such valuation assumes costs to be incurred in the ordinary course of sale.
On September 16, 1996, the general partner entered into a purchase and sale
agreement with US Restaurants Properties Master LP ("USRPMLP"), a Delaware
limited partnership and US Restaurants Properties Operating LP ("USRPOLP"), a
Delaware limited partnership whereby the Partnership would sell its restaurant
assets to USRPOLP for $7,571,234 and certain of its notes receivable at a price
which provides USRPOLP with a 13.5% yield. USRPOLP will pay for the purchase of
the assets with limited partnership units of USRPMLP. USRPMLP is a New York
Stock Exchange traded master limited partnership traded under the symbol "USV."
The transaction which is subject to certain contingencies, including
approval by the limited partners of the Partnership is expected to close in the
first half of 1997. The transaction is expected to be tax-free for most limited
partners. After the sale of the Partnership's assets, the Partnership expects to
liquidate, distributing to the Unitholders the limited partnership interests in
USRPMLP and any cash reserves.
8
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits - the following exhibit is included herein:
(27) Financial Data Schedule
b) Reports on 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 13, 1997
QSR Income Properties, Ltd.,
a California Limited Partnership
BY: /s/ B. Wayne Hughes
------------------------------------
B. Wayne Hughes
General Partner
9