FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number: 0-22520
CENTENNIAL MORTGAGE INCOME FUND
(Exact name of registrant as specified in its charter)
California 33-0053488
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1540 South Lewis Street, Anaheim, California 92805
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)502-8484
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
PART I
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
September 30, 2001 and December 31, 2000
September 30, December 31,
ASSETS 2001 2000
(Unaudited)
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 967,000 $ 1,599,000
Other assets, net --- ---
- ------------------------------------------------------------------------------
$ 967,000 $ 1,599,000
==============================================================================
LIABILITIES AND PARTNERS' EQUITY
- ------------------------------------------------------------------------------
Accounts payable and
accrued liabilities $ 13,000 $ 10,000
- ------------------------------------------------------------------------------
Total liabilities 13,000 10,000
- ------------------------------------------------------------------------------
Partners' equity (deficit)
-- 38,729 limited partnership
units outstanding at September 30, 2001
and December 31, 2000
General partners (132,000) (132,000)
Limited partners 1,086,000 1,721,000
- ------------------------------------------------------------------------------
Total partners' equity 954,000 1,589,000
Contingencies (note 4)
- ------------------------------------------------------------------------------
$ 967,000 $ 1,599,000
==============================================================================
See accompanying notes to consolidated financial statements
1
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations (Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------
Revenue:
Interest income loans
to nonaffiliates,
including fees $ --- $ 31,000 $ --- $ 10,000
Interest on interest-
bearing deposits 44,000 43,000 8,000 16,000
Other 6,000 8,000 2,000 3,000
- -------------------------------------------------------------------------
Total revenue 50,000 82,000 10,000 29,000
- -------------------------------------------------------------------------
Expenses:
Provision for possible losses --- 30,000 --- 30,000
General and administrative,
affiliates 53,000 61,000 17,000 21,000
General and administrative,
nonaffiliates 51,000 55,000 18,000 18,000
- -------------------------------------------------------------------------
Total expenses 104,000 146,000 35,000 69,000
- -------------------------------------------------------------------------
Net loss $ (54,000) $ (64,000) $ (25,000) $ (40,000)
=========================================================================
Net loss per limited
partnership unit
-basic and diluted $ (1.39) $ (1.65) $ (.64) $ (1.03)
=========================================================================
See accompanying notes to consolidated financial statements
2
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statement of Partners' Equity (Unaudited)
For the nine months ended September 30, 2001
Total
General Limited Partners'
Partners Partners Equity
- ---------------------------------------------------------------------------
Balance (deficit) at
December 31, 2000 $ (132,000) $ 1,721,000 $ 1,589,000
Distribution to limited partners (581,000) (581,000)
Net loss --- (54,000) (54,000)
- ---------------------------------------------------------------------------
Balance (deficit) at
September 30, 2001 $ (132,000) $ 1,086,000 $ 954,000
==========================================================================
See accompanying notes to consolidated financial statements
3
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2001 and 2000
2001 2000
- -----------------------------------------------------------------------
Cash flows used in operating activities:
Net loss $ (54,000) $ (64,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Provision for possible losses --- 30,000
Changes in assets and liabilities:
Increase in other assets --- (4,000)
Increase in due from
unconsolidated investee --- (1,000)
Increase (decrease) in accounts
payable and accrued liabilities 3,000 (2,000)
- -----------------------------------------------------------------------
Net cash used in operating
activities (51,000) (41,000)
- -----------------------------------------------------------------------
Cash flows from investing activities:
Principal collected on loans --- 26,000
- -----------------------------------------------------------------------
Cash flows used in financing activities:
Distribution to limited partners (581,000) ---
- -----------------------------------------------------------------------
Net decrease in cash and
cash equivalents (632,000) (15,000)
Beginning cash and
cash equivalents 1,599,000 1,124,000
- -----------------------------------------------------------------------
Ending cash and cash
equivalents $ 967,000 $ 1,109,000
=======================================================================
Supplemental schedule of noncash investing
and financing activities:
Decrease in notes receivable as
a result of partial chargeoff $ --- $ 30,000
See accompanying notes to consolidated financial statements
4
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2001 and 2000
(1) BUSINESS
Centennial Mortgage Income Fund (the "Partnership") initially invested in
commercial, industrial and residential income-producing real property through
mortgage investments consisting of participating first mortgage loans, other
equity participation loans, construction loans, and wrap-around and other
junior loans. The Partnership's underwriting policy for granting credit was
to fund loans secured by first and second deeds of trust on real property.
The Partnership's area of concentration was in California. In the normal
course of business, the Partnership participated with other lenders in
extending credit to single borrowers; the Partnership did this in an effort to
decrease credit concentrations and provide a greater diversification of credit
risk.
As of September 30, 2001, all of the loans secured by properties have been
repaid or charged off.
As required by the Partnership Agreement, the Partnership is currently in the
repayment stage, and as a result, cash proceeds from mortgage investments are
no longer available for reinvestment.
(2) BASIS OF PRESENTATION
The consolidated financial statements are unaudited and reflect all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods.
Results for the nine and three months ended September 30, 2001 and 2000 are
not necessarily indicative of results which may be expected for any other
interim period, or for the year as a whole.
Information pertaining to the nine and three months ended September 30, 2001
and 2000 is unaudited and condensed inasmuch as it does not include all
related footnote disclosures.
The consolidated financial statements do not include all information and
footnotes necessary for fair presentation of financial position, results of
operations and cash flows in conformity with accounting principles generally
accepted in the United States of America. Notes to consolidated financial
statements included in Form 10-K for the year ended December 31, 2000 on file
with the Securities and Exchange Commission, provide additional disclosures
and a further description of accounting policies.
Financial Information about Industry Segments
Given that the Partnership is in the process of liquidation, the Partnership
has identified only one operating business segment which is the business of
asset liquidation.
5
Net loss per Limited Partnership Unit
Net loss per limited partnership unit for financial statement purposes was
based on the weighted average number of limited partnership units outstanding
of 38,729 for all periods presented.
(3) TRANSACTIONS WITH AFFILIATES
Under the provisions of the Partnership Agreement, the general partners are to
receive compensation for their services in supervising the affairs of the
Partnership. This partnership management compensation shall be equal to 10
percent of the cash available for distribution, as defined in the Partnership
Agreement. The general partners will not receive this compensation until the
limited partners have received a 12 percent per annum cumulative return on
their adjusted invested capital but are entitled to receive a 5 percent
interest in cash available for distribution in any year until this provision
has been met. Adjusted invested capital is defined as the original capital
invested less distributions from mortgage reductions. Payments to the general
partners have been limited to 5 percent of cash available for distribution as
the limited partners have not yet received their 12 percent per annum
cumulative return. Under this provision of the Partnership Agreement, no
distributions were paid to the general partners during the nine months ended
September 30, 2001 or 2000.
(4) CONTINGENCIES
The Partnership has disclosed in previous reports certain litigation related
to the Partnership's shopping center in Upland, California. The Partnership's
insurance company settled this litigation with the plaintiffs during the three
months ended June 30, 2001 at no cost to the Partnership
(5) DISTRIBUTION TO LIMITED PARTNERS
The Partnership declared a distribution payable to limited partners who were
holders of record on July 15, 2001 in the amount of $15 per limited
partnership unit. The distribution totaled approximately $581,000. This
distribution was paid on August 1, 2001.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Partnership had net losses and net losses per limited partnership unit of
$(54,000) and $(1.39) for the nine months ended September 30, 2001 and
$(64,000) and $(1.65) for the nine months ended September 30, 2000,
respectively.
Cautionary Statements Regarding Forward-Looking Information
The Partnership wishes to caution readers that the forward-looking statements
contained in this Form 10-Q under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Form 10-Q involve known and unknown risks and uncertainties which may
cause the actual results, performance or achievements of the Partnership to be
materially different from any future results, performance or achievements
expressed or implied by any forward-looking statements made by or on behalf of
the Partnership. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Partnership is filing
the following cautionary statements identifying important factors that in some
cases have affected, and in the future could cause the Partnership's actual
results to differ materially from those expressed in any such forward-looking
statements.
The factors that could cause the Partnership's results to differ materially
include, but are not limited to, general economic and business conditions,
including interest rate fluctuations; success of operating initiatives;
adverse publicity; changes in business strategy; quality of management;
business abilities and judgment of personnel; availability of qualified
personnel; employee benefit costs and changes in, or the failure to comply
with government regulations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Partnership had $967,000 in cash and interest-
bearing deposits. The Partnership had no unfunded loan commitments at
September 30, 2001. During the first three quarters of 2001, the
Partnership's principal source of cash was $44,000 in interest income on
interest bearing deposits. The Partnership's principal uses of cash during
the first three quarters of 2001 were a $581,000 cash distribution to limited
partners and approximately $101,000 in general and administrative costs. The
Partnership's principal future capital requirements are expected to be general
and administrative costs.
Effective with the third quarter of 1991, the Partnership suspended making
any cash distributions to partners due to a decline in liquidity and the
uncertainty of the cash requirements for existing and potential real estate
owned. Pursuant to the Partnership Agreement, 60 months after the closing of
the offering, cash proceeds from mortgage investments are no longer available
for reinvestment by the Partnership.
The Partnership declared a distribution payable to limited partners who were
holders of record on July 15, 2001 in the amount of $15 per limited
partnership unit. The distribution totaled approximately $581,000. This
distribution was paid on August 1, 2001.
7
The general partners have had discussions with legal counsel regarding the
amounts of cash balances that would be prudent to be retained by the
Partnership. In light of the substantial amount of real estate that the
Partnership has held an interest in over the years, there was the potential
for unanticipated litigation to arise, particularly in the area of toxic
contamination. Although the general partners were not aware of any threatened
litigation, or litigation that was likely to arise, they determined that the
Partnership should retain at least $1,000,000 in cash balances to be available
to defend the Partnership in any litigation which may have arisen.
As of the date of this report, no litigation has arisen and Management is in
the process of making a final evaluation of the potential for any future
litigation arising as a result of any activity that the Partnership has been
involved with in the past. The General Partners believe that, when finished,
this evaluation will enable them to conclude that the potential for future
litigation is now remote. If such a conclusion is reached, the General
Partners intend on taking the necessary steps to dissolve the Partnership,
including paying for the costs of winding up the affairs of the Partnership
and declaring and paying a final distribution to the limited partners.
RESULTS OF OPERATIONS
INTEREST INCOME
Interest income on loans to nonaffiliates decreased from $31,000 and $10,000
during the nine and three months ended September 30, 2000, respectively, to
$-0- during the three and nine months ended September 30, 2001. The decrease
was attributable to the payoff of the last remaining Partnership loans
receivable during the three months ended December 31, 2000.
Interest earned on interest-bearing deposits totaled $44,000 and $8,000 for
the nine and three months ended September 30, 2001, respectively. Interest
earned on interest-bearing deposits totaled $43,000 and $16,000 for the nine
and three months ended September 30, 2000, respectively. Interest on
interest-bearing deposits represents interest earned on Partnership funds
invested, for liquidity, in time certificate and money market deposits. The
slight increase in income on interest-bearing deposits during the nine months
ended September 30, 2001 over the same period in 2000 is due to increased
average cash balances for the nine months ended September 30, 2001 that were
offset by a decrease in average interest rates earned. The increase in
average cash balances resulted from the payoff of the last remaining
Partnership loan receivable in October 2000. The decrease in income for the
three months ended September 30, 2001 as compared to the three months ended
September 30, 2000 was principally the result of a substantial decline in
average interest rates earned.
PROVISION FOR POSSIBLE LOSSES
There was a $30,000 provision for possible losses for the nine months ended
September 30, 2000. There was no provision for possible losses for the nine
months ended September 30, 2001. The provision in 2000 was related to a note
receivable for which the Partnership accepted a discounted payoff. This was
the final note that the Partnership held.
8
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, affiliates totaled $53,000 and $17,000,
respectively, for the nine and three months ended September 30, 2001. General
and administrative expenses, affiliates totaled $61,000 and $21,000,
respectively, for the nine and three months ended September 30, 2000. These
expenses are primarily salary allocation reimbursements paid to affiliates.
General and administrative expenses, nonaffiliates totaled $51,000 and $18,000
for the nine and three months ended September 30, 2001, respectively. General
and administrative expenses, nonaffiliates totaled $55,000 and $18,000 for the
nine and three months ended September 30, 2000, respectively. These expenses
consist of other costs associated with the administration of the Partnership.
The decrease for 2001 is primarily due to a decrease in professional fees and
office expense.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership does not invest in any derivative financial instruments
or enter into any activities involving foreign currencies, its market risk
associated with financial instruments is limited to the effect that changing
domestic interest rates might have on the fair value of its bank deposits and
notes receivable. As of September 30, 2001, the Partnership held only cash in
checking accounts of $3,000 and fixed rate bank deposits with carrying values
totaling $964,000. The bank deposits and fixed rate bank deposits all had
maturities of less than ninety days. The estimated fair value of all of these
assets was estimated to be equal to their carrying values as of September 30,
2001.
Management currently intends to hold the remaining fixed rate assets until
their respective maturities. Accordingly, the Partnership is not exposed to
any material cash flow or earnings risk associated with these assets. Given
the relatively short-term maturities of these assets, management does not
believe the Partnership is exposed to any significant market risk related to
the fair value of these assets.
The Partnership had no interest bearing indebtedness outstanding as of
September 30, 2001. Accordingly, the Partnership is not exposed to any market
risk associated with its liabilities.
9
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
(3) & (4) Articles of Incorporation and Bylaws
The Amended Limited Partnership Agreement
Incorporated by reference to Exhibit A to the Partnership's
Prospectus contained in the Partnership's registration
Statement on Form Form S-11 (Commission File No. 0-22520)
Dated June 8, 1984, as supplemented and filed under the Securities
Act of 1933
(b) None
10
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A California Limited Partnership
By:/s/ John B. Joseph
_________________________________
John B. Joseph
General Partner November 14, 2001
By:/s/ Ronald R. White
_________________________________
Ronald R. White
General Partner November 14, 2001
By: CENTENNIAL CORPORATION
General Partner
By:/s/ Joel H. Miner
_________________________________
Joel H. Miner
Chief Financial Officer November 14, 2001