SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File No. 033-53455-03
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CRC-II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3213679
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(State of Organization) (I.R.S. Employer
Identification No.)
9330 BALBOA AVENUE, SAN DIEGO, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 571-2470
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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
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CRC-II LIMITED PARTNERSHIP
UNAUDITED BALANCE SHEETS
ASSETS
September 30, December 31,
1994 1993
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Cash . . . . . . . . . . . . . . . . . . . . $ 100 $ 100
Accrued interest receivable. . . . . . . . . 970,784 --
Sinking fund deposits. . . . . . . . . . . . 425,240 --
Long-term notes receivable . . . . . . . . . 37,952,632 --
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TOTAL. . . . . . . . . . . . . . . . . . . . $39,348,756 $ 100
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LIABILITIES AND PARTNERS' CAPITAL
Accrued interest payable . . . . . . . . . . $ 970,784 $ --
Sinking fund liability . . . . . . . . . . . 425,240 --
Long-term notes payable. . . . . . . . . . . 37,952,632 --
Partners' Capital:
General Partner. . . . . . . . . . . . . . 1 1
Limited Partner. . . . . . . . . . . . . . 99 99
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Total Partners' Capital. . . . . . . . . 100 100
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TOTAL. . . . . . . . . . . . . . . . . . . . $39,348,756 $ 100
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See accompanying notes to financial statements.
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CRC-II LIMITED PARTNERSHIP
UNAUDITED STATEMENTS OF OPERATIONS
Three months Nine months
ended ended
September 30, 1994 September 30, 1993
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Revenues:
Interest income. . . . . . . . . . . . $1,023,493 $3,038,120
Administrative fee income. . . . . . . 6,250 18,750
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1,029,743 3,056,870
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Expenses:
Interest expense . . . . . . . . . . . 1,023,493 3,038,120
Administrative fee expense . . . . . . 6,250 18,750
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1,029,743 3,056,870
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Net earnings . . . . . . . . . . . . . . $ -- $ --
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See accompanying notes to financial statements.
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CRC-II LIMITED PARTNERSHIP
UNAUDITED STATEMENTS OF CASH FLOWS
Nine months
ended
September 30, 1994
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Cash flows from operations:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ --
Increase in accrued interest receivable. . . . . . . . . . (970,784)
Increase in accrued interest payable . . . . . . . . . . . 970,784
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Cash flows provided by operations. . . . . . . . . . . . --
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Cash flows from investing activities:
Long-term notes receivable purchased . . . . . . . . . . . (37,794,505)
Increase in sinking fund deposits. . . . . . . . . . . . . (425,240)
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Cash flows used in investing activities. . . . . . . . . (38,219,745)
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Cash flows from financing activities:
Proceeds from issuance of
long-term notes payable. . . . . . . . . . . . . . . . . 37,794,505
Increase in sinking fund liability . . . . . . . . . . . . 425,240
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Cash flows provided by
financing activities . . . . . . . . . . . . . . . . . 38,219,745
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Net increase in cash . . . . . . . . . . . . . . . . . . . . --
Cash at beginning of period. . . . . . . . . . . . . . . . . 100
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Cash at end of period. . . . . . . . . . . . . . . . . . . . $ 100
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See accompanying notes to financial statements.
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CRC-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the audited financial statements
for and as of March 31, 1994. The Company had no operations in the prior
year.
2. ORGANIZATION
CRC-II Limited Partnership ("CRC-II") and another similar special purpose
limited partnership, CRC-I Limited Partnership ("CRC-I"), (collectively,
"CRC") were organized December 8, 1993 to (i) acquire, own, hold and sell or
transfer estates for years in various existing and to-be-constructed
Foodmaker, Inc. restaurant properties, (ii) sell mortgage notes to the FM
1993A Corp. accompanied by a pledge of the foregoing estates for years, and
(iii) lease the restaurant properties to Foodmaker. CRC-I and CRC-II may not
engage in any other activities other than those required to accomplish the
foregoing.
FM 1993A Corp. was incorporated in the State of Delaware on December 22,
1993 for the purpose of: (i) issuing and selling debt obligations ("Notes"),
as principal and as agent for CRC-I and CRC-II, Massachusetts limited
partnerships, and (ii) acquiring, owning and holding obligations of CRC-I and
CRC-II as well as accounts, investments and other property to be pledged as
collateral for the Notes. FM 1993A Corp. may not engage in any other
activities other than those required to accomplish the foregoing.
3. SIGNIFICANT TRANSACTIONS
On January 5, 1994, in a private placement transaction, FM 1993A Corp.
issued and sold $70 million aggregate principal amount of notes (the "Private
Placement Notes") for $68.9 million, less offering expenses of $2.5 million,
which proceeds were used to purchase for $66.4 million, notes receivable from
CRC-I and CRC-II with an aggregate principal amount of $70 million
(collectively, the "CRC Notes"). In September 1994, the Private Placement
Notes were exchanged for substantially identical registered notes (the
"Notes). The Notes are due November 1, 2003, payable interest only at the
rate of 9.75% per annum semi-annually on July 1 and January 1 each year, with
a mandatory prepayment of 50% of the original principal on the first business
day of January 2003. The CRC Notes' payment and interest terms are equivalent
to and structured to coincide with the Notes such that funds will be available
to make payments on the Notes. In addition, the CRC Notes require semi-annual
sinking fund payments to a trustee of $747 thousand, which will be utilized to
partially fund the 50% prepayment in January 2003. CRC-I and CRC-II used the
proceeds of the CRC Notes (of which approximately 43% relates to CRC-I and 57%
to CRC-II) to purchase estates for years in various Foodmaker restaurant
properties and, in a transaction accounted for as a financing, will lease back
such properties to Foodmaker on terms which will provide the funds necessary
to make the CRC Notes' payments. The Notes are secured by, among other
things, the CRC Notes, the CRC leases to Foodmaker, first priority liens on
the underlying properties and any sinking fund or other amounts held in trust.
CRC's only source of liquidity is collection of Foodmaker's payments on
the CRC leases. If Foodmaker were to fail to make payments to CRC on the
financing leases,
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CRC would be unable to make payments on the CRC Notes. CRC would then be
required to initiate proceedings to gain possession of, liquidate or obtain
tenants for the restaurant properties. Although CRC-I and CRC-II believed at
the time of the transaction that the value of the restaurant properties and
other collateral would be adequate to secure the CRC leases, there can be no
assurance that such collateral will maintain its value or that, if necessary,
it can be liquidated in sufficient amounts or at times required to satisfy all
scheduled principal and interest payments.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
CRC-I and CRC-II limited partnerships were organized in December 1993
under the laws of the Commonwealth of Massachusetts, and FM 1993A Corp., a
special purpose corporation, was incorporated in the State of Delaware in
December 1993, all for the benefit of Foodmaker in connection with the
financing of certain of its restaurant properties. Operations commenced on
January 4, 1994 with the issuance and sale by FM 1993A Corp., in a private
placement transaction, of $70 million aggregate principal amount of notes.
The net sales proceeds from the sale of the Private Placement Notes were
approximately $68.9 million, which proceeds were used to purchase the CRC-I
Note, issued in the principal amount of approximately $30.2 million, and the
CRC-II Note, issued in the principal amount of approximately $39.8 million,
for approximately $66.4 million (the total acquisition cost of the estates for
years purchased by CRC-I and CRC-II). The closing costs paid by the FM 1993A
Corp. were approximately $2.5 million. In September 1994, the Private
Placement Notes were exchanged for substantially identical registered notes.
The Notes are due November 1, 2003, payable interest only at the rate of 9.75%
per annum semi-annually on the first business day of each January and July and
continuing through the first business day of July 2003. A mandatory
prepayment of 50% of the original balance of the Notes is due on the first
business day of January 2002. The CRC Notes' payment and interest terms are
equivalent to and structured to coincide with the Notes such that funds will
be available to make payments on the Notes. In addition, the CRC Notes
require semi-annual sinking fund payments to a trustee of approximately $.7
million, which will be utilized to partially fund the 50% prepayment due in
January 2002. The proceeds of the CRC Notes (of which approximately 43%
relates to CRC-I and 57% to CRC-II) have been and will be used by CRC-I and
CRC-II to purchase estates for years in various Foodmaker restaurant
properties and, in a transaction accounted for as a financing, CRC-I and
CRC-II will lease back such properties to Foodmaker on terms which will
provide the funds required to make the necessary payments on CRC Notes. The
Notes are secured by, among other things, the CRC Notes, the CRC leases to
Foodmaker, first priority liens on the leased properties and any sinking fund
or other amounts held in trust.
CRC-I and CRC-II reflect the financing lease obligations of Foodmaker as
9.75% notes receivable and have equivalent notes payable to FM 1993A Corp.
(the CRC Notes), with face amounts and net proceeds, respectively, of
approximately $30.2 million and approximately $28.6 million for CRC-I and
approximately $39.8 million and approximately $37.8 million for CRC-II. As a
result, interest income and expense, inclusive of amortization of
approximately $.2 million of original issue discount, will each be
approximately $2.9 million for CRC-I and approximately $3.9 million for
CRC-II, respectively. For the three and nine months ended September 30, 1994,
slightly less than one-fourth and three-fourths, respectively, of the annual
amounts are reflected as interest income and expense, since the notes were
issued a few days after the beginning of the periods.
No provision for income taxes has been made as the liability for such
taxes is that of the partners rather than the partnership.
Liquidity and Capital Resources
The only source of liquidity for CRC-I and CRC-II is collection of
scheduled payments by Foodmaker on the CRC leases. The basic amounts payable
on the CRC leases are equal to, and timed to coincide with, the payments
required to be made on the CRC Notes. The CRC leases and CRC Notes require
sinking fund payments to the Trustee, which, in addition to the value of the
leased properties, should provide an increasing amount of security through
year nine of the Notes. If Foodmaker were to fail to make payments on the CRC
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leases, CRC-I and CRC-II would be unable to make payments on the CRC Notes.
FM 1993A Corp. and/or CRC-I and CRC-II would then be required to initiate
proceedings to gain possession of, liquidate or obtain tenants for the leased
properties. Although CRC-I and CRC-II believed at the time of the transaction
that the value of the restaurant properties and other collateral would be
adequate to secure the CRC leases, there can be no assurance that such
collateral will maintain its value or that, if necessary, it can be liquidated
in sufficient amounts or at times required to satisfy all scheduled principal
and interest payments.
PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
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27 Financial Data Schedule (included only with electronic
filing)
(b) Reports on Form 8-K - None.
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SIGNATURE
Pursuant to the requirements 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 and in the capacities indicated.
CRC-II LIMITED PARTNERSHIP
By: CRC-II Corp., General Partner
By: CHARLES W. DUDDLES
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Charles W. Duddles,
President, Treasurer and Clerk
(Duly Authorized Signatory)
Date: November 14, 1994
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