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
or
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: 33-1624
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
Exact Name of Registrant as Specified in its Charter
13-3100473
13-3143115
New York 13-3178423
State or Other Jurisdiction I.R.S. Employer
of Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285-2900
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
BK I REALTY INC.
Balance Sheets At September 30, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership I $ (58,068) $ (62,210)
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 27,187 22,878
Total Liabilities 27,187 22,878
Stockholders' Deficit :
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 412,524 409,699
Accumulated deficit (498,779) (495,787)
Total Stockholders' Deficit (85,255) (85,088)
Total Liabilities and Stockholders' Deficit $ (58,068) $ (62,210)
BK I REALTY INC.
Statement of Changes in Stockholders' Deficit
For the nine months ended September 30, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $(85,088) $1,000 $409,699 $(495,787)
Distributions (30,760) --- --- (30,760)
Capital contribution 2,825 --- 2,825 ---
Net income 27,768 --- --- 27,768
Balance at September 30, 1996 $(85,255) $1,000 $412,524 $(498,779)
BK I REALTY INC.
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Equity in earnings of
Burger King Limited Partnership I $9,707 $7,544 $30,593 $40,415
Income taxes (896) (2,315) (2,825) (12,400)
Net Income $8,811 $5,229 $27,768 $28,015
Per COP unit
(3,084 outstanding) $2.28 $1.36 $7.20 $7.27
BK I REALTY INC.
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 27,768 $ 28,015
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership I (30,593) (40,415)
Contributions to capital 2,825 12,400
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership I 26,451 94,609
Cash distributions paid (26,451) (94,609)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK I REALTY INC.
Notes to the Financial Statements
These unaudited financial statements should be read in conjunction with
Certificates of Participation's ("COPs") annual 1995 audited financial
statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996 and the results of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995, the
statement of changes in stockholders' deficit for the nine-month period ended
September 30, 1996 and the statements of cash flows for the nine- month periods
ended September 30, 1996 and 1995. Results of operations for the three-month
and nine-month periods ended September 30, 1996 are not necessarily indicative
of the results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
On October 1, 1996, Burger King Limited Partnership I completed the sale of a
property located in Wichita, Kansas to the franchisee operating such property.
In accordance with COPs' Partnership Agreement, BK I Realty Inc. intends to
include a portion of the net proceeds from this sale in COPs' 1996 fourth
quarter distribution which is anticipated to be paid in the first quarter of
1997.
BK II PROPERTIES INC.
Balance Sheets At September 30, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership II $ 53,472 $ 23,371
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 53,472 84,499
Total Liabilities 53,472 84,499
Stockholders' Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 514,469 443,147
Accumulated deficit (515,469) (505,275)
Total Stockholders' Deficit --- (61,128)
Total Liabilities and Stockholders' Deficit $ 53,472 $ 23,371
BK II PROPERTIES INC.
Statement of Changes in Stockholders' Deficit
For the nine months ended September 30, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $ (61,128) $1,000 $443,147 $(505,275)
Distributions (711,156) --- --- (711,156)
Capital Contribution 71,322 --- 71,322 ---
Net income 700,962 --- --- 700,962
Balance at September 30, 1996 $ --- $1,000 $514,469 $(515,469)
BK II PROPERTIES INC.
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Equity in earnings of Burger
King Limited Partnership II $(4,967) $26,869 $772,284 $78,186
Income taxes 458 (9,619) (71,322) (25,364)
Net Income (Loss) $(4,509) $17,250 $700,962 $52,822
Per COP unit
(3,084 outstanding) $(1.17) $4.47 $181.83 $13.70
BK II PROPERTIES INC.
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 700,962 $ 52,822
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership II (772,284) (78,186)
Contributions to capital 71,322 25,364
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership II 742,183 93,618
Cash distributions paid (742,183) (93,618)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK II PROPERTIES INC.
Notes to the Financial Statements
These unaudited financial statements should be read in conjunction with COPs'
annual 1995 audited financial statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996 and the results of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995, the
statements of changes in stockholders' deficit for the nine-month period ended
September 30, 1996 and the statements of cash flows for the nine- month periods
ended September 30, 1996 and 1995. Results of operations for the three-month
and nine-month periods ended September 30, 1996 are not necessarily indicative
of the results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Burger King Limited Partnership II ("BK-II") agreed, subject to the
satisfaction of certain conditions, to sell BK-II's remaining 29 restaurant
properties (the "Properties") to U.S. Restaurant Properties Operating L.P., a
Delaware limited partnership (the "Buyer"), pursuant to an Agreement of
Purchase and Sale, dated as of October 11, 1995, as amended by the First
Amendment to Agreement of Purchase and Sale dated as of January 9, 1996 and
the Second Amendment to Agreement of Purchase and Sale dated as of May 1, 1996
(as amended, the "Purchase Agreement"). Pursuant to the terms of the Purchase
Agreement, the Buyer agreed to acquire the Properties for consideration in the
amount of $17,325,000 in cash (the "Purchase Price"), subject to adjustments
and prorations for base and percentage rents as well as certain other charges
payable in respect of the Properties and adjustments in respect of certain
closing costs (the "Sale").
In connection with the Sale and in accordance with the terms of BK-II's
partnership agreement, a proxy statement (the "Proxy") was mailed to limited
partners of BK-II (the "BK-II Unitholders") on March 25, 1996, describing the
terms of the Proposed Sale and presenting the BK-II Unitholders with the
opportunity to call a meeting to consider whether to disapprove the Sale. In
order to effect a disapproval of the Sale, BK-II Unitholders holding 10% or
more in interest of BK-II's outstanding limited partnership interests ("BK-II
Units") were required to submit written requests by April 30, 1996 to call for
a meeting of BK-II Unitholders to consider whether to disapprove the Sale.
BK-II did not receive written requests aggregating an amount equal to or in
excess of the required 10% in interest of the outstanding BK-II Units required
to call a meeting of the BK-II Unitholders to disapprove the Sale. As a
result, no meeting was convened, and BK II Properties Inc. ("GP- II"), the
general partner of BK-II, completed the Sale on May 10, 1996.
In accordance with the terms of COPs' partnership agreement, a portion of the
net proceeds from the Sale was used to make a special distribution in the
amount of $171.35 per COPs' Unit to the limited partners of COPs ("COPs
Holders") on August 30, 1996. After establishing sufficient reserves to pay
BK-II's remaining general and administrative expenses and other liabilities,
GP-II currently anticipates that BK-II should have additional cash available
to fund a final liquidating distribution to the partners of BK-II, including
the COPs Holders, in the fourth quarter of 1996. GP-II is currently in the
process of winding-up the affairs of BK-II which is expected to be dissolved
by the end of 1996.
BK III RESTAURANTS INC.
Balance Sheets At September 30, At December 31,
1996 1995
Assets
Investment in Burger King Limited Partnership III $ (1,414) $ (2,424)
Liabilities and Stockholders' Deficit
Liabilities:
Distributions payable 21,543 20,205
Total liabilities 21,543 20,205
Stockholders' Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 333,670 327,758
Accumulated deficit (357,627) (351,387)
Total Stockholders' Deficit (22,957) (22,629)
Total Liabilities and Stockholders' Deficit $ (1,414) $ (2,424)
BK III RESTAURANTS INC.
Statement of Changes in Stockholders' Deficit
For the nine months ended September 30, 1996
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1995 $ (22,629) $1,000 $327,758 $(351,387)
Distributions (64,346) --- --- (64,346)
Capital Contribution 5,912 --- 5,912 ---
Net income 58,106 --- --- 58,106
Balance at September 30, 1996 $(22,957) $1,000 $333,670 $(357,627)
BK III RESTAURANTS INC.
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Equity in earnings of Burger
King Limited Partnership III $ 21,371 $ 21,358 $ 64,018 $ 60,546
Income taxes (1,973) (6,553) (5,912) (18,576)
Net Income $ 19,398 $ 14,805 $ 58,106 $ 41,970
Per COP unit
(3,084 outstanding) $5.03 $3.84 $15.07 $10.89
BK III RESTAURANTS INC.
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 58,106 $ 41,970
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership III (64,018) (60,546)
Contributions to capital 5,912 18,576
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership III 64,346 64,609
Cash distributions paid (64,346) (64,609)
Net cash provided by financing activities --- ---
Net change in cash --- ---
Cash, beginning of period --- ---
Cash, end of period $ --- $ ---
BK III RESTAURANTS INC.
Notes to the Financial Statements
These unaudited financial statements should be read in conjunction with COPs'
annual 1995 audited financial statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996 and the results of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995, the
statement of changes in stockholders' deficit for the nine-month period ended
September 30, 1996 and the statements of cash flows for the nine- month periods
ended September 30, 1996 and 1995. Results of operations for the three-month
and nine-month periods are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Certificates of Participation ("COPs") represents an assignment by the issuing
general partners of some, but not all, of the profits, losses, and gains of,
and distributions from, Burger King Limited Partnership I ("BK-I"), Burger King
Limited Partnership II ("BK-II") and Burger King Limited Partnership III
("BK-III") (collectively, the "Partnerships"). Each of the Partnerships is a
New York limited partnership. The issuing general partners are BK I Realty
Inc. ("GP-I"), which is the general partner of BK-I; BK II Properties Inc.
("GP-II"), which is the general partner of BK-II; and BK III Restaurants Inc.
("GP-III"), which is the general partner of BK-III (collectively, the "General
Partners"). Each of the General Partners is a New York corporation. Each COPs
unit consists of one BK-I COPs unit, one BK-II COPs unit and one BK-III COPs
unit. COPs commenced operations on January 17, 1986, and the COPs units were
assigned as of December 1, 1985.
The Partnerships were formed to acquire and hold Burger King restaurants (the
"Properties"), including the restaurant buildings and, in some cases, the
underlying land. The Properties are net leased on a long-term basis to
franchisees of Burger King Corporation ("BKC").
The General Partners do not engage in the sale of goods or services. The
General Partners' only assets are their respective investments in the
Partnerships.
On October 1, 1996, BK-I completed a sale of its Property located in Wichita,
Kansas to the franchisee operating such Property. In accordance with COPs'
Partnership Agreement, GP-I intends to include a portion of the net proceeds
from this sale in COPs' 1996 fourth quarter distribution which is anticipated
to be paid in the first quarter of 1997. GP-I has had discussions with a
number of institutions and other third parties interested in purchasing BK-I's
nine remaining Properties. However, an environmental issue at one of the
Properties, located in Greenfield, Wisconsin (the "Greenfield Property"), has
delayed efforts to complete a bulk sale of the remaining Properties. In May
1995, BK-I proposed site-specific clean-up standards to the Wisconsin
Department of Natural Resources ("WDNR"), whose response has taken longer than
originally anticipated. BK-I remains in contact with the WDNR in an effort to
obtain approval for site-specific clean-up standards in order to establish a
remediation plan for the Greenfield Property. Once the remediation issue is
resolved and costs associated with an approved remediation plan have been
determined, GP-I should be in a better position to attempt to sell the
remaining Properties. Upon such sale, GP-I intends to distribute the net sales
proceeds in accordance with the terms of BK-I's Partnership Agreement.
BK-II agreed, subject to the satisfaction of certain conditions, to sell
BK-II's remaining 29 Properties to the Buyer, pursuant to the Purchase
Agreement. Pursuant to the terms of the Purchase Agreement, the Buyer agreed
to acquire the Properties for $17,325,000 in cash, subject to adjustments and
prorations for base and percentage rents as well as certain other charges
payable in respect of the Properties and adjustments in respect of certain
closing costs. On May 10, 1996, the sale of BK-II's remaining Properties was
completed (the "Sale"). In accordance with the terms of COPs' partnership
agreement, a portion of the net proceeds of the Sale was used to make a special
distribution in the amount of $171.35 per COPs' Unit to COPs Holders on August
30, 1996. After establishing sufficient reserves to pay BK-II's remaining
general and administrative expenses and other liabilities, GP-II currently
anticipates that BK-II should have additional cash available to fund a final
liquidating distribution to the partners of BK-II, including the COPs Holders,
in the fourth quarter of 1996. GP-II is currently in the process of winding-up
the affairs of BK-II which is expected to be dissolved by the end of 1996.
After a careful evaluation of existing market conditions, GP-III has decided to
market BK-III's remaining 24 Properties for sale. GP-III currently plans to
commence its marketing efforts in the fourth quarter of 1996. Until all of the
Properties are sold, BK- III intends to continue operating the Properties and
distributing cash flow from operations to the partners in accordance with the
terms of BK-III's partnership agreement.
At September 30, 1996, GP-I's investment in BK-I was $(58,068) and GP-III's
investment in BK-III was $(1,414), reflecting distributions in excess of equity
in earnings plus the initial investments. GP-II's investment in BK-II was
$53,472 at September 30, 1996, reflecting COPs' share of BK-II's remaining
cash.
Results of Operations
The results of operations for the three-month and nine-month periods ended
September 30, 1996 are primarily attributable to the General Partners'
respective investments in the Partnerships.
For the three-month and nine-month periods ended September 30, 1996, GP-I
generated net income of $8,811 and $27,768, respectively, compared to $5,229
and $28,015, respectively, for the corresponding periods in 1995. The increase
for the three- month period is primarily attributable to a reduction in general
and administrative expenses incurred by BK-I during the 1996 period, which was
primarily due to a decrease in environmental consulting costs and other
professional fees incurred in connection with the Greenfield Property.
For the three-month and nine-month periods ended September 30, 1996, GP-II
generated net income (loss) of $(4,509) and $700,962, respectively, compared to
$17,250 and $52,822, respectively, for the corresponding periods in 1995. The
decrease for the three- month period is primarily attributable to the Sale,
which was completed on May 10, 1996. The increase for the nine-month period is
attributable to the gain resulting from the Sale.
For the three-month and nine-month periods ended September 30, 1996, GP-III
generated net income of $19,398 and $58,106, respectively, compared to $14,805
and $41,970, respectively, for the corresponding periods in 1995. The increase
for both periods is primarily attributable to an increase in rental income
generated by BK-III's Properties during the 1996 periods as a result of an
increase in food and beverage sales at the Properties.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27.1) Financial Data Schedule for BK I Realty Inc.
(27.2) Financial Data Schedule for BK II Properties Inc.
(27.3) Financial Data Schedule for BK III Restaurants Inc.
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 1996
SIGNATURES
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.
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
BY: BK I REALTY INC.
BK II PROPERTIES INC.
BK III RESTAURANTS INC.
Registrant
Date: November 13, 1996 BY: /s/ Rocco F. Andriola
Rocco F. Andriola
President, Director and
Chief Financial Officer