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 March 31, 1997
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 III RESTAURANTS INC.
Exact Name of Registrant as Specified in its Charter
13-3100473
New York 13-3178423
State or Other Jurisdiction I.R.S. Employer
of Incorporation or Organization Identification No.
Attn: Andre Anderson
3 World Financial Center, 29th Floor, New York, NY 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 March 31, At December 31,
1997 1996
Assets
Investment in Burger King Limited Partnership I $ (81,673) $ (48,060)
Liabilities and Stockholder's Deficit
Liabilities:
Distributions payable --- 40,763
Accrued expenses 18,375 10,000
Total Liabilities 18,375 50,763
Stockholder's Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 419,879 419,879
Accumulated deficit (520,927) (519,702)
Total Stockholder's Deficit (100,048) (98,823)
Total Liabilities and Stockholder's Deficit $ (81,673) $ (48,060)
BK I REALTY INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
For the three months ended March 31, 1997
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1996 $ (98,823) $1,000 $ 419,879 $ (519,702)
Net loss (1,225) --- --- (1,225)
Balance at March 31, 1997 $(100,048) $1,000 $ 419,879 $ (520,927)
BK I REALTY INC.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 1996
Income (Loss)
Equity in earnings of Burger King Limited Partnership I $ 7,150 $ 9,083
General and administrative expenses (8,375) ---
Income taxes --- (2,787)
Net income (loss) $(1,225) $ 6,296
Earnings per COPs unit (3,084 outstanding) $(.32) $2.36
BK I REALTY INC.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net income (loss) $ (1,225) $ 6,296
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in earnings of Burger King Limited Partnership I (7,150) (9,083)
Accrued expenses 8,375 ---
Contributions to capital --- 2,787
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership I 40,763 22,878
Cash distributions paid (40,763) (22,878)
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 1996 audited financial
statements within Form 10-K.
These unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1997 and the results of
operations for the three-month periods ended March 31, 1997 and 1996, the
statement of changes in stockholders' deficit for the three-month period ended
March 31, 1997 and the statements of cash flows for the three-month periods
ended March 31, 1997 and 1996. Results of operations for the three-month
period ended March 31, 1997 are not necessarily indicative of the results to be
expected for the full year.
Reclassification. Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
No significant events have occurred subsequent to fiscal year 1996, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
BK III RESTAURANTS INC.
BALANCE SHEETS At March 31, At December 31,
1997 1996
Assets
Investment in Burger King Limited Partnership III $ (6,178) $ 878
Liabilities and Stockholder's Deficit
Liabilities:
Distributions payable 12,110 25,648
Accrued expenses 18,375 10,000
Total Liabilities 30,485 35,648
Stockholder's Deficit:
Common Stock, $1.00 par value authorized,
issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 356,128 352,993
Accumulated deficit (393,791) (388,763)
Total Stockholder's Deficit (36,663) (34,770)
Total Liabilities and Stockholder's Deficit $ (6,178) $ 878
BK III RESTAURANTS INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
For the three months ended March 31, 1997
Additional
Common Paid-in Accumulated
Total Stock Capital Deficit
Balance at December 31, 1996 $(34,770) $1,000 $352,993 $(388,763)
Distributions (12,110) --- --- (12,110)
Capital contribution 3,135 --- 3,135 ---
Net income 7,082 --- --- 7,082
Balance at March 31, 1997 $(36,663) $1,000 $356,128 $(393,791)
BK III RESTAURANTS INC.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 1996
Income
Equity in earnings of Burger King Limited Partnership III $ 18,592 $ 19,795
General and administrative expenses (8,375) ---
Income taxes (3,135) (6,073)
Net income $ 7,082 $ 13,722
Earnings per COPs unit (3,084 outstanding) $2.65 $5.13
BK III RESTAURANTS INC.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net income $ 7,082 $ 13,722
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of Burger King Limited Partnership III (18,592) (19,795)
Accrued expenses 8,375 ---
Contributions to capital 3,135 6,073
Net cash provided by operating activities --- ---
Cash Flows From Financing Activities
Distributions from Burger King Limited Partnership III 25,648 20,205
Cash distributions paid (25,648) (20,205)
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 1996 audited financial statements within Form 10-K.
These unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1997 and the results of
operations for the three-month periods ended March 31, 1997 and 1996, the
statement of changes in stockholders' deficit for the three-month period ended
March 31, 1997 and the statements of cash flows for the three-month periods
ended March 31, 1997 and 1996. Results of operations for the three-month
period ended March 31, 1997 are not necessarily indicative of the results to be
expected for the full year.
Reclassification. Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
No significant events have occurred subsequent to fiscal year 1996, and no
material contingencies exist which would 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
COPs represents an assignment by the issuing general partners of some, but not
all, of their rights to participate in the profits, losses, and gains of, and
to receive distributions from, Burger King Limited Partnership I ("BK-I") and
Burger King Limited Partnership III ("BK-III") (BK-I and BK-III are
collectively referred to herein as 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; 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 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 Kingr restaurants (the
"Properties"), including the buildings and, in some cases, the underlying land.
The Properties are net leased 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.
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 BK-I's Properties located in Greenfield,
Wisconsin (the "Greenfield Property") has delayed BK-I's efforts to complete a
sale of the remaining Properties. BK-I had previously proposed site-specific
clean-up standards for the Greenfield Property to the Wisconsin Department of
Natural Resources (the "WDNR"), whose response has taken significantly longer
than originally anticipated. In light of the unanticipated lengthy delay, GP-I
has decided to commence marketing the Properties in the second quarter of 1997
for a bulk sale to a single purchaser. Upon the sale of the Properties, GP-I
intends to distribute the net sales proceeds in accordance with the terms of
BK-I's Partnership Agreement. While GP-I is hopeful that a sale of the
Properties can be completed during 1997, there can be no assurance that such
efforts will be successful.
GP-I believes that the potential environmental remediation costs associated
with the Greenfield Property should not exceed approximately $300,000 and,
therefore, in accordance with BK-I's Partnership Agreement, such amount has
been set aside from BK-I's net cash flow from operations to fund these costs.
If the proposed site-specific standards are approved by the WDNR prior to any
sale of the Properties, it is expected that any of such reserves spent on the
environmental remediation should be recovered from the proceeds of the eventual
sale of the Greenfield Property. Therefore, any remediation costs incurred
prior to a sale of the Greenfield Property will be capitalized and included in
the carrying value of the Greenfield Property. Alternatively, if the sale
occurs prior to the receipt of such approval, it is likely that any buyer will
attribute a discount to the value of the Greenfield Property in determining an
acceptable purchase price.
GP-I believes that BK-I should have sufficient assets with which to pay any
potential remediation costs on the Greenfield Property. In the unlikely event
that BK-I does not have sufficient assets with which to pay such costs, GP-I is
unaware of any Federal or State of Wisconsin environmental law potentially
imposing any personal liability on the unitholders of BK-I for their pro-rata
share of BK-I's remediation costs. Therefore, except as otherwise provided for
in BK-I's Partnership Agreement, unitholders of BK-I may be liable for BK-I's
obligations only to the extent of their respective capital contributions.
GP-III has decided to commence marketing BK-III's remaining 23 Properties in
the second quarter of 1997 for a bulk sale to a single purchaser. While GP-III
is hopeful that a sale of the Properties can be completed during 1997, there
can be no assurance that such efforts will be successful. Until all of
BK-III's remaining Properties are sold, BK-III intends to continue operating
the Properties and will distribute cash flow from operations to the partners in
accordance with the terms of BK-III's Partnership Agreement.
As a result of BK-I's and BK-III's intention to pursue a sale of their
respective Properties, the Properties have been reclassified on the
Partnership's respective balance sheets as real estate held for sale and are
carried at the lower of cost or fair value less any estimated costs to sell the
Properties, including any estimated environmental remediation costs.
At March 31, 1997, GP-I's investment in BK-I was $(81,673) and GP-III's
investment in BK-III was $(6,178), reflecting distributions in excess of equity
in earnings plus the initial investments.
COPs Holders receive their pro rata share of the cash distributions assigned by
GP-III on a quarterly basis and their pro rata share of the cash distributions
assigned by GP-I on an annual basis in accordance with the respective
Partnership Agreements. A quarterly cash distribution in the amount of $3.93
per Unit, representing COPs Holders' share of BK-III's cash flow from
operations for the first quarter of 1997, is anticipated to be paid on or about
May 31, 1997. Including this scheduled distribution, COPs Holders have
received total cash distributions of $976.12 per original $1,000 Unit since the
inception of COPs. This total includes distributions of net cash flow from
operations in the amount of $768.04 per Unit and distributions of net proceeds
from the sales of Properties in the amount of $208.08 per Unit. Distributions
of net sales proceeds represent returns of capital which have reduced the size
of each Unit from $1,000 to $791.92.
Results of Operations
The results of operations for the three-month period ended March 31, 1997 are
primarily attributable to the General Partners' investment in the Partnerships.
For the three-month period ended March 31, 1997, GP-I generated a net loss of
($1,225), compared to net income of $6,296 for the corresponding period in
1996. The decrease is primarily attributable to an $8,375 increase in general
and administrative expenses incurred by COPs. During the 1997 period, certain
expenses incurred by unaffiliated third-party service providers in servicing
GP-I, which were voluntarily absorbed by affiliates of GP-I in prior periods,
were reimbursed to its affiliates.
For the three-month period ended March 31, 1997, GP-III generated net income of
$7,082, compared to net income of $13,722 for the corresponding period in 1996.
The decrease is primarily attributable to an $8,375 increase in general and
administrative expenses incurred by COPs. During the 1997 period, certain
expenses incurred by unaffiliated third party service providers in servicing
GP-III, which were voluntarily absorbed by affiliates of GP-III in prior
periods, were reimbursed to its affiliates.
Same-store sales for BK-I's remaining nine Properties were $2,562,430 for the
three-month period ended March 31, 1997, representing a small decrease of
approximately 1% when compared to sales of $2,600,630 for the same period in
1996. The decrease in same-store sales is partly attributable to a decrease in
sales at one of BK-I's Properties during the first quarter of 1997 as a result
of construction which has temporarily impacted the traffic flow at that site.
Same-store sales for BK-III's remaining 23 Properties were $5,624,897 for the
three-month period ended March 31, 1997, representing an increase of
approximately 3% when compared to sales of $5,452,827 for the same period in
1996. Rental income received by the Partnerships from the franchisees at the
Properties is equal to the greater of a minimum annual base rent or 8.5% of the
Properties' annual food and beverage sales. Therefore, fluctuations in a
Property's sales volume can result in an increase or decrease in rent received
by the Partnerships from an individual Property.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the three month period covered by this
report.
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 III RESTAURANTS INC.
BY: BK I REALTY INC.
BK III RESTAURANTS INC.
Registrant
Date: May 15, 1997 BY: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: President, Director and
Chief Financial Officer