-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IiE1ACGGZSqE9t44g6J+unh1GouiS5RiqTCaESze4Ab9kx6vlX/FDqYCdRWS17bq aOzgfY2zhLw05xOk8XuYSQ== 0000950147-99-000358.txt : 19990416 0000950147-99-000358.hdr.sgml : 19990416 ACCESSION NUMBER: 0000950147-99-000358 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARTICIPATING INCOME PROPERTIES 1986 LP CENTRAL INDEX KEY: 0000797977 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 860570015 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16720 FILM NUMBER: 99594528 BUSINESS ADDRESS: STREET 1: 17207 N PERIMETER DR STREET 2: THE PERIMETER CENTER CITY: SCOTTSDALE STATE: AZ ZIP: 85255 BUSINESS PHONE: 6025854500 MAIL ADDRESS: STREET 1: 17207 N PERIMETER DR CITY: SCOTTSDALE STATE: AZ ZIP: 85255-5402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FFCA INVESTOR SERVICES CORP 86-B CENTRAL INDEX KEY: 0000797978 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 860557949 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16721 FILM NUMBER: 99594529 BUSINESS ADDRESS: STREET 1: 17207 N PERIMETER DR STREET 2: C/O FINANCIAL CTR CITY: SCOTTSDALE STATE: AZ ZIP: 85255 BUSINESS PHONE: 6025854500 MAIL ADDRESS: STREET 1: 17207 N PERIMETER DR CITY: SCOTTSDALE STATE: AZ ZIP: 85255-5402 10-K405 1 ANNUAL REPORT FOR THE YEAR ENDED 12/31/98 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 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 0-16720 Commission File Number 0-16721 PARTICIPATING INCOME PROPERTIES 1986, L.P. and FFCA INVESTOR SERVICES CORPORATION 86-B --------------------------------------- (Exact Name of Co-Registrants as Specified in Their Organizational Documents) Delaware 86-0570015 - --------------------- ----------------------- (Partnership State of (Partnership I.R.S. Organization) Employer Identification No.) Delaware 86-0557949 - --------------------- ----------------------- (Corporation State of (Corporation I.R.S. Incorporation) Employer Identification No.) The Perimeter Center 17207 North Perimeter Drive Scottsdale, Arizona 85255 - ---------------------------------------- ----------------------- (Address of Principal Executive Offices) (Zip Code) Co-Registrants' telephone number, including area code: (602) 585-4500 Securities registered Pursuant to Section 12(b) of the Act: None Securities pursuant to Section 12(g) of the Act: Limited Partnership Interests ----------------------------- (Title of Class) Limited Partnership Depository Units ------------------------------------ (Title of Class) Indicate by check mark whether the Co-Registrants (1) have 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 Co-Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Co-Registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the Co-Registrants: Not applicable. The limited partnership depository units (the "Units") are not currently traded in any market. Therefore, there is no market price or average bid and asked price for the Units within 60 days prior to the date of this filing. DOCUMENTS INCORPORATED BY REFERENCE None PART I ITEM 1. BUSINESS. Participating Income Properties 1986, L.P., a Delaware limited partnership (the "Partnership"), was organized on June 23, 1986 under the Delaware Revised Uniform Limited Partnership Act. The Partnership serves as a co-general partner of FFCA/PIP 1986 Property Company, a Delaware general partnership (the "Company"), which was organized to acquire new and existing travel plazas, including land, buildings and equipment, to be leased to Flying J Inc. and to franchisees of Flying J Franchise Inc. The other co-general partner of the Company is Perimeter Center Management Company ("PCMC"). The Partnership invests in the travel plazas through the Company to avoid burdensome state filing requirements. The Partnership is entitled to 99.9% of all of the profits, losses and disbursable cash of the Company. Under the terms of the First Restated Agreement of Partnership of the Company, PCMC is entitled to the remaining 0.1% of the profits, losses and disbursable cash of the Company. The general partner of the Partnership is FFCA Management Company Limited Partnership, a Delaware limited partnership (the "General Partner"). FFCA Investor Services Corporation 86-B, a Delaware corporation and wholly-owned subsidiary of PCMC, which is the corporate general partner of the General Partner, was incorporated on June 23, 1986, to serve as the assignor and initial limited partner of the Partnership and the owner of record of the limited partnership interests in the Partnership. The limited partnership interests are assigned by FFCA Investor Services Corporation 86-B to investors in the Partnership. FFCA Investor Services Corporation 86-B conducts no other business activity. The Partnership and FFCA Investor Services Corporation 86-B are referred to collectively as the "Co-Registrants." On October 10, 1986, the Co-Registrants commenced a public offering of $75,000,000 in limited partnership depository units (the "Units") in the Partnership pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933, as amended. The Co-Registrants sold a total of 51,687 Units to investors at $1,000 per Unit for a total of $51,687,000. Purchasers of the Units (the "Holders") acquired the following number of Units from FFCA Investor Services Corporation 86-B on each of the following dates: 19,865 Units on January 15, 1987; and 31,822 Units on April 16, 1987. Subsequent to that date, no Holder has made any additional capital contribution. The Holders share in the benefits of ownership of the Partnership's assets, including its interest in the Company's real and personal property investments, according to the number of Units held, in substantially the same manner as limited partners of the Partnership. After deducting organizational and offering expenses, including sales commissions, the net proceeds of the offering of the Units, $45,613,778, were fully invested by the Partnership, through its investment in the Company, as of September 1988, in eleven "Flying J Travel Plazas" located in nine states. "Flying J Travel Plaza" facilities offer a full-service operation, generally including fuel facilities, a restaurant, convenience store and other amenities for use by the trucking industry and traveling public in general. As of December 31, 1998, seven of the travel plazas were leased to CFJ Properties, a general partnership formed pursuant to a joint venture between Flying J Inc., through its subsidiary, Big West Oil Company ("Big West"), and Douglas Oil Company of California, a subsidiary of Conoco Inc. ("Douglas Oil"), one of the travel plazas was leased to Flying J Inc. and the remaining two were leased to franchisees of Flying J Franchise Inc. ("FJFI"), a subsidiary of Flying J Inc. and the franchisor of Flying J Travel Plazas. The Partnership and the Company are not affiliated with CFJ Properties, Flying J Inc. or FJFI. The Partnership entered into purchase agreements with Flying J Inc. on September 4, 1998 to sell substantially all of the Partnership's assets (those assets comprising the travel plazas) for cash of $45,508,869 (the original sales price of $48,534,216 for the ten travel plazas, less the Ellensburg, Washington travel plaza referred to below). The limited partners received a consent solicitation statement describing the proposed transaction and an affirmative vote of investors holding a majority of the partnership units was achieved on October 26, 1998. The sale transaction was completed on March 22, 1999 and the Partnership recognized a gain of approximately $24.9 million on the sale. The net cash proceeds from this sale are being held in U.S. government securities pending distribution to investors. The lessee of the Ellensburg, Washington travel plaza has signed a purchase agreement dated March 30, 1999 related to the remaining travel plaza for a sales price of $3,025,347, which will result in a pro forma gain of approximately $1.8 million. The sale of the travel plazas represents the disposition of substantially all of the Partnership's assets and the Partnership has no further liability in connection with any of the travel plazas sold. A subordinated real estate disposition fee of approximately $1.5 million will be paid to the General Partner related to the sales of the travel plazas. Upon consummation of the sale of the Ellensburg, Washington travel plaza, the General Partner will begin the process of winding down the affairs of the Partnership that includes liquidation and distribution of assets to the investors in accordance with the Partnership agreement. The liquidation of the Partnership is expected to be completed in June 1999. As part of the sale of the travel plazas, approximately $320,000 (representing less than one percent of the aggregate sales price) may, at the General Partner's discretion, be deposited in a trust (the "Trust Fund") with a bank. The Trust Fund, including interest income, would be available to satisfy claims made directly or indirectly with respect to the liquidation, dissolution and winding up of the affairs of the Partnership during a period of up to 36 months following the liquidation date. At the end of this period, final decisions will be made in settlement of all disputed claims, if any, and the remaining balance of the Trust Fund will be disbursed to the investors. Real estate owned by the Company at December 31, 1998 was leased for a term of 20 years. Lessees paid the Company annual rental payments (in monthly installments) equal to 10% of the Company's total investment in properties. As additional rent, the Company was entitled to receive a portion of the operating revenues of the lessees equal to (a) 4% of annual gross receipts derived from the travel plaza facility, excluding fuel sales; (b) 3/10 of $.01 per gallon of fuel sold; and (c) 4% of all amounts received by the lessee for any lease year pursuant to any sublease by the lessee of any part of its leased premises. All leases, except for the lease on the Ellensburg, Washington travel plaza, were terminated on March 22, 1999 upon sale of the related travel plazas. During 1998, CFJ Properties and Flying J Inc. together contributed approximately 88% of the Company's total rental and participating rental revenue for the year. Flying J Inc., through its subsidiary Big West, entered into a joint venture with Douglas Oil to form CFJ Properties in February 1991. Flying J Inc. (and subsidiaries) is a fully integrated oil and gas company that is engaged in the production, refining, transportation, wholesaling and retail marketing of petroleum products and other services through its travel plazas and gasoline stations. Flying J Inc. operates all of CFJ Properties' travel plazas and related facilities, which included 78 interstate travel plaza properties as 2 of January 31, 1998. As of December 31, 1998, the Company owned seven of these properties. With the exception of the Butte, Montana travel plaza, Flying J Inc. assigned its leasehold interests in the travel plazas owned by the Company to CFJ Properties and was released by the Company with respect to its obligations under those leases. The Partnership's leases with CFJ Properties were with full recourse to the assets of CFJ Properties, but without recourse to Big West or Douglas Oil. A default on one lease constituted a default on all other leases to the same lessee by the Partnership and two other partnerships sponsored by affiliates of the General Partner, all of whose travel plazas were leased to CFJ Properties, Flying J Inc. or franchisees of FJFI. For the fiscal year ended January 31, 1998, CFJ Properties reported net income of $16 million on revenues of $1.3 billion. Revenues rose 7% from $1.2 billion in the prior year. The higher revenues resulted from the opening of six new units and increases in fuel prices. Net income increased from $1.8 million in the prior year due to higher gross profit margins. During the fiscal year ended January 31, 1998, CFJ Properties reported $41.7 million in net cash provided by operating activities. This cash, along with the cash provided by financing activities, was used to make capital expenditures. As of January 31, 1998, CFJ Properties reported cash balances of approximately $3.8 million, with liquidity supported by net cash provided by operating activities and a $150 million revolving line of credit with a bank. As of January 31, 1998, CFJ Properties reported partners' capital of $155.5 million and total assets of $463.7 million. CFJ Properties leases travel plazas and equipment under non-cancelable operating leases, which generally expire at various dates over the next 9 to 15 years. Payments under these leases were $17.5 million in fiscal 1998 and $17.3 million in fiscal 1997, including percentage lease payments. The nine properties operated by CFJ Properties and Flying J Inc., and leased from the Partnership, generated a combined fuel and non-fuel gross profit (including other income) of approximately $27.5 million during the fiscal year ended January 31, 1998 as compared to $24.4 million in fiscal year 1997. Total travel plaza unit-level income for these nine properties (before depreciation and allocated corporate overhead) totaled approximately $2.8 million in 1998 with five of the nine properties reporting positive unit-level income. The remaining four properties reported net losses primarily due to higher expenses. The combined result of the travel plaza unit-level income before depreciation and allocated corporate overhead was up from $700,000 in the prior year due largely to an increase in fuel and non-fuel sales volumes and an increase in fuel prices. Volumes and margins were reduced in 1997 due to CFJ's curtailment of its relationship with a third party billing company in June 1996. For CFJ Properties' fiscal year ended January 31, 1998, the average unit-level base and participating rents approximated 14.4% of the original cost of these properties. Those properties that each represent over 10% of the Partnership's total assets at December 31, 1998 are located in Eloy, Arizona; Clive, Iowa; Truxton, Missouri; Amarillo, Texas; and Cheyenne, Wyoming. 3 As of December 31, 1998, the Partnership, through its investment in the Company, had invested in real estate located in nine states in the western and central portions of the United States, and no real estate investments are located outside of the United States. A presentation of revenues or assets by geographic region is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. The Partnership does not believe that any aspect of its business is significantly seasonal in nature. No portion of the Partnership's business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the United States Government. The Partnership does not manufacture any products and therefore does not require any raw materials in order to conduct its business. The Partnership is managed by the General Partner and therefore has no employees of its own. FFCA Investor Services Corporation 86-B has no employees because it does not conduct any business operations. The Partnership has completed its assessment of its Year 2000 preparedness and has determined that any potential consequences of Year 2000 issues will not have a material effect on the partnership's business, results of operation or financial condition. On March 22, 1999, the Partnership sold substantially all of its assets to a third party. The sale of substantially all of its assets will lead to the prompt liquidation of the partnership and the distribution of net assets to the limited partners. The General Partner anticipates that the partnership liquidation will be accomplished during 1999 and, accordingly, does not expect the Partnership to be in existence when the year 2000 arrives. The statements contained in this Annual Report on Form 10-K, regarding the planned dissolution and liquidation of the Partnership, are forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from the results, financial or otherwise, or other expectations described in the forward-looking statements. Although the General Partner believes that the estimated timing and amounts of the liquidating distributions are reasonable, the actual costs of the liquidation and dissolution of the Partnership may vary from the estimates and that variation could be material. In addition, the actual timing of the liquidating distribution could vary from the estimate; therefore, forward-looking statements should not be relied upon as a prediction of actual future results or occurrences. ITEM 2. PROPERTIES. As of December 31, 1998, the Partnership, through its investment in the Company, had ten travel plaza properties located in nine states, without borrowings by the Company or the Partnership. The properties were acquired by the Company during 1987 and 1988 with the net proceeds received by the Partnership from the public offering of the Units. On September 4, 1998, the Partnership entered into purchase agreements with Flying J Inc. to sell substantially all of the Partnership's assets (those assets comprising the travel plazas) for cash of $45,508,869 (the original sales price of $48,534,216 for the ten travel plazas, less the Ellensburg, Washington travel plaza referred to below). The limited partners received a consent solicitation statement describing the proposed transaction and an affirmative vote of investors holding a majority of the partnership units was achieved in October 1998. The sale transaction was completed on March 22, 1999. The lessee of the Ellensburg, Washington travel plaza has signed a purchase agreement dated March 30, 1999 related to the remaining travel plaza for a sales price of $3,025,347. The sale of the travel plazas represents the disposition of substantially all of the Partnership's assets and the Partnership has no further liability in connection with the travel plazas sold. 4 The travel plazas, divided into sections which serve both the commercial and non-commercial traveler, generally offer a multi-use, full-service operation including fuel facilities for the storage and sale of automotive and diesel fuels, a 24-hour restaurant, a convenience store, restroom facilities with private showers, and other amenities designed to meet the needs of the trucking industry and the traveling public in general. Five of the Company's properties represented over 10% of the Partnership's total assets at December 31, 1998, as follows: Approximate % of Location Total Assets -------- ------------ Eloy, Arizona 10% Clive, Iowa 15% Truxton, Missouri 10% Amarillo, Texas 12% Cheyenne, Wyoming 11% The following is a description of the properties owned by the Company at December 31, 1998. BOISE, IDAHO. The Boise travel plaza was a completely renovated full-service travel plaza, built on a parcel consisting of approximately 21 acres approximately 1/5 of a mile south of Interstate 84. During 1994, the lessee of this travel plaza exercised its option to purchase the motel portion of the travel plaza comprising two and one-half acres of land, the motel building and motel equipment. In addition, approximately one-half acre of land was sold to the State of Idaho Transportation Department, leaving the Boise travel plaza with approximately 18 acres, which was sold to CFJ Properties in February 1998. POST FALLS, IDAHO. The Post Falls travel plaza is a full-service travel plaza, built on a parcel consisting of approximately 8 acres of land, located at the northeast off-ramp of Interstate Highway 90. BUTTE, MONTANA. The Butte travel plaza was a pre-existing Husky truck stop, renovated in 1988, and is located on a parcel consisting of approximately 9.01 acres of land along the north side of I-15 and I-90. ELLENSBURG, WASHINGTON. The Ellensburg travel plaza was a pre-existing Husky truck stop, renovated in 1987, and is located on a parcel consisting of approximately 8.06 acres of land just south of I-90 and one mile west of I-82. This travel plaza is expected to be sold in April 1999. AMARILLO, TEXAS. The Amarillo travel plaza was a pre-existing Husky truck stop, renovated in 1989, and is located on a parcel consisting of 16.32 acres of land five miles west of the I-27 and I-40 interchange and four miles east of downtown Amarillo. 5 CLIVE, IOWA. The Clive travel plaza is a full-service travel plaza, built on a parcel consisting of 26.6 acres of land, located at the southwest corner of I-35/80. Clive, Iowa is located northwest of Des Moines. ELOY, ARIZONA. The Eloy travel plaza is a full-service travel plaza, built on a 15-acre parcel of land, located three miles south of the I-8 and I-10 junction. Eloy, Arizona is located 60 miles south of Phoenix and 53 miles north of Tucson. THOUSAND PALMS, CALIFORNIA. The Thousand Palms travel plaza is a full-service travel plaza, built on a 5.01-acre parcel of land north of I-10. Thousand Palms is situated midway between the Arizona/California border and Los Angeles. TRUXTON, MISSOURI. The Truxton travel plaza is a full-service travel plaza, built on a parcel of land of approximately 15 acres located south of the I-70 and Highway B junction. Truxton, Missouri is located 55 miles northwest of St. Louis. CHEYENNE, WYOMING. The Cheyenne travel plaza is a full-service travel plaza, built on a 15.2-acre parcel of land west of I-25. Downtown Cheyenne is located three miles north of the site. EVANSTON, WYOMING. The Evanston travel plaza is located on a 5.42-acre parcel of land along the north side of Highway 30 and north of I-80. Evanston is approximately two miles from the Utah border. FFCA Investor Services Corporation 86-B has no interest in any real or personal property independent of the Partnership. ITEM 3. LEGAL PROCEEDINGS. Neither the Co-Registrants nor their properties are parties to, or subject to, any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. A proposal to sell substantially all of the Company's assets was submitted to a vote of the security holders during the fourth quarter of fiscal year 1998. A Consent Solicitation Statement dated September 11, 1998 relating to the proposal was sent to the security holders. Voting was completed on October 26, 1998 without a meeting. The results of the voting are as follows: FOR, 32,591 votes; AGAINST, 4,124 votes, and ABSTAIN, 1,354 votes. PART II ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED SECURITY HOLDER MATTERS. MARKET INFORMATION. During 1998, there was no established public trading market for the Units, and it is not anticipated that an established public trading market for the Units will develop. HOLDERS. As of March 9, 1999, there were 4,087 record holders of the Units. DISTRIBUTIONS. For the two most recent fiscal years, the Partnership made the following cash distributions to the Holders: 6 1998 Per Unit Distribution Total Annualized ------------------- -------------------- Cash Date of Number Cash from Cash from Yield from Distribution of Units Operations Capital Operations Capital Operations - ------------ -------- ---------- ------- ---------- ------- ---------- December 31 51,687 $24.80 -- $1,281,838 -- 11.1% September 30 51,687 26.45 -- 1,367,121 -- 11.8% June 30 51,687 25.52 -- 1,319,052 -- 11.4% March 31 51,687 26.02 $65.50 1,344,896 $3,385,499 10.8% 1997 Per Unit Distribution Total Annualized ------------------- -------------------- Cash Date of Number Cash from Cash from Yield from Distribution of Units Operations Capital Operations Capital Operations - ------------ -------- ---------- ------- ---------- ------- ---------- December 31 51,687 $26.43 -- $1,366,087 -- 11.0% September 30 51,687 27.68 -- 1,430,696 -- 11.5% June 30 51,687 26.81 -- 1,385,728 -- 11.2% March 31 51,687 25.47 -- 1,316,468 -- 10.6% Cash from operations, defined as disbursable cash in the agreement of limited partnership which governs the Partnership, is distributed to the Holders. Any variations in the amount of distributions from quarter to quarter are due to fluctuations in net cash provided by operating activities. Reference is made to Item 7 below for a discussion and analysis of such fluctuations. Cash proceeds from the sale of property are distributed to the Holders as a return of capital. The Adjusted Capital Contribution of a Holder is generally the Holder's initial capital contribution reduced by the cash distributions to the Holders of proceeds from the sale of Partnership properties and reduced by any other cash distributions other than from operations. The Adjusted Capital Contribution per Unit of the Holders, as defined in the agreement of limited partnership which governs the Partnership, was $894.83 as of December 31, 1998. At December 31, 1995, the Partnership declared a return of capital of $2,050,000 ($39.66 per Unit) related to the 1994 sale of the Boise, Idaho lodging premises and equipment, which was distributed in January 1996. At March 31, 1998, the Partnership declared a return of capital of $3,385,784 ($65.50 per Unit) related to the 1998 sale of the remainder of the Boise, Idaho travel plaza, which was distributed in April 1998. Any differences in the amounts of distributions set forth in the above tables from the information contained in Item 6 below are due to rounding the amount of distributions payable per Unit down to the nearest whole cent and carrying any fractional cents forward from one period to the next. The Partnership expects to make cash distributions from operations to the Holders through the date of the sale of the nine travel plazas on March 22, 1999, and on the Ellensburg, Washington travel plaza until it is sold. The 7 liquidation of the Partnership is expected to be completed in June 1999. The General Partner estimates that the liquidating distribution will be approximately $924 per limited partnership unit. Although the General Partner believes that the amount of the liquidating distribution is reasonable, the actual costs of the liquidation and dissolution of the Partnership may vary from the estimates and that variation could be material. As part of the sale of the travel plazas, approximately $320,000 (representing less than one percent of the aggregate sales price) may, at the General Partner's discretion, be deposited in a trust (the "Trust Fund") with a bank. The Trust Fund, including interest income, would be available to satisfy claims made directly or indirectly with respect to the liquidation, dissolution and winding up of the affairs of the Partnership during a period of up to 36 months following the liquidation date. At the end of this period, final decisions will be made in settlement of all disputed claims, if any, and the remaining balance of the Trust Fund will be disbursed to the Holders. ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data should be read in conjunction with the Consolidated Financial Statements and the related notes attached as an exhibit to this Report.
Year Ended December 31, ----------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Revenues $ 7,813,299 $ 6,297,173 $ 6,289,831 $ 6,563,996 $7,179,846 Net Income 5,798,859 4,239,903 4,013,518 3,944,780 4,375,249 Net Income Per Unit 111.07 81.21 76.87 75.56 83.80 Total Assets 24,589,017 27,480,329 28,759,012 32,378,912 34,094,240 Distributions of Cash from Operations to Holders 5,312,684 5,499,084 5,440,957 5,592,710 5,674,532 Distributions of Cash from Operations Per Unit 102.79 106.39 105.27 108.20 109.79 Return of Capital to Holders 3,385,784 -- -- 2,050,000 -- Return of Capital Per Unit 65.51 -- -- 39.66 --
The 1994 and 1998 results of operations include gains totaling $653,477 and $1,725,741 on the sale of the motel portion of the Boise, Idaho travel plaza in 1994 and the sale of the remainder of the travel plaza in 1998. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES The Partnership received $51,687,000 in gross proceeds from its public offering of the Units. After deducting organizational and offering expenses, 8 including sales commissions, the Partnership, through the Company, invested the net offering proceeds of $45,613,778 in 11 travel plazas. The rental payments from lessees of the properties have been the Partnership's primary source of income. As of December 31, 1998, the Partnership had cash and marketable securities aggregating $2,202,940 of which $1,281,838 was paid out to the Holders in January 1999 as their fourth quarter distribution for 1998. The Partnership entered into purchase agreements with Flying J Inc. on September 4, 1998 to sell substantially all of the Partnership's assets (those assets comprising the travel plazas) for cash of $45,508,869 (the original sales price of $48,534,216 for the ten travel plazas, less the Ellensburg, Washington travel plaza referred to below). The limited partners received a consent solicitation statement describing the proposed transaction and an affirmative vote of investors holding a majority of the partnership units was achieved on October 26, 1998. The sale transaction was completed on March 22, 1999 and the Partnership recognized a gain of approximately $24.9 million on the sale. The net cash proceeds from this sale are being held in U.S. government securities pending distribution to investors. The lessee of the Ellensburg, Washington travel plaza has signed a purchase agreement dated March 30, 1999 related to the remaining travel plaza for a sales price of $3,025,347, which will result in a pro forma gain of approximately $1.8 million. The sale of the travel plazas represents the disposition of substantially all of the Partnership's assets and the Partnership has no further liability in connection with any of the travel plazas sold. A subordinated real estate disposition fee of approximately $1.5 million will be paid to the General Partner related to the sales of the travel plazas. Upon consummation of the sale of the Ellensburg, Washington travel plaza, the General Partner will begin the process of winding down the affairs of the Partnership that includes liquidation and distribution of assets to the investors in accordance with the Partnership agreement. The liquidation of the Partnership is expected to be completed in June 1999. As part of the sale of the travel plazas, approximately $320,000 (representing less than one percent of the aggregate sales price) may, at the General Partner's discretion, be deposited in a trust (the "Trust Fund") with a bank. The Trust Fund, including interest income, would be available to satisfy claims made directly or indirectly with respect to the liquidation, dissolution and winding up of the affairs of the Partnership during a period of up to 36 months following the liquidation date. At the end of this period, final decisions will be made in settlement of all disputed claims, if any, and the remaining balance of the Trust Fund will be disbursed to the investors. In February 1998, the Partnership sold the Boise, Idaho travel plaza (the Boise Plaza) to CFJ Properties for a cash sales price of $3,385,784. The Boise Plaza was a full-service travel plaza, built on a parcel consisting of approximately 21 acres. Proceeds from the Boise Plaza sale of $65.50 per limited partnership unit were distributed to the limited partners in April 1998 as a partial return of their adjusted capital contribution. The Partnership accrued a subordinated real estate disposition fee equal to three percent of the selling price of the Boise Plaza (amounting to $101,574) payable to the General Partner of the Partnership. FFCA Investor Services Corporation 86-B has no capital resources and conducted no operations in 1998. 9 RESULTS OF OPERATIONS FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1997 The Partnership's total revenues increased to $7,813,299 for the year ended December 31, 1998 from $6,297,173 for the year ended December 31, 1997 primarily due to the gain on the sale of the Boise, Idaho travel plaza of $1,725,741. Participating rental revenues also increased from $1,897,489 in 1997 to $1,935,301 in 1998 due to higher travel plaza fuel and non-fuel sales volumes. Partially offsetting the increase in revenues, was a decrease in rental revenues due to the Boise, Idaho travel plaza sale in February 1998, which resulted in a monthly reduction of $26,049 in rental revenue. Total Partnership expenses for 1998 increased to $2,007,855 from $2,052,340 in 1997, mainly resulting from a decrease in depreciation expense of $124,922 related to the sale of travel plaza equipment. Partially offsetting this decrease was an increase in general partner fees of $82,952 primarily resulting from the accrual of the subordinated real estate disposition fee of $101,574 related to the Boise, Idaho travel plaza sale. Net income for 1998 was $ 5,798,859 as compared to $4,239,903 for 1997, representing an increase of approximately 37%, primarily due to the gain on sale of property. FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1996 The Partnership's total revenues increased to $6,297,173 for the year ended December 31, 1997 from $6,289,831 for the year ended December 31, 1996. The overall increase in revenues is due to an increase in participating rentals. Participating rental revenues increased to $1,897,489 in 1997 from $1,818,632 in 1996 due to higher travel plaza sales volumes. Partially offsetting the increase in participating rentals, was a decrease in rental revenues due to a partial land sale in the first quarter of 1996, which resulted in a monthly reduction of $2,128 in rental revenue. Total Partnership expenses for 1997 were $2,052,340, representing a decrease of approximately 10% from $2,271,611 in 1996, primarily resulting from a decrease in depreciation expense of $243,800 related to the sale of travel plaza equipment in 1996. Net income for 1997 was $4,239,903 as compared to $4,013,518 for 1996, representing an increase of approximately 6%. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The financial instruments held by the Partnership and the Company at December 31, 1998 consist of cash equivalents (primarily investments in U.S. Treasury securities or repurchase agreements that are collateralized by U.S. Treasury and government obligations) and receivables from lessees. These financial instruments are short- term in nature and do not subject the Partnership or the Company to a material exposure to changes in interest rates. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and supporting schedules of the Co-Registrants required by Regulation S-X are attached to this Report. Reference is made to Item 14 below for an index to the financial statements and financial statement schedules. 10 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS. The Partnership, the General Partner and the Company have no directors or executive officers. PCMC is the managing general partner and Morton H. Fleischer is the individual general partner of the General Partner. PCMC, through the General Partner, has responsibility for all of the Partnership's operations. The directors and executive officers of PCMC and FFCA Investor Services Corporation 86-B are as follows: PCMC DIRECTOR Name Position Held Since ---- ------------------- Morton H. Fleischer 1993 OFFICERS Associated With PCMC Name Positions Held Since ---- -------------- ----- Morton H. Fleischer President and Chief Executive Officer 1993 John R. Barravecchia Executive Vice President, Chief Financial 1993 Officer, Treasurer and Assistant Secretary Christopher H. Volk Executive Vice President, Chief Operating 1993 Officer, Secretary and Assistant Treasurer Dennis L. Ruben Executive Vice President, General Counsel 1994 and Assistant Secretary Stephen G. Schmitz Executive Vice President, Chief Investment 1995 Officer and Assistant Secretary Catherine F. Long Senior Vice President-Finance, Principal 1993 Accounting Officer, Assistant Secretary and Assistant Treasurer 11 FFCA INVESTOR SERVICES CORPORATION 86-B DIRECTOR Name Position Held Since ---- ------------------- Morton H. Fleischer, Chairman 1986 OFFICERS Position Held Name Positions Held Since ---- -------------- ----- Morton H. Fleischer Chairman of the Board of Directors 1986 John R. Barravecchia President, Secretary and Treasurer 1990 Christopher H. Volk Vice President, Assistant Secretary and 1994 Assistant Treasurer All of the foregoing directors and executive officers have been elected to serve a one-year term and until their successors are elected and qualified. There are no arrangements or understandings between or among any of the officers or directors and any other person pursuant to which any officer or director was selected as such. There are no family relationships among any directors and officers. BUSINESS EXPERIENCE The business experience during the past five years of each of the above directors and executive officers is as follows: MORTON H. FLEISCHER, age 62, has served as a director, President and Chief Executive Officer of PCMC since 1993, and as Chairman of the Board of FFCA Investor Services Corporation 86-B since 1986. Mr. Fleischer also serves as President, Chief Executive Officer and Chairman of the Board of Franchise Finance Corporation of America, a Delaware corporation ("FFCA") having previously served as a director, President and Chief Executive Officer of Franchise Finance Corporation of America I ("FFCA I"), a predecessor of FFCA, from 1980 to 1994. Mr. Fleischer is an individual general partner of the General Partner, and is a general partner (or general partner of a general partner) of the following public limited partnerships: Participating Income Properties II, L.P.; Participating Income Properties III Limited Partnership; and Scottsdale Land Trust Limited Partnership. JOHN R. BARRAVECCHIA, age 43, has served as President, Secretary and Treasurer of FFCA Investor Services Corporation 86-B since 1990. He has served as Chief Financial Officer of PCMC since 1993 and as Senior Vice President and Treasurer since 1994. In 1995, Mr. Barravecchia was named Executive Vice President of PCMC. Mr. Barravecchia currently serves as Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary of FFCA and served in various capacities for FFCA I from 1984 to 1994. He was appointed Vice President and Chief Financial Officer of FFCA I in December 1986, and Senior Vice President in October 1989. Mr. Barravecchia was elected as a director of FFCA I in March 1993 and Treasurer in December 1993. Prior to joining FFCA I, Mr. Barravecchia was associated with the international public accounting firm of Arthur Andersen LLP. 12 CHRISTOPHER H. VOLK, age 42, has served as Vice President, Assistant Secretary and Assistant Treasurer of FFCA Investor Services Corporation 86-B since 1994, and has served as Secretary of PCMC since 1993 and Senior Vice President-Underwriting and Research since 1994. In 1995, Mr. Volk was named Executive Vice President and Chief Operating Officer of PCMC. Mr. Volk currently serves as Executive Vice President, Chief Operating Officer, Secretary and Assistant Treasurer of FFCA. He joined FFCA I in 1986 and served in various capacities in FFCA I's capital preservation and underwriting areas prior to being named Vice President-Research in October 1989. In December 1993, he was appointed Secretary and Senior Vice President-Underwriting and Research of FFCA I, and he was elected as a director of FFCA I in March 1993. Prior to joining FFCA I, Mr. Volk was employed for six years with the National Bank of Georgia, where his last position was Assistant Vice President and Senior Correspondent Banking Credit Officer. DENNIS L. RUBEN, age 46, has served as Senior Vice President and General Counsel for PCMC since 1994. Mr. Ruben was named Executive Vice President, General Counsel and Assistant Secretary of PCMC in February 1997. He currently serves in the same capacity for FFCA and served as attorney and counsel for FFCA I from 1991 to 1994. In December 1993, he was appointed Senior Vice President and General Counsel of FFCA I. Prior to joining FFCA I, Mr. Ruben was associated with the law firm of Kutak Rock from 1980 until March 1991. Mr. Ruben became a partner of Kutak Rock in 1984. STEPHEN G. SCHMITZ, age 44, has served as Senior Vice President-Corporate Finance of PCMC since January 1996. He was named Executive Vice President, Chief Investment Officer and Assistant Secretary of PCMC in February 1997. He currently serves in the same capacity for FFCA. Mr. Schmitz served in various positions as an officer of FFCA I from 1986 to June 1, 1994. CATHERINE F. LONG, age 42, has served as Vice President-Finance and Principal Accounting Officer of PCMC since 1994, and Vice President from 1993 to 1994. In February 1997 she was named Senior Vice President-Finance of PCMC. She currently serves as Senior Vice President-Finance, Principal Accounting Officer, Assistant Secretary and Assistant Treasurer of FFCA and served as Vice President-Finance of FFCA I from 1990 to 1993. In December 1993, she was appointed Principal Accounting Officer of FFCA I. Prior to joining FFCA I, Ms. Long was associated with the international public accounting firm of Arthur Andersen LLP. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Co-Registrants during fiscal year 1998 and Forms 5 and amendments thereto furnished to the Co-Registrants with respect to fiscal year ended December 31, 1998 (the "Forms"), and any written representations by the directors and executive officers of FFCA Investor Services Corporation 86-B and PCMC, the Co-Registrants have not identified herein any such person that failed to file on a timely basis the Forms required by Section 16(a) of the Securities Exchange Act of 1934 for fiscal year 1998. 13 ITEM 11. EXECUTIVE COMPENSATION. The Partnership is required to pay an acquisition fee and a subordinated real estate disposition fee to the General Partner, and the General Partner is entitled to receive a share of cash distributions, when and as made to the Holders, a share of profits and losses and a subordinated share of any sale proceeds. Reference is made to Note (1) and Note (5) of the Notes to Consolidated Financial Statements of the Partnership and the Company which are filed with this Report for a description of the fees and distributions paid in 1998. FFCA Investor Services Corporation 86-B serves as assignor and initial limited partner without compensation from the Partnership. It is not entitled to any share of the profits, losses or cash distributions of the Partnership. The director and officers of FFCA Investor Services Corporation 86-B serve without compensation from FFCA Investor Services Corporation 86-B or the Partnership. PCMC is entitled to a one-tenth of one percent share of the profits and losses of the Company. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of March 9, 1999, no person or group was known by the Partnership to own directly or beneficially more than 5% of the outstanding Units of the Partnership. None of the General Partner of the Partnership and its general partners owned any Units as of March 9, 1999. None of the directors and officers of the General Partner's corporate general partner, PCMC, owned any Units as of March 9, 1999. PCMC is owned by Morton H. Fleischer. FFCA Investor Services Corporation 86-B has an interest in the Partnership as a limited partner and it serves as the owner of record of all of the limited partnership interests assigned by it to the Holders. However, FFCA Investor Services Corporation 86-B has no right to vote its interest on any matter and it must vote the assigned interests as directed by the Holders. FFCA Investor Services Corporation 86-B is a wholly-owned subsidiary of PCMC. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Since the beginning of the Co-Registrants' last fiscal year, there have been no significant transactions or business relationships among the Co-Registrants, the Company, and PCMC or their affiliates or their management, other than as described in Items 1, 10 and 11 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Report: 1. FINANCIAL STATEMENTS. THE PARTNERSHIP AND THE COMPANY Report of independent public accountants Consolidated Balance Sheets as of December 31, 1998 and 1997 14 Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Changes In Partners' Capital for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements FFCA INVESTOR SERVICES CORPORATION 86-B Report of independent public accountants Balance Sheet as of December 31, 1998 Notes to Balance Sheet 2. FINANCIAL STATEMENT SCHEDULES. Schedule III-Schedule of Real Estate and Accumulated Depreciation as of December 31, 1998 All other schedules are omitted since they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto. 3. EXHIBITS. The following is a complete list of exhibits filed as part of this Form 10-K. For electronic filing purposes only, this report contains Exhibit 27, the Financial Data Schedule. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following document, filed with the Securities and Exchange Commission as Exhibit 4 to the Co-Registrants' Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 0-16720, is incorporated herein by this reference. Second Amended and Restated Certificate and Agreement of Limited Partnership which governs the Partnership, as filed with the Secretary of State of Delaware on April 16, 1987. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following documents, filed with the Securities and Exchange Commission as exhibits to the Co-Registrants' Form 10-K for the fiscal year ended December 31, 1986, Commission File No. 0-16720, are incorporated herein by this reference. 15 1986 Form 10-K Exhibit No. ----------- Depositary Agreement of the Partnership. 3-C The Certificate of Incorporation which 3-D governs FFCA Investor Services Corporation 86-B, as filed with the Secretary of State of Delaware on June 23, 1986. Bylaws of FFCA Investor Services Corporation 3-E 86-B. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following document, filed with the Securities and Exchange Commission on October 8, 1986 as Exhibit 10(e) to the Co-Registrants' Registration Statement on Form S-11, Registration No. 33-7502, is incorporated herein by this reference. Operating Agreement, dated October 7, 1986, by and among FFCA Management Company, L.P., FFCA/PIP 1986 Property Company, Flying J Inc. and Flying J Franchise Inc. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following documents, filed with the Securities and Exchange Commission as exhibits to the Co-Registrant's Form 8-K dated March 22, 1999, Commission File No. 0-16720, are incorporated herein by this reference. March 22, 1999, Form 8-K Exhibit No. ----------- Purchase Agreement dated as of September 4, 10.01 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company III LLC Purchase Agreement dated as of September 4, 10.02 1998, between FFCA/PIP 1986 Property Company and FJI Plaza Company LLC Purchase Agreement dated as of September 4, 10.03 1998, between FFCA/PIP 1986 Property Company and Flying J Real Estate Enterprises Inc., including the First Amendment thereto dated as of March 22, 1999 Purchase Agreement dated as of September 4, 10.04 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company II LLC Purchase Agreement dated as of September 4, 10.05 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company I LLC Extension Agreement dated March 22, 1999 10.06 Assignment of purchase agreement dated as of 10.07 March 22, 1999, between Flying J Real Estate Enterprises Inc. and FJI Plaza Company LLC (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the Co-Registrants during the last quarter of the fiscal year ended December 31, 1998. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Partnership has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. PARTICIPATING INCOME PROPERTIES 1986, L.P. By: FFCA MANAGEMENT COMPANY LIMITED PARTNERSHIP, General Partner Date: April 8, 1999 By /s/ Morton H. Fleischer ---------------------------------------- Morton H. Fleischer, General Partner By: PERIMETER CENTER MANAGEMENT COMPANY, Corporate General Partner Date: April 8, 1999 By /s/ Morton H. Fleischer ---------------------------------------- Morton H. Fleischer, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Partnership and in the capacities and on the dates indicated. SIGNATURES OF REQUIRED OFFICERS AND DIRECTORS OF PERIMETER CENTER MANAGEMENT COMPANY, CORPORATE GENERAL PARTNER OF FFCA MANAGEMENT COMPANY LIMITED PARTNERSHIP, GENERAL PARTNER OF PARTICIPATING INCOME PROPERTIES 1986, L.P. Date: April 8, 1999 By /s/ Morton H. Fleischer ---------------------------------------- Morton H. Fleischer, President, Chief Executive Officer and Director Date: April 8, 1999 By /s/ John Barravecchia ----------------------------------------- John Barravecchia, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary Date: April 8, 1999 By /s/ Catherine F. Long ----------------------------------------- Catherine F. Long, Senior Vice President- Finance, Principal Accounting Officer, Assistant Secretary and Assistant Treasurer 17 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Co-Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. FFCA INVESTOR SERVICES CORPORATION 86-B Date: April 8, 1999 By /s/ Morton H. Fleischer ----------------------------------------- Morton H. Fleischer, Sole Director Date: April 8, 1999 By /s/ John Barravecchia ----------------------------------------- John Barravecchia, President, Secretary, Treasurer, Principal Financial Officer and Principal Accounting Officer 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Participating Income Properties 1986, L.P.: We have audited the accompanying consolidated balance sheets of PARTICIPATING INCOME PROPERTIES 1986, L.P. (a Delaware limited partnership) and affiliate as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1998. These financial statements and the schedule referred to below are the responsibility of the partnership's general partner. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Participating Income Properties 1986, L.P. and affiliate as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of Real Estate and Accumulated Depreciation is presented for purposes of complying with the Securities and Exchange Commission's rule and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Phoenix, Arizona, March 22, 1999. 19 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1998 AND 1997 1998 1997 ------------ ----------- ASSETS CASH AND CASH EQUIVALENTS $ 2,202,940 $ 2,402,680 RECEIVABLES FROM LESSEES 146,270 161,608 SECURED NOTES RECEIVABLE 66,595 100,569 DEFERRED COSTS (Note 6) 208,904 -- PROPERTY SUBJECT TO OPERATING LEASES (Note 3) 21,964,308 24,815,472 ----------- ----------- Total assets $24,589,017 $27,480,329 =========== =========== LIABILITIES AND PARTNERS' CAPITAL DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 1,282,310 $ 1,366,497 PAYABLE TO GENERAL PARTNER 177,582 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 20,328 52,297 RENTAL DEPOSITS 114,400 114,400 ----------- ----------- Total liabilities 1,594,620 1,533,194 ----------- ----------- MINORITY INTEREST (Note 1) (15,705) (16,239) ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General partner (166,879) (171,205) Limited partners 23,176,981 26,134,579 ----------- ----------- Total partners' capital 23,010,102 25,963,374 ----------- ----------- Total liabilities and partners' capital $24,589,017 $27,480,329 =========== =========== The accompanying notes are an integral part of these consolidated balance sheets. 20 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1998 1997 1996 ---------- ---------- ---------- REVENUES: Rental $4,020,124 $4,288,989 $4,295,373 Participating rentals 1,935,301 1,897,489 1,818,632 Interest and other 132,133 110,695 99,868 Gain on sale of property 1,725,741 -- 75,958 ---------- ---------- ---------- 7,813,299 6,297,173 6,289,831 ---------- ---------- ---------- EXPENSES: General partner fees (Note 5) 632,311 549,359 543,553 Depreciation 1,191,121 1,316,043 1,559,843 Operating 184,423 186,938 168,215 ---------- ---------- ---------- 2,007,855 2,052,340 2,271,611 ---------- ---------- ---------- MINORITY INTEREST IN INCOME (Note 1) 6,585 4,930 4,702 ---------- ---------- ---------- NET INCOME $5,798,859 $4,239,903 $4,013,518 ========== ========== ========== NET INCOME ALLOCATED TO (Note 1): General partner $ 57,989 $ 42,399 $ 40,135 Limited partners 5,740,870 4,197,504 3,973,383 ---------- ---------- ---------- $5,798,859 $4,239,903 $4,013,518 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (based on 51,687 units held by limited partners) $ 111.07 $ 81.21 $ 76.87 ========== ========== ========== The accompanying notes are an integral part of these consolidated statements. 21 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 General Limited Partner Partners Total ------- -------- ----- BALANCE, December 31, 1995 $(143,234) $28,903,733 $28,760,499 Net income 40,135 3,973,383 4,013,518 Distributions to partners, cash from operations (54,959) (5,440,957) (5,495,916) --------- ----------- ----------- BALANCE, December 31, 1996 (158,058) 27,436,159 27,278,101 Net income 42,399 4,197,504 4,239,903 Distributions to partners, cash from operations (55,546) (5,499,084) (5,554,630) --------- ----------- ----------- BALANCE, December 31, 1997 (171,205) 26,134,579 25,963,374 Net income 57,989 5,740,870 5,798,859 Distributions to partners, cash from operations (53,663) (5,312,684) (5,366,347) Return of capital to limited partners (Note 1) -- (3,385,784) (3,385,784) --------- ----------- ----------- BALANCE, December 31, 1998 $(166,879) $23,176,981 $23,010,102 ========= =========== =========== The accompanying notes are an integral part of these consolidated statements. 22 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1998 1997 1996 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,798,859 $ 4,239,903 $ 4,013,518 Adjustments to net income: Depreciation 1,191,121 1,316,043 1,559,843 Gain on sale of property (1,725,741) -- (75,958) Minority interest in income 6,585 4,930 4,702 Change in assets and liabilities: Decrease (increase) in receivables from lessees 15,338 (11,805) (5,620) Increase in deferred costs (208,904) -- -- Increase (decrease) in payable to general partner 177,582 (10,304) (7,401) Increase (decrease) in accounts payable and accrued liabilities (31,969) 2,593 (11,384) ----------- ----------- ----------- Net cash provided by operating activities 5,222,871 5,541,360 5,477,700 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property 3,385,784 -- 811,441 Principal collections on secured notes receivable 33,974 30,754 26,588 ----------- ----------- ----------- Net cash provided by investing activities 3,419,758 30,754 838,029 ----------- ----------- ----------- CASH FLOWS FOR FINANCING ACTIVITIES: Partner distributions declared (Note 1) (5,366,347) (5,554,630) (5,495,916) Return of capital to limited partners declared (Note 1) (3,385,784) -- -- Increase (decrease) in distribution payable (84,187) 45,071 (2,117,230) Distributions to minority interest (6,051) (6,246) (6,189) ----------- ----------- ----------- Net cash used in financing activities (8,842,369) (5,515,805) (7,619,335) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (199,740) 56,309 (1,303,606) CASH AND CASH EQUIVALENTS, beginning of year 2,402,680 2,346,371 3,649,977 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, end of year $ 2,202,940 $ 2,402,680 $ 2,346,371 =========== =========== =========== The accompanying notes are an integral part of these consolidated statements. 23 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE Notes to Consolidated Financial Statements December 31, 1998 and 1997 1) ORGANIZATION: Participating Income Properties 1986, L.P. (the Partnership) was formed on June 23, 1986 under the Delaware Revised Uniform Limited Partnership Act. The Partnership invests as a co-general partner with Perimeter Center Management Company (PCMC) in FFCA/PIP 1986 Property Company, a Delaware general partnership (the Property Company). The general partner of the Partnership is FFCA Management Company Limited Partnership (the General Partner) of which PCMC is a general partner. The Property Company was organized to purchase new and existing "Flying J Travel Plaza" facilities, including land, buildings and equipment to be leased on a net basis to Flying J Inc. and certain franchisees of Flying J Franchise Inc. At December 31, 1998, seven of the ten travel plazas owned by the Partnership (eight of the eleven properties owned at December 31, 1997) were leased to CFJ Properties (CFJ), an affiliate of Flying J Inc. (one property was sold in 1998). One of the travel plazas was leased to Flying J Inc. in 1998 and 1997 and the remaining two were leased to franchisees that operate Flying J Travel Plazas. "Flying J Travel Plaza" facilities offer a full-service operation, generally including fuel facilities, a restaurant, convenience store and other amenities for use by the trucking industry and traveling public in general. The Partnership and the Property Company will expire December 31, 2029 and 2028, respectively, or sooner (see Note 6), in accordance with the terms of their respective partnership agreements. Investors acquired units of assigned limited partnership interest (the limited partnership units) in the Partnership from FFCA Investor Services Corporation 86-B (the Initial Limited Partner), a Delaware corporation wholly-owned by PCMC. Holders of the units have all of the economic benefits and substantially the same rights and powers of limited partners; therefore, they are referred to herein as "limited partners." The Partnership agreement provides for allocation of profits and losses and cash distributions among its partners as follows: Profits and Losses: Allocated 99% to the limited partners and 1% to the General Partner. Cash Distributions: All cash from operations, as defined, after payment of fees to the General Partner is allocated 99% to the limited partners and 1% to the General Partner. Cash proceeds from the sale of property are not considered cash from operations but, when distributed, represent a partial return of the limited partners' initial $1,000 per unit capital contribution. There have been two such distributions to date, therefore, the limited partner Adjusted Capital Contribution, as defined in the Partnership agreement, at December 31, 1998 is $894.83 per unit. The following is a reconciliation of net income to cash distributions from operations as defined in the Partnership agreement: 1998 1997 1996 ----------- ----------- ----------- Net income $ 5,798,859 $4,239,903 $4,013,518 Adjustments to reconcile net income to cash distributions declared: Depreciation 1,191,121 1,316,043 1,559,843 Gain on sale of property (1,725,741) -- (75,958) Accrued disposition fee to General Partner (Note 5) 101,574 -- -- Change in minority interest 534 (1,316) (1,487) ----------- ---------- ---------- Cash distributions declared from operations $ 5,366,347 $5,554,630 $5,495,916 =========== ========== ========== 24 The Property Company agreement provides for allocation of profits and losses and cash distributions among its partners as follows: Profits and Losses: Allocated 99.9% to the Partnership and .1% to PCMC. Cash Distributions: All cash from operations, as defined, is allocated 99.9% to the Partnership and .1% to PCMC. 2) SIGNIFICANT ACCOUNTING POLICIES: CONSOLIDATION AND FINANCIAL STATEMENTS - The accompanying consolidated financial statements include the accounts of the Partnership and the Property Company in which the Partnership holds a substantial interest, as discussed in Note 1. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared on the accrual basis of accounting. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates. CASH AND CASH EQUIVALENTS - Investment securities that are highly liquid and have maturities of three months or less at the date of purchase are classified as cash equivalents. Cash equivalents include United States Treasury securities of $1,560,172 and $2,091,603 at December 31, 1998 and 1997, respectively, and bank repurchase agreements (which are collateralized by United States Treasury and Government obligations) of $350,093 at December 31, 1998. Short-term investments are recorded at cost plus accrued interest, which approximates market value. LEASES - The Partnership leases its property under long-term net leases which are classified as operating leases. Rental revenue from operating leases is recognized as it is earned. DEPRECIATION - Depreciation on buildings is provided using the straight-line method based upon an estimated useful life of 24 years. Equipment is depreciated over an estimated useful life of eight years, assuming a 10% salvage value at the end of its useful life. The cost of properties includes miscellaneous acquisition and closing costs. 3) PROPERTY SUBJECT TO OPERATING LEASES: The following is an analysis of the Partnership's investment, at cost, in property subject to operating leases by major class at December 31, 1998 and 1997: 1998 1997 ----------- ----------- Land $ 5,766,190 $ 6,773,272 Buildings 28,456,079 29,669,322 Equipment 626,781 626,781 ----------- ----------- 34,849,050 37,069,375 Less - Accumulated depreciation 12,884,742 12,253,903 ----------- ----------- $21,964,308 $24,815,472 =========== =========== Lease agreements provide for monthly base rentals equal to a percentage of the property's cost. As additional rent, the Property Company receives a portion of the operating revenues of the lessee equal to a percentage of gross receipts (participating rentals) from travel plaza facilities and fuel sales. The terms of the leases are eight years for equipment and 20 years for land and buildings. During the year ended December 31, 1998, CFJ and Flying J Inc., accounting for 88% of total rental and participating rental revenue, operated a total of nine Partnership properties in Idaho, Montana, California, Arizona, Iowa, Missouri, Texas and Wyoming. 25 Scheduled minimum future rentals (excluding participating rentals) under noncancellable operating leases as of December 31, 1998, are $4 million per year through the year 2007. All of the Partnership's property comprising the travel plazas was subject to agreements entered into with Flying J Inc. on September 4, 1998 in which Flying J Inc. agreed to buy the property (subject to certain conditions) for cash totaling approximately $48.5 million (see Note 6). The Partnership was the beneficiary of a letter of credit from CFJ in the amount of $599,304 (to be used as security for CFJ's lease payments), which was released on the date of sale. The General Partner, the Property Company, Flying J Inc. and Flying J Franchise Inc. have entered into an operating agreement. In the event of a default in the payment of any amount due and payable under the lease agreements, and upon the General Partner's written request and delivery of the defaulting lessee's property to Flying J Inc., Flying J Inc. has agreed to operate such defaulted lessee's property for the maximum potential lease term. 4) INCOME TAXES: The Partnership is not directly subject to income taxes; rather, each partner is subject to income taxes on his distributable share of taxable income. The Partnership tax returns and the amount of distributable partnership profits or losses are subject to examination by Federal and state taxing authorities. If examinations by taxing authorities result in changes to distributable partnership profits or losses, the tax liabilities of the partners could be changed accordingly. The following is a reconciliation of net income for financial reporting purposes to income reported for Federal income tax purposes for the years ended December 31, 1998, 1997 and 1996: 1998 1997 1996 ---------- ---------- ---------- Net income for financial reporting purposes $5,798,859 $4,239,903 $4,013,518 Differences for tax purposes in: Depreciation 460,584 554,950 765,189 Gain on sale and other (192,300) -- 17,534 ---------- ---------- ---------- Taxable income to partners $6,067,143 $4,794,853 $4,796,241 ========== ========== ========== For Federal income tax reporting purposes, taxable income to partners is reported on the accrual basis of accounting and is classified as ordinary income. At December 31, 1998, the tax bases of the Partnership's assets and liabilities exceed the amounts recorded for financial reporting purposes by $4,956,709. This difference results primarily from the use of different depreciation methods for financial reporting and tax reporting purposes. 5) TRANSACTIONS WITH RELATED PARTIES: Under the terms of the Partnership agreement, the General Partner is entitled to compensation for certain services performed in connection with managing the affairs of the Partnership. During 1998, 1997 and 1996, fees paid to the General Partner were as follows: 1998 1997 1996 -------- -------- -------- Disbursable cash fee $530,737 $549,359 $543,553 Subordinated real estate disposition fee 101,574 -- -- -------- -------- -------- $632,311 $549,359 $543,553 ======== ======== ======== 26 The disbursable cash fee equals 9% of all cash received by the Partnership (excluding sale proceeds) less Partnership operating expenses, only to the extent the limited partners have received an annual return of 9% (calculated quarterly) on their Adjusted Capital Contribution, as defined. A subordinated real estate disposition fee equal to three percent of the selling price on the disposition of any real property (subject to certain limitations) is payable to the General Partner only after the limited partners have received an amount equal to their Adjusted Capital Contribution, as defined, and a cumulative, non-compounded return of 10% per annum on their Adjusted Capital Contribution. A subordinated real estate disposition fee amounting to $101,574 has been accrued by the Partnership representing three percent of the selling price of the Boise, Idaho travel plaza, which was sold in February 1998 for a cash sales price of $3,385,784. An affiliate of the General Partner incurs expenses on behalf of the Partnership for maintenance of the books and records and for computer, investor and legal services performed for the Partnership. These expenses are reimbursable in accordance with the Partnership agreement and are less than the amount that the Partnership would have paid to independent parties for comparable services. The Partnership reimbursed the affiliate $67,381 in 1998, $35,018 in 1997 and $30,001 in 1996 for such expenses. 6) SUBSEQUENT EVENT - SALE OF SUBSTANTIALLY ALL ASSETS: The Partnership entered into purchase agreements with Flying J Inc. on September 4, 1998 to sell substantially all of the Partnership's assets (those assets comprising the travel plazas) for cash of $45,508,869 (the original sales price of $48,534,216 for the ten travel plazas, less the Ellensburg, Washington travel plaza referred to below). The limited partners received a consent solicitation statement describing the proposed transaction and an affirmative vote of investors holding a majority of the partnership units was achieved on October 26, 1998. The sale transaction was completed on March 22, 1999 and the Partnership recognized a gain of approximately $24.9 million on the sale. The net cash proceeds from this sale are being held in U.S. government securities pending distribution to investors. The lessee of the Ellensburg, Washington travel plaza has signed a purchase agreement dated March 30, 1999 related to the remaining travel plaza for a sales price of $3,025,347, which will result in a pro forma gain of approximately $1.8 million. The sale of the travel plazas represents the disposition of substantially all of the Partnership's assets and the Partnership has no further liability in connection with any of the travel plazas sold. A subordinated real estate disposition fee of approximately $1.5 million will be paid to the General Partner related to the sales of the travel plazas. Upon consummation of the sale of the Ellensburg, Washington travel plaza, the General Partner will begin the process of winding down the affairs of the Partnership that includes liquidation and distribution of assets to the investors in accordance with the Partnership agreement. The liquidation of the Partnership is expected to be completed in June 1999. As part of the sale of the travel plazas, approximately $320,000 (representing less than one percent of the aggregate sales price) may, at the General Partner's discretion, be deposited in a trust (the "Trust Fund") with a bank. The Trust Fund, including interest income, would be available to satisfy claims made directly or indirectly with respect to the liquidation, dissolution and winding up of the affairs of the Partnership during a period of up to 36 months following the liquidation date. At the end of this period, final decisions will be made in settlement of all disputed claims, if any, and the remaining balance of the Trust Fund will be disbursed to the limited partners. 27 SCHEDULE III Page 1 of 2 PARTICIPATING INCOME PROPERTIES 1986, L. P. AND AFFILIATE SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998 Initial Cost to Partnership and Gross Amount at December 31, 1998 ------------------------------------------- Travel Plaza Location Land Buildings Equipment Total - --------------------- ---- --------- --------- ----- Eloy, Arizona $ 458,740 $ 3,558,260 $ -- $ 4,017,000 Thousand Palms, California 809,050 2,757,950 -- 3,567,000 Post Falls, Idaho 351,320 1,818,680 -- 2,170,000 Clive, Iowa 307,250 6,191,750 -- 6,499,000 Truxton, Missouri 403,600 3,803,400 -- 4,207,000 Butte, Montana 242,710 1,631,290 259,000 2,133,000 Amarillo, Texas 1,326,000 2,814,000 -- 4,140,000 Ellensburg, Washington 533,040 1,266,113 -- 1,799,153 Evanston, Wyoming 622,640 1,188,476 367,781 2,178,897 Cheyenne, Wyoming 711,840 3,426,160 -- 4,138,000 ---------- ----------- --------- ----------- TOTAL $5,766,190 $28,456,079 $ 626,781 $34,849,050 ========== =========== ========= =========== Accumulated Depreciation --------------------------------- Date Travel Plaza Location Buildings Equipment Total Acquired - --------------------- --------- --------- ----- -------- Eloy, Arizona $ 1,544,384 $ -- $ 1,544,384 Aug. 1988 Thousand Palms, California 1,206,603 -- 1,206,603 Jul. 1988 Post Falls, Idaho 909,340 -- 909,340 Jan. 1987 Clive, Iowa 2,708,891 -- 2,708,891 Jul. 1988 Truxton, Missouri 1,663,988 -- 1,663,988 Jul. 1988 Butte, Montana 745,466 233,099 978,565 Jul. 1987 Amarillo, Texas 1,108,821 -- 1,108,821 Jun. 1988 Ellensburg, Washington 562,681 -- 562,681 Sep. 1987 Evanston, Wyoming 346,639 367,781 714,420 Dec. 1987* Cheyenne, Wyoming 1,487,049 -- 1,487,049 Aug. 1988 ----------- --------- ----------- TOTAL $12,283,862 $ 600,880 $12,884,742 =========== ========= =========== * Restaurant reconstructed during 1991 28 SCHEDULE III Page 2 of 2 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND AFFILIATE SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1998 NOTES: (1) There are no encumbrances on the properties. The properties are subject to a purchase agreement whereby Flying J Inc. has agreed, subject to certain conditions, to purchase the properties for an aggregate cash price of approximately $48.5 million. (2) Cost for Federal income tax purposes is the same as cost for financial reporting purposes. (3) All buildings and equipment are depreciated over estimated useful lives of 24 and eight years, respectively. Substantially all of the buildings and equipment were purchased as new properties. (4) Transactions in real estate, equipment and accumulated depreciation during 1998, 1997 and 1996 are summarized as follows: Accumulated Cost Depreciation ------------ ------------ Balance, December 31, 1995 $ 40,660,542 $ 12,233,701 Cost of land sold (248,645) -- Cost of equipment sold (3,342,522) (2,855,684) Depreciation expense -- 1,559,843 ------------ ------------ Balance, December 31, 1996 37,069,375 10,937,860 Depreciation expense -- 1,316,043 ------------ ------------ Balance, December 31, 1997 37,069,375 12,253,903 Cost of real estate sold (2,220,325) (560,282) Depreciation expense -- 1,191,121 ------------ ------------ Balance, December 31, 1998 $ 34,849,050 $ 12,884,742 ============ ============ 29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To FFCA Investor Services Corporation 86-B: We have audited the accompanying balance sheet of FFCA INVESTOR SERVICES CORPORATION 86-B (a Delaware corporation) as of December 31, 1998. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of FFCA Investor Services Corporation 86-B as of December 31, 1998, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Phoenix, Arizona, March 22, 1999. 30 FFCA INVESTOR SERVICES CORPORATION 86-B BALANCE SHEET - DECEMBER 31, 1998 ASSETS Cash $100 Investment in Participating Income Properties 1986, L.P., at cost 100 ---- Total Assets $200 ==== LIABILITY Payable to Parent (Note 2) $100 ---- STOCKHOLDER'S EQUITY Common Stock; $l par value; 100 shares authorized, issued and outstanding 100 ---- Liability and Stockholder's Equity $200 ==== The accompanying notes are an integral part of this balance sheet. 31 FFCA INVESTOR SERVICES CORPORATION 86-B NOTES TO BALANCE SHEET DECEMBER 3l, l998 (l) Operations: FFCA Investor Services Corporation 86-B (a Delaware corporation) (86-B) was organized on June 23, l986 to act as the assignor limited partner in Participating Income Properties 1986, L.P. (PIP-86). The assignor limited partner is the owner of record of the limited partnership units of PIP-86. All rights and powers of 86-B have been assigned to the holders, who are the registered and beneficial owners of the units. Other than to serve as assignor limited partner, 86-B has no other business purpose and will not engage in any other activity or incur any debt. (2) Related Parties: Perimeter Center Management Company (a Delaware corporation) (PCMC) is the sole stockholder of 86-B. The general partner of PIP-86 is an affiliate of PCMC. 32 PARTICIPATING INCOME PROPERTIES 1986, L.P. AND FFCA INVESTOR SERVICES CORPORATION 86-B ----------------------------- EXHIBIT INDEX The following is a complete list of exhibits filed as part of this Form 10-K. For electronic filing purposes only, this report contains Exhibit 27, the Financial Data Schedule. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit ------- Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following document, filed with the Securities and Exchange Commission as Exhibit 4 to the Co-Registrants' Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 0-16720, is incorporated herein by this reference. Second Amended and Restated Certificate and Agreement of Limited Partnership which governs the Partnership, as filed with the Secretary of State of Delaware on April 16, 1987. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following documents, filed with the Securities and Exchange Commission as exhibits to the Co-Registrants' Form 10-K for the fiscal year ended December 31, 1986, Commission File No. 0-16720, are incorporated herein by this reference. 1986 Form 10-K Exhibit No. ----------- Depositary Agreement of the 3-C Partnership. The Certificate of Incorporation 3-D which governs FFCA Investor Services Corporation 86-B, as filed with the Secretary of State of Delaware on June 23, 1986. Bylaws of FFCA Investor Services 3-E Corporation 86-B. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following document, filed with the Securities and Exchange Commission on October 8, 1986 as Exhibit 10(e) to the Co-Registrants' Registration Statement on Form S-11, Registration No. 33-7502, is incorporated herein by this reference. Operating Agreement, dated October 7, 1986, by and among FFCA Management Company, L.P., FFCA/PIP 1986 Property Company, Flying J Inc. and Flying J Franchise Inc. Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended, the following documents, filed with the Securities and Exchange Commission as exhibits to the Co-Registrant's Form 8-K dated March 22, 1999, Commission File No. 0-16720, are incorporated herein by this reference. March 22, 1999, Form 8-K Exhibit No. ----------- Purchase Agreement dated as of September 4, 10.01 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company III LLC Purchase Agreement dated as of September 4, 10.02 1998, between FFCA/PIP 1986 Property Company and FJI Plaza Company LLC Purchase Agreement dated as of September 4, 10.03 1998, between FFCA/PIP 1986 Property Company and Flying J Real Estate Enterprises Inc., including the First Amendment thereto dated as of March 22, 1999 Purchase Agreement dated as of September 4, 10.04 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company II LLC Purchase Agreement dated as of September 4, 10.05 1998, between FFCA/PIP 1986 Property Company and CFJ Plaza Company I LLC Extension Agreement dated March 22, 1999 10.06 Assignment of purchase agreement dated as of 10.07 March 22, 1999, between Flying J Real Estate Enterprises Inc. and FJI Plaza Company LLC EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 797977 PARTICIPATING INCOME PROPERTIES 1986, L.P. 1 U.S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 2,202,940 0 212,865 0 0 0 34,849,050 12,884,742 24,589,017 0 0 0 0 0 23,010,102 24,589,017 0 7,813,299 0 2,007,855 0 0 0 5,798,859 0 5,798,859 0 0 0 5,798,859 111.07 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH BALANCE SHEET. 797978 FFCA INVESTOR SERVICES CORPORATION 86-B 1 U.S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 100 0 0 0 0 0 0 0 200 0 0 0 0 100 0 200 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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