-----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, MTEnZybnrrpt+aj4y2U05gBygRuXH2sBCDRhNbVIVprpGgtGkNfgKgBB6PRNtz8R 4WOXawUw3rcz3PQ+y5fSbw== /in/edgar/work/0000736980-00-000005/0000736980-00-000005.txt : 20001115 0000736980-00-000005.hdr.sgml : 20001115 ACCESSION NUMBER: 0000736980-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTENNIAL MORTGAGE INCOME FUND CENTRAL INDEX KEY: 0000736980 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 330053488 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-88588 FILM NUMBER: 764580 BUSINESS ADDRESS: STREET 1: 1540 S LEWIS STREET CITY: ANAHEIM STATE: CA ZIP: 92805 BUSINESS PHONE: 7145028484225 MAIL ADDRESS: STREET 2: 1540 S LEWIS STREET CITY: ANAHEIM STATE: CA ZIP: 92805 10-Q 1 0001.txt CENTENNIAL MORTGAGE INCOME FUND FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A Commission File Number: 0-22520 CENTENNIAL MORTGAGE INCOME FUND (Exact name of registrant as specified in its charter) California 33-0053488 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1540 South Lewis Street, Anaheim, California 92805 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714)502-8484 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO PART I ITEM 1. FINANCIAL STATEMENTS CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A Limited Partnership Consolidated Balance Sheets September 30, 2000 and December 31, 1999
September 30, December 31, ASSETS 2000 1999 (Unaudited) - ------------------------------------------------------------------------------ Cash and cash equivalents $ 1,109,000 $ 1,124,000 Real estate loans receivable, earning 485,000 541,000 - ------------------------------------------------------------------------------ Net real estate loans receivable 485,000 541,000 - ------------------------------------------------------------------------------ Other assets, net 4,000 --- Due from affiliates 8,000 7,000 - ------------------------------------------------------------------------------ $ 1,606,000 $ 1,672,000 ============================================================================== LIABILITIES AND PARTNERS' EQUITY - ------------------------------------------------------------------------------ Accounts payable and accrued liabilities $ 10,000 $ 12,000 - ------------------------------------------------------------------------------ Total liabilities 10,000 12,000 - ------------------------------------------------------------------------------ Partners' equity (deficit) -- 38,729 limited partnership units outstanding at September 30, 2000 and December 31, 1999 General partners (132,000) (132,000) Limited partners 1,728,000 1,792,000 - ------------------------------------------------------------------------------ Total partners' equity 1,596,000 1,660,000 Contingencies (note 4) - ------------------------------------------------------------------------------ $ 1,606,000 $ 1,672,000 ==============================================================================
See accompanying notes to consolidated financial statements 1 CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A Limited Partnership Consolidated Statements of Operations (Unaudited)
Nine Months Three Months Ended September 30, Ended September 30, 2000 1999 2000 1999 - ------------------------------------------------------------------------ Revenue: Interest income on loans to nonaffiliates, including fees $ 31,000 $ 38,000 $ 10,000 $ 11,000 Interest income on loans to affiliates, including fees --- 3,000 --- --- Interest on interest- bearing deposits 43,000 54,000 16,000 12,000 Other 8,000 36,000 3,000 5,000 - ------------------------------------------------------------------------- Total revenue 82,000 131,000 29,000 28,000 - ------------------------------------------------------------------------- Expenses: Provision for possible losses 30,000 --- 30,000 --- Expenses associated with non- operating real estate owned --- 4,000 --- 1,000 General and administrative affiliates 61,000 137,000 21,000 18,000 General and administrative nonaffiliates 55,000 77,000 18,000 30,000 - ------------------------------------------------------------------------- Total expenses 146,000 218,000 69,000 49,000 - ------------------------------------------------------------------------- Net loss $ (64,000) $ (87,000) $ (40,000) $ (21,000) ========================================================================= Net loss per limited partnership unit -basic and diluted $ (1.65) $ (2.25) $ (1.03) $ (.54) =========================================================================
See accompanying notes to consolidated financial statements 2 CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A Limited Partnership Consolidated Statement of Partners' Equity (Unaudited) For the nine months ended September 30, 2000
Total General Limited Partners' Partners Partners Equity (Unaudited) (Unaudited) (Unaudited) - --------------------------------------------------------------------------- Balance (deficit) at December 31, 1999 $ (132,000) $ 1,792,000 $ 1,660,000 Net loss --- (64,000) (64,000) - --------------------------------------------------------------------------- Balance at (deficit) September 30, 2000 $ (132,000) $ 1,728,000 $ 1,596,000 ==========================================================================
See accompanying notes to consolidated financial statements 3 CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A Limited Partnership Consolidated Statements of Cash Flows (Unaudited) For the nine months ended September 30, 2000 and 1999
2000 1999 (Unaudited) (Unaudited) - ----------------------------------------------------------------------- Cash flows from operating activities: Net loss $ (64,000) $ (87,000) Adjustments to reconcile net loss to net cash used in operating activities: Provision for possible losses 30,000 --- Changes in assets and liabilities: Decrease (increase) in other assets (4,000) 291,000 Increase in due from affiliates (1,000) --- Decrease in accounts payable and accrued liabilities (2,000) (379,000) - ----------------------------------------------------------------------- Net cash used in operating activities (41,000) (175,000) - ----------------------------------------------------------------------- Cash flows from investing activities: Principal collected on loans 26,000 145,000 Principal collected on loans to unconsolidated investee --- 100,000 - ----------------------------------------------------------------------- Net cash provided by investing activities 26,000 245,000 - ----------------------------------------------------------------------- Cash flows from financing activities: Principal payments on notes payable to affiliates --- (2,000) Distribution to limited partners --- (3,873,000) - ----------------------------------------------------------------------- Net cash used in financing activities --- (3,875,000) - ----------------------------------------------------------------------- Net decrease in cash and cash equivalents (15,000) (3,805,000) Beginning cash and cash equivalents 1,124,000 4,938,000 - ----------------------------------------------------------------------- Ending cash and cash equivalents $ 1,109,000 $ 1,133,000 =======================================================================
Supplemental schedule of noncash investing and financing activities: Decrease in notes receivable as a result of partial chargeoff $ 30,000 $ --- See accompanying notes to consolidated financial statements 4 CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A Limited Partnership Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 and 1999 (1) BUSINESS Centennial Mortgage Income Fund (the "Partnership") initially invested in commercial, industrial and residential income-producing real property through mortgage investments consisting of participating first mortgage loans, other equity participation loans, construction loans, and wrap-around and other junior loans. The Partnership's underwriting policy for granting credit was to fund loans secured by first and second deeds of trust on real property. The Partnership's area of concentration is in California. In the normal course of business, the Partnership participated with other lenders in extending credit to single borrowers; the Partnership did this in an effort to decrease credit concentrations and provide a greater diversification of credit risk. As of September 30, 2000, a majority of the loans secured by properties have been repaid or charged off. During October 2000, the Partnership's last remaining note receivable was repaid. As required by the Partnership Agreement, the Partnership is currently in the repayment stage, and as a result, cash proceeds from mortgage investments are no longer available for reinvestment. (2) BASIS OF PRESENTATION The consolidated financial statements are unaudited and reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods. Results for the nine and three months ended September 30, 2000 and 1999 are not necessarily indicative of results which may be expected for any other interim period, or for the year as a whole. Information pertaining to the nine and three months ended September 30, 2000 and 1999 is unaudited and condensed inasmuch as it does not include all related footnote disclosures. The condensed consolidated financial statements do not include all information and footnotes necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Notes to consolidated financial statements included in Form 10-K for the year ended December 31, 1999 on file with the Securities and Exchange Commission, provide additional disclosures and a further description of accounting policies. Financial Information about Industry Segments Given that the Partnership is in the process of liquidation, the Partnership has identified only one operating business segment which is the business of asset liquidation. 5 Net Income (loss) per Limited Partnership Unit Net income (loss) per limited partnership unit for financial statement purposes was based on the weighted average number of limited partnership units outstanding of 38,729 for all periods presented. (3) TRANSACTIONS WITH AFFILIATES Under the provisions of the Partnership Agreement, the general partners are to receive compensation for their services in supervising the affairs of the Partnership. This partnership management compensation shall be equal to 10 percent of the cash available for distribution, as defined in the Partnership Agreement. The general partners will not receive this compensation until the limited partners have received a 12 percent per annum cumulative return on their adjusted invested capital but are entitled to receive a 5 percent interest in cash available for distribution in any year until this provision has been met. Adjusted invested capital is defined as the original capital invested less distributions from mortgage reductions. Payments to the general partners have been limited to 5 percent of cash available for distribution as the limited partners have not yet received their 12 percent per annum cumulative return. Under this provision of the Partnership Agreement, no distributions were paid to the general partners during the nine months ended September 30, 2000 or 1999. (4) CONTINGENCIES Unbeknownst to the Partnership, on July 19, 1996, a default was entered against the Partnership for failure to respond to a complaint filed on July 17, 1995 in the San Bernardino Superior Court, entitled Henry Yong Lim et al - vs.- Cardinal Security, et al and allegedly served on the Partnership in May 1996. As shown by the proofs of service, the complaint was served on the wrong party in 1996. The Partnership first became aware of its involvement in this lawsuit in September 1997 when it received copies of requests for entry of default judgement totaling approximately $1,000,000. The judgements involved both economic and non-economic damages and injuries allegedly suffered by the plaintiffs as a result of an altercation between the plaintiffs, other third parties and security guards employed by the Partnership at its shopping center in Upland, California. The request for judgement names Centennial Mortgage Income Fund Partnership as a defendant in this action. Since the Partnership was never served with the complaint and had no other way of knowing about this action, the Partnership retained legal counsel to set aside the defaults and any default judgements which were entered, due to the lack of proper service and notice. The Partnership also tendered this action to its liability insurance carrier for legal and liability coverage. The default judgement has been set aside and the plaintiff's appeal of the set aside ruling has been denied by the Court. The Court has also ruled that the prior jury found 0% liability as to the Partnership for non-economic damages and that the plaintiffs can only proceed to trial against the Partnership for recovery of economic damages. Based upon evidence presented at the prior trial, Management believes that these economic damages should not exceed $40,000. Management intends to vigorously defend any future actions related to this matter. Management believes that even if the plaintiff's prevail in these actions, the Partnership's insurance coverage and/or the security company's insurance carrier should prevent the Partnership from suffering a material loss from these proceedings. 6 There are no other material pending legal proceedings other than ordinary routine litigation incidental to the Partnership's business. Based on part of advice of legal counsel, management does not believe that the results of any of these matters will have a material impact on the Partnership's financial position or results of operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The Partnership had net losses and net losses per limited partnership unit of $(40,000) and $(1.03) for the three months ended September 30, 2000 and $(21,000) and $(.54) for the three months ended September 30, 1999, respectively. The Partnership had net losses and net losses per limited partnership unit of $(64,000) and $(1.65) for the nine months ended September 30, 2000 and $(87,000) and $(2.25) for the nine months ended September 30, 1999, respectively. Cautionary Statements Regarding Forward-Looking Information The Partnership wishes to caution readers that the forward-looking statements contained in this Form 10-Q under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by any forward-looking statements made by or on behalf of the Partnership. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Partnership is filing the following cautionary statements identifying important factors that in some cases have affected, and in the future could cause the Partnership's actual results to differ materially from those expressed in any such forward-looking statements. The factors that could cause the Partnership's results to differ materially include, but are not limited to, general economic and business conditions, including interest rate fluctuations; the impact of competitive products and pricing; success of operating initiatives; adverse publicity; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; the results of financing efforts; business abilities and judgment of personnel; availability of qualified personnel; employee benefit costs and changes in, or the failure to comply with government regulations. Risks of the year 2000 Issue The Partnership is in the process of liquidating its remaining assets. As of September 30, 2000, the Partnership held only cash and cash equivalents, a single note secured by real estate, and $12,000 in other non-cash assets. In light of these circumstances, the Partnership made only the absolutely necessary modifications to existing software which were necessitated by the year 2000 issues. The cost of these modifications was less than $10,000. To date, the Partnership has experienced only minor computer related problems that are the result of the year 2000. None of these problems have caused any significant disruption to the Partnership's operations. The Partnership anticipates that it will encounter additional minor problems in the coming months. It does not anticipate that it will be required to spend any significant amounts to correct these problems or that these problems will cause any disruptions of any consequence to the Partnership's operations. 8 LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, the Partnership had $1,109,000 in cash and interest- bearing deposits. The Partnership had no unfunded loan commitments at September 30, 2000. During the first nine months of 2000, the Partnership's principal sources of cash were $43,000 in interest income on interest bearing deposits, $31,000 in interest on notes receivable and $26,000 in principal payments on notes receivable. The Partnership's principal uses of cash during the first nine months of 2000 were approximately $122,000 in general and administrative costs. The Partnership's principal future capital requirements are expected to be general and administrative costs. During October 2000, the Partnership received $485,000 in cash from the payoff of its last remaining note receivable. Effective with the third quarter of 1991, the Partnership had suspended making any cash distributions to partners due to a decline in liquidity and the uncertainty of the cash requirements for existing and potential real estate owned. Pursuant to the Partnership Agreement, 60 months after the closing of the offering, cash proceeds from mortgage investments are no longer available for reinvestment by the Partnership. As a result of the substantial sales activity which occurred in the fourth quarter of 1998, the general partners declared and paid a $3,873,000 cash distribution to limited partners in February 1999. The general partners have had discussions with legal counsel regarding the amounts of cash balances that would be prudent to be retained by the Partnership at this time. In light of the substantial amount of real estate that the Partnership has held an interest in over the years, there is always the potential for future litigation to arise, particularly in the area of toxic contamination. Although the general partners are not aware of any threatened litigation, or litigation that is likely to arise, they have determined that the Partnership should retain at least $1,000,000 in cash balances to be available to defend the Partnership in any future litigation which may arise. It is expected that these cash balances will be retained until such time as legal counsel advises the general partners that the potential for any future litigation is remote. RESULTS OF OPERATIONS INTEREST INCOME Interest income on loans to nonaffiliates decreased from $11,000 during the three months ended September 30, 1999 to $10,000 during the three months ended September 30, 2000. Interest income on loans to nonaffiliates decreased from $38,000 during the nine months ended September 30, 1999 to $31,000 during the nine months ended September 30, 2000. The year to date decrease is attributable to the payoff of two of the Partnership's smaller loans receivable during the early part of 1999. These paid off loans did not generate interest income during 2000. Interest income on loans to nonaffiliates for the nine months ended September 30, 2000 was earned from a single note secured by real estate. The Partnership owns a 50% interest in the note with the remaining interest in the note being owned by Centennial Mortgage Income Fund II, an affiliate. The 9 principal balance of this note of $1,070,000 was due in April 2000, however, the borrower failed to repay the note when it matured. The Partnership commenced foreclosure proceedings under the trust deed securing the note in July 2000. In August 2000, the Partnership entered into a modification agreement with the borrower which required the borrower to make an immediate $50,000 principal payment, bring interest current and pay for all foreclosure proceeding costs. In addition, the modification agreement required the borrower to make monthly interest payments, make $50,000 principal payments in September 2000 and November 2000, and to repay the remaining balance of the note by December 28, 2000. The borrower failed to make the required payment in September 2000. During discussions with the borrower in early October, they indicated that they had an external source of funds available to repay the entire note, but only if the Partnership was willing to take a payoff amount that was $60,000 less than the face value of the note plus accrued interest. Additionally, the borrower indicated that if the Partnership did not accept this discounted payoff and instead pursued its right to foreclose under the deed of trust securing the note, the borrower would be likely to seek protection under the federal bankruptcy laws. Before deciding whether or not to accept the discounted payoff, the General Partners considered the following items: i) the length of time that it might take to pursue its rights through a bankruptcy proceeding; ii) the risk that the Partnership might not ultimately recover the full face value of the note plus accrued interest and collection costs; and iii) the potential administrative costs of having to continue to operate the Partnership for additional time due to the extended holding period of the note. After evaluating these factors, the General Partners determined that it would be in the best interest of the limited partners to accept the discounted payoff. The Partnership received approximately $485,000 in cash from the payoff of the note in October 2000. The Partnership reduced its carrying value of the note by $30,000 (1/2 of the total discount) as of September 30, 2000 to reflect this agreement and charged the write down to provision for possible losses. Interest income on loans to unconsolidated investee, including fees, totaled $-0- and $3,000 for the nine months ended September 30, 2000 and 1999, respectively. There was no interest income on loans to unconsolidated investee, including fees, during either the three months ended September 30, 2000 or 1999. Interest income on loans to unconsolidated investee represents interest earned on loans to an unconsolidated subsidiary. The decrease for 2000 is due to a decrease in the outstanding loan balances to this affiliate. Interest earned on interest-bearing deposits totaled $16,000 and $12,000 for the three months ended September 30, 2000 and 1999, respectively. Interest earned on interest-bearing deposits totaled $43,000 and $54,000 for the nine months ended September 30, 2000 and 1999, respectively. Interest on interest- bearing deposits represents interest earned on Partnership funds invested, for liquidity, in time certificate and money market deposits. The decrease in income on interest-bearing deposits for the nine months ended September 30, 2000 is principally due to decreased average cash balances. The decline in average cash balances resulted from a $3.9 million distribution to limited partners during February 1999. 10 OTHER EXPENSES Expenses associated with non-operating real estate owned were $-0- and $1,000 for the three months ended September 30, 2000 and 1999, respectively. Expenses associated with non-operating real estate owned were $-0- and $4,000 for the nine months ended September 30, 2000 and 1999, respectively. The expenses relate to the 19 acres in Sacramento and the condominiums in Oxnard. These real estate assets were sold in the fourth quarter of 1998. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, affiliates totaled $21,000 and $18,000, respectively, for the three months ended September 30, 2000 and 1999. General and administrative expenses, affiliates totaled $61,000 and $137,000, respectively, for the nine months ended September 30, 2000 and 1999. These expenses are primarily salary allocation reimbursements paid to affiliates. The decrease from 1999 to 2000 is due to the termination of five employment contracts effective March 31, 1999 and the continuing decrease in time spent by employees of the general partners in managing the affairs of the Partnership. General and administrative expenses, nonaffiliates totaled $18,000 and $30,000 for the three months ended September 30, 2000 and 1999, respectively. General and administrative expenses, nonaffiliates totaled $55,000 and $77,000 for the nine months ended September 30, 2000 and 1999, respectively. These expenses consist of other costs associated with the administration of the Partnership. The decrease for nine and three months ended September 30, 2000 is primarily due to a decrease in professional fees. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Since the Partnership does not invest in any derivative financial instruments or enter into any activities involving foreign currencies, its market risk associated with financial instruments is limited to the effect that changing domestic interest rates might have on the fair value of its bank deposits and notes receivable. As of September 30, 2000, the Partnership held fixed rate bank deposits with carrying values totaling $1,109,000 and a fixed rate note receivable with carrying values totaling $485,000. The bank deposits and fixed rate note all had maturities of less than ninety days. The estimated fair value of all of these assets was estimated to be equal to their carrying values as of September 30, 2000. Management currently intends to hold the remaining fixed rate assets until their respective maturities. Accordingly, the Partnership is not exposed to any material cash flow or earnings risk associated with these assets. Given the relatively short-term maturities of these assets, management does not believe the Partnership is exposed to any significant market risk related to the fair value of these assets. The Partnership had no interest bearing indebtedness outstanding as of Septmeber 30, 2000. Accordingly, the Partnership is not exposed to any market risk associated with its liabilities. 11 PART II OTHER INFORMATION Item 1. Legal Proceedings See note 4 to the Consolidated Financial Statements Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (3) & (4) Articles of Incorporation and Bylaws The Amended Limited Partnership Agreement Incorporated by reference to Exhibit A to the Partnership's Prospectus contained in the Partnership's registration Statement on Form Form S-11 (Commission File No. 0-22520) Dated June 8, 1984, as supplemented and filed under the Securities Act of 1933 Exhibit 27. Financial Data Schedule (b) Reports on Form 8-K None 12 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES A California Limited Partnership /s/John B Joseph _________________________________ John B. Joseph General Partner November 13, 2000 /s/ Ronald R. White _________________________________ Ronald R. White General Partner November 13, 2000 By: CENTENNIAL CORPORATION General Partner /s/ Joel H. Miner _________________________________ Joel H. Miner Chief Financial Officer November 13, 2000 EX-27 2 0002.txt ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS DEC-31-2000 SEP-30-2000 1,109 0 485 0 0 1,606 0 0 1,606 10 0 0 0 0 1,596 1,606 0 82 0 0 0 0 0 (64) 0 (64) 0 0 0 (64) (1.65) (1.65)
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