10-Q 1 cmif-930.txt CENT MORT INC FUND 9-30-01 10-Q 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, 2001 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, 2001 and December 31, 2000
September 30, December 31, ASSETS 2001 2000 (Unaudited) ------------------------------------------------------------------------------ Cash and cash equivalents $ 967,000 $ 1,599,000 Other assets, net --- --- ------------------------------------------------------------------------------ $ 967,000 $ 1,599,000 ============================================================================== LIABILITIES AND PARTNERS' EQUITY ------------------------------------------------------------------------------ Accounts payable and accrued liabilities $ 13,000 $ 10,000 ------------------------------------------------------------------------------ Total liabilities 13,000 10,000 ------------------------------------------------------------------------------ Partners' equity (deficit) -- 38,729 limited partnership units outstanding at September 30, 2001 and December 31, 2000 General partners (132,000) (132,000) Limited partners 1,086,000 1,721,000 ------------------------------------------------------------------------------ Total partners' equity 954,000 1,589,000 Contingencies (note 4) ------------------------------------------------------------------------------ $ 967,000 $ 1,599,000 ==============================================================================
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, 2001 2000 2001 2000 ------------------------------------------------------------------------ Revenue: Interest income loans to nonaffiliates, including fees $ --- $ 31,000 $ --- $ 10,000 Interest on interest- bearing deposits 44,000 43,000 8,000 16,000 Other 6,000 8,000 2,000 3,000 ------------------------------------------------------------------------- Total revenue 50,000 82,000 10,000 29,000 ------------------------------------------------------------------------- Expenses: Provision for possible losses --- 30,000 --- 30,000 General and administrative, affiliates 53,000 61,000 17,000 21,000 General and administrative, nonaffiliates 51,000 55,000 18,000 18,000 ------------------------------------------------------------------------- Total expenses 104,000 146,000 35,000 69,000 ------------------------------------------------------------------------- Net loss $ (54,000) $ (64,000) $ (25,000) $ (40,000) ========================================================================= Net loss per limited partnership unit -basic and diluted $ (1.39) $ (1.65) $ (.64) $ (1.03) =========================================================================
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, 2001
Total General Limited Partners' Partners Partners Equity --------------------------------------------------------------------------- Balance (deficit) at December 31, 2000 $ (132,000) $ 1,721,000 $ 1,589,000 Distribution to limited partners (581,000) (581,000) Net loss --- (54,000) (54,000) --------------------------------------------------------------------------- Balance (deficit) at September 30, 2001 $ (132,000) $ 1,086,000 $ 954,000 ==========================================================================
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, 2001 and 2000
2001 2000 ----------------------------------------------------------------------- Cash flows used in operating activities: Net loss $ (54,000) $ (64,000) Adjustments to reconcile net loss to net cash used in operating activities: Provision for possible losses --- 30,000 Changes in assets and liabilities: Increase in other assets --- (4,000) Increase in due from unconsolidated investee --- (1,000) Increase (decrease) in accounts payable and accrued liabilities 3,000 (2,000) ----------------------------------------------------------------------- Net cash used in operating activities (51,000) (41,000) ----------------------------------------------------------------------- Cash flows from investing activities: Principal collected on loans --- 26,000 ----------------------------------------------------------------------- Cash flows used in financing activities: Distribution to limited partners (581,000) --- ----------------------------------------------------------------------- Net decrease in cash and cash equivalents (632,000) (15,000) Beginning cash and cash equivalents 1,599,000 1,124,000 ----------------------------------------------------------------------- Ending cash and cash equivalents $ 967,000 $ 1,109,000 =======================================================================
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, 2001 and 2000 (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 was 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, 2001, all of the loans secured by properties have been repaid or charged off. 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, 2001 and 2000 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, 2001 and 2000 is unaudited and condensed inasmuch as it does not include all related footnote disclosures. The 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 accounting principles generally accepted in the United States of America. Notes to consolidated financial statements included in Form 10-K for the year ended December 31, 2000 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 loss per Limited Partnership Unit Net 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, 2001 or 2000. (4) CONTINGENCIES The Partnership has disclosed in previous reports certain litigation related to the Partnership's shopping center in Upland, California. The Partnership's insurance company settled this litigation with the plaintiffs during the three months ended June 30, 2001 at no cost to the Partnership (5) DISTRIBUTION TO LIMITED PARTNERS The Partnership declared a distribution payable to limited partners who were holders of record on July 15, 2001 in the amount of $15 per limited partnership unit. The distribution totaled approximately $581,000. This distribution was paid on August 1, 2001. 6 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 $(54,000) and $(1.39) for the nine months ended September 30, 2001 and $(64,000) and $(1.65) for the nine months ended September 30, 2000, 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; success of operating initiatives; adverse publicity; changes in business strategy; quality of management; business abilities and judgment of personnel; availability of qualified personnel; employee benefit costs and changes in, or the failure to comply with government regulations. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2001, the Partnership had $967,000 in cash and interest- bearing deposits. The Partnership had no unfunded loan commitments at September 30, 2001. During the first three quarters of 2001, the Partnership's principal source of cash was $44,000 in interest income on interest bearing deposits. The Partnership's principal uses of cash during the first three quarters of 2001 were a $581,000 cash distribution to limited partners and approximately $101,000 in general and administrative costs. The Partnership's principal future capital requirements are expected to be general and administrative costs. Effective with the third quarter of 1991, the Partnership 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. The Partnership declared a distribution payable to limited partners who were holders of record on July 15, 2001 in the amount of $15 per limited partnership unit. The distribution totaled approximately $581,000. This distribution was paid on August 1, 2001. 7 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. In light of the substantial amount of real estate that the Partnership has held an interest in over the years, there was the potential for unanticipated litigation to arise, particularly in the area of toxic contamination. Although the general partners were not aware of any threatened litigation, or litigation that was likely to arise, they determined that the Partnership should retain at least $1,000,000 in cash balances to be available to defend the Partnership in any litigation which may have arisen. As of the date of this report, no litigation has arisen and Management is in the process of making a final evaluation of the potential for any future litigation arising as a result of any activity that the Partnership has been involved with in the past. The General Partners believe that, when finished, this evaluation will enable them to conclude that the potential for future litigation is now remote. If such a conclusion is reached, the General Partners intend on taking the necessary steps to dissolve the Partnership, including paying for the costs of winding up the affairs of the Partnership and declaring and paying a final distribution to the limited partners. RESULTS OF OPERATIONS INTEREST INCOME Interest income on loans to nonaffiliates decreased from $31,000 and $10,000 during the nine and three months ended September 30, 2000, respectively, to $-0- during the three and nine months ended September 30, 2001. The decrease was attributable to the payoff of the last remaining Partnership loans receivable during the three months ended December 31, 2000. Interest earned on interest-bearing deposits totaled $44,000 and $8,000 for the nine and three months ended September 30, 2001, respectively. Interest earned on interest-bearing deposits totaled $43,000 and $16,000 for the nine and three months ended September 30, 2000, respectively. Interest on interest-bearing deposits represents interest earned on Partnership funds invested, for liquidity, in time certificate and money market deposits. The slight increase in income on interest-bearing deposits during the nine months ended September 30, 2001 over the same period in 2000 is due to increased average cash balances for the nine months ended September 30, 2001 that were offset by a decrease in average interest rates earned. The increase in average cash balances resulted from the payoff of the last remaining Partnership loan receivable in October 2000. The decrease in income for the three months ended September 30, 2001 as compared to the three months ended September 30, 2000 was principally the result of a substantial decline in average interest rates earned. PROVISION FOR POSSIBLE LOSSES There was a $30,000 provision for possible losses for the nine months ended September 30, 2000. There was no provision for possible losses for the nine months ended September 30, 2001. The provision in 2000 was related to a note receivable for which the Partnership accepted a discounted payoff. This was the final note that the Partnership held. 8 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, affiliates totaled $53,000 and $17,000, respectively, for the nine and three months ended September 30, 2001. General and administrative expenses, affiliates totaled $61,000 and $21,000, respectively, for the nine and three months ended September 30, 2000. These expenses are primarily salary allocation reimbursements paid to affiliates. General and administrative expenses, nonaffiliates totaled $51,000 and $18,000 for the nine and three months ended September 30, 2001, respectively. General and administrative expenses, nonaffiliates totaled $55,000 and $18,000 for the nine and three months ended September 30, 2000, respectively. These expenses consist of other costs associated with the administration of the Partnership. The decrease for 2001 is primarily due to a decrease in professional fees and office expense. 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, 2001, the Partnership held only cash in checking accounts of $3,000 and fixed rate bank deposits with carrying values totaling $964,000. The bank deposits and fixed rate bank deposits 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, 2001. 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 September 30, 2001. Accordingly, the Partnership is not exposed to any market risk associated with its liabilities. 9 PART II OTHER INFORMATION Item 1. Legal Proceedings None 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 (b) None 10 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 By:/s/ John B. Joseph _________________________________ John B. Joseph General Partner November 14, 2001 By:/s/ Ronald R. White _________________________________ Ronald R. White General Partner November 14, 2001 By: CENTENNIAL CORPORATION General Partner By:/s/ Joel H. Miner _________________________________ Joel H. Miner Chief Financial Officer November 14, 2001