-----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, MHJQSgXYm4mvo+gajh4n/Uu2cdhS6BzeqERQiW5G+2njlUWAyqZ5RCUwfpGE+Sp2 IKo8X1LxAHSfj1WJ3RMXmg== 0000773337-03-000007.txt : 20031117 0000773337-03-000007.hdr.sgml : 20031117 20031117124125 ACCESSION NUMBER: 0000773337-03-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTENNIAL MORTGAGE INCOME FUND II CENTRAL INDEX KEY: 0000773337 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330112106 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15448 FILM NUMBER: 031007243 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 cmif2930.txt CENT. MORT. INCOME FUND II 9-30-03 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 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: 0-15448 CENTENNIAL MORTGAGE INCOME FUND II (Exact name of registrant as specified in its charter) California 33-0112106 (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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES NO X PART I ITEM 1. FINANCIAL STATEMENTS CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES A Limited Partnership Consolidated Balance Sheets (Unaudited)
September 30, December 31, 2003 2002 Assets - --------------------------------------------------------------------------- Cash and cash equivalents $ 1,078,000 $ 1,294,000 Other assets, net --- 4,000 - --------------------------------------------------------------------------- $ 1,078,000 $ 1,298,000 =========================================================================== Liabilities and Partners' Equity - --------------------------------------------------------------------------- Accounts payable and accrued liabilities $ --- $ 62,000 - --------------------------------------------------------------------------- Total liabilities --- 62,000 - --------------------------------------------------------------------------- Partners' equity (deficit) -- 29,133 limited partnership units outstanding at September 30, 2003 and December 31, 2002 General partners (56,000) (56,000) Limited partners 1,134,000 1,292,000 - --------------------------------------------------------------------------- Total partners' equity 1,078,000 1,236,000 Contingencies (note 5) - --------------------------------------------------------------------------- $ 1,078,000 $ 1,298,000 ===========================================================================
See accompanying notes to consolidated financial statements 1 CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES A Limited Partnership Consolidated Statements of Operations (Unaudited)
Nine Months Three Months Ended September 30, Ended September 30, 2003 2002 2003 2002 - ------------------------------------------------------------------------------ Revenue: Interest on interest- bearing deposits $ 8,000 $ 22,000 $ 2,000 $ 9,000 Other 7,000 14,000 1,000 1,000 Gain on sale of property --- 846,000 --- --- - ------------------------------------------------------------------------------ Total revenue 15,000 882,000 3,000 10,000 - ------------------------------------------------------------------------------ Expenses: Expenses associated with non- operating real estate owned --- 20,000 --- --- General and administrative, affiliates 109,000 89,000 39,000 29,000 General and administrative, nonaffiliates 64,000 54,000 8,000 13,000 - ------------------------------------------------------------------------------ Total expenses 173,000 163,000 47,000 42,000 - ------------------------------------------------------------------------------ Net income (loss) $ (158,000) $ 719,000 $ (44,000) $ (32,000) ============================================================================== Net income (loss) per limited partnership unit $ (5.42) $ 24.68 $ (1.51) $ (1.10) ==============================================================================
See accompanying notes to consolidated financial statements 2 CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES A Limited Partnership Consolidated Statement of Partners' Equity (Unaudited)
For the nine months ended September 30, 2003 Total General Limited Partners' Partners Partners Equity - --------------------------------------------------------------------------- Balance (deficit) at December 31, 2002 $ (56,000) $ 1,292,000 $ 1,236,000 Net loss --- (158,000) (158,000) - --------------------------------------------------------------------------- Balance (deficit) at September 30, 2003 $ (56,000) $ 1,134,000 $ 1,078,000 ===========================================================================
See accompanying notes to consolidated financial statements 3 CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES A Limited Partnership Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2003 and 2002 2003 2002 - -------------------------------------------------------------------------- Cash flows used in operating activities: Net income (loss) $ (158,000) $ 719,000 Adjustments to reconcile net income (loss) to net cash used in operating activities: Gain on sale of real estate owned --- (846,000) Changes in assets and liabilities: Decrease in other assets 4,000 --- Decrease in accounts payable and accrued liabilities (62,000) (11,000) - -------------------------------------------------------------------------- Net cash used in operating activities (216,000) (138,000) - -------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of real estate owned --- 1,122,000 - -------------------------------------------------------------------------- Net cash provided by investing activities --- 1,122,000 - -------------------------------------------------------------------------- Net increase (decrease) in in cash and cash equivalents (216,000) 984,000 Beginning cash and cash equivalents 1,294,000 1,333,000 - -------------------------------------------------------------------------- Ending cash and cash equivalents $ 1,078,000 $ 2,317,000 ========================================================================== Supplemental schedule of noncash investing and financing activities: Decrease in allowance for possible losses on real estate owned as a result of sales $ --- $ 768,000
See accompanying notes to consolidated financial statements 4 CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES A Limited Partnership Notes to Consolidated Financial Statements (Unaudited) September 30, 2003 and 2002 (1) BUSINESS Centennial Mortgage Income Fund II (the "Partnership") was formed in 1985 and 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. Beginning with the fourth quarter of 1992, the Partnership entered its repayment stage and cash proceeds from mortgage investments are no longer available for reinvestment in new loans by the Partnership. (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, 2003 and 2002 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, 2003 And 2002 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, 2002 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. As of December 31, 2002 and September 30, 2003, the Partnership does not believe that there would be a material difference if it had adopted the liquidation basis of accounting. 5 Net Income (Loss) per Limited Partnership Unit Net income (loss) per limited partnership unit was based on the weighted average number of limited partnership units outstanding of 29,133 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 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, 2003 or 2002. (4) CONTINGENCIES There are no material pending legal proceedings. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The Partnership had net income (losses) and income (losses) per limited partnership unit of $(158,000) and $(5.42) and $719,000 and $24.68 for the nine months ended September 30, 2003 and September 30, 2002, respectively. The income for the nine months ended September 30, 2002 was generated by the sale of the remaining 12 acres of the last parcel of land owned by the Partnership. 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. 6 LIQUIDITY AND CAPITAL RESOURCES At September 30, 2003, the Partnership had $1,078,000 in unrestricted cash and interest-bearing deposits. During the first nine months of 2003, the Partnership's principal sources of cash were $8,000 in interest income on interest bearing deposits and $7,000 in other income related to transfer fee charges. The Partnership's principal uses of cash during the first nine months of 2003 were approximately $173,000 in general and administrative costs. During the second quarter of 2002, the Partnership had consummated a purchase and sale agreement involving the remaining 12 acres of its property in Sacramento. Net proceeds from the sale were $1,122,000 and the Partnership reported a gain of $846,000. The Partnership's principal capital requirements for the next year consist of general and administrative costs. These commitments will be paid from existing cash balances. 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 were no longer available for reinvestment by the Partnership. As a result of the substantial decrease in real estate owned which occurred in 1997 and 1998, the general partners determined that the Partnership could make a $3,496,000 distribution to its limited partners in October 1998. Additional asset liquidations during 1999, 2000 and 2001 enabled the Partnership to make a $2,127,000 cash distribution to its limited partners in October 2000 and $583,000 in September 2001. With the proceeds from the sale of the remaining 12 acres in Sacramento, the Partnership made a $1,000,000 distribution to its limited partners in December 2002. 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. 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. In order to begin the dissolution of the Partnership, the Partnership Agreement requires that the general partners obtain a majority vote of the limited 7 partners in favor of dissolution. Ballots were mailed starting June 30, 2003 and a majority vote was declared on July 15, 2003. As a result of the majority vote and the finalization of the litigation evaluation, the general partners intend to take the additional steps to dissolve the Partnership include paying for the costs of winding up the affairs of the Partnership and declaring and paying a final distribution to the limited partners. The Partnership expects to make the final distribution during the fourth quarter of 2003. INTEREST ON INTEREST-BEARING DEPOSITS Interest on interest-bearing deposits totaled $8,000 and $22,000 for the nine months ended September 30, 2003 and 2002, respectively. Interest on interest-bearing deposits totaled $2,000 and $9,000 for the three months ended September 30, 2003 and 2002, 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 2003 is primarily attributable to a decrease in the average balance of cash and cash equivalents as well as a reduction in the interest rates earned on those balances. OTHER EXPENSES Expenses associated with non-operating real estate owned were zero and $20,000 for the nine months ended September 30, 2003 and 2002, respectively. Expenses associated with non-operating real estate owned were zero for the three months ended September 30, 2003 and 2002, respectively. The expenses relate primarily to the land in Sacramento. The decrease for 2003 is due to the sale of the property. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, affiliates totaled $109,000 and $89,000 for the nine months ended September 30, 2003 and 2002, respectively. General and administrative expenses, affiliates totaled $39,000 and $29,000 for the three months ended September 30, 2003 and 2002, respectively. These expenses are primarily salary allocation reimbursements paid to affiliates. The increase for 2003 is partially the result of additional rent expense allocations. General and administrative expenses, nonaffiliates totaled $64,000 and $54,000 for the nine months ended September 30, 2003 and 2002, respectively, and $8,000 and $13,000 for the three months ended September 30, 2003 and 2002, respectively. These expenses consist of other costs associated with the administration of the Partnership and real estate owned. The increase for 2003 is principally due to payments made for accounting, tax preparation and investor reporting. 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. 8 As of September 30, 2003, the Partnership held fixed rate bank deposits with carrying values totaling $815,000. The 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, 2003. 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, 2003. Accordingly, the Partnership is not exposed to any market risk associated with its liabilities. ITEM 4. CONTROLS AND PROCEDURES As of September 30, 2003, the Partnership carried out an evaluation, under the supervision and with the participation of the Partnership's management, including the general partners and chief financial officer of Centennial Corporation, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures pursuant to Securities and Exchange Commission ("SEC") rules. Based upon that evaluation, management concluded that the Partnership's disclosure controls and procedures are effective in timely alerting them to material information relating to the Partnership, which is required to be included in the Partnership's periodic SEC filings. There has been no significant change in the Partnership's internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. Disclosure controls and procedures are defined in SEC rules as controls and other procedures designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Partnership's disclosure controls and procedures were designed to ensure that material information related to the Partnership, including subsidiaries, is made known to management, including the general partners and chief financial officer, in a timely manner. 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)31-Certification pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 32-Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (3) & (4) Articles of Incorporation and Bylaws The Amended and Restated Limited Partnership Agreement Incorporated by reference to Exhibit A to the Partnership's Prospectus contained in the Partnership's registration Statement on Form S-11 (Commission File No. 0-15448) Dated January 17, 1986, as supplemented filed under the Securities Act of 1933 (b) None 10 Exhibit 31 SECTION 302 CERTIFICATION I, Ronald R. White, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Centennial Mortgage Income Fund II and Subsidiaries, the ("Partnership"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge , the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this quarterly report; 4. The Partnership's other General Partners and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Partnership and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b)Evaluated the effectiveness of the Partnership's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c)Disclosed in this report any change in the Partnership's internal control over financial reporting that occurred during the third quarter of 2003 that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting; and 5. The Partnership's management and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Partnership's auditors and the audit committee (or persons performing the equivalent function) of the Partnership: a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal control over financial reporting. Date: November 14, 2003 /s/ Ronald R. White Ronald R. White General Partner and Chief Financial Officer of Centennial Corporation 11 Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Centennial Mortgage Income Fund II and Subsidiaries, the ("Partnership") on Form 10-Q for the period ending September 30, 2003, as filed with Securities and Exchange Commission on November 14, 2003, (the "Report") I, Ronald R. White, General Partner and Chief Financial Officer of Centennial Corporation (Corporate General Partner), certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/ Ronald R. White ______________________________ November 14, 2003 Ronald R. White General Partner and Chief Financial Officer of Centennial Corporation 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 II AND SUBSIDIARIES A California Limited Partnership /s/ John B. Joseph ________________________ John B. Joseph General Partner November 14, 2003 /s/ Ronald R. White _________________________________ Ronald R. White General Partner November 14, 2003 13 -----END PRIVACY-ENHANCED MESSAGE-----