<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund, Ltd. at March 31, 1996, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10-Q of CNL Income Fund, Ltd. for the three months ended March 31,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 246,634
<SECURITIES> 0
<RECEIVABLES> 169,574
<ALLOWANCES> 157,741
<INVENTORY> 0
<CURRENT-ASSETS> 260,501
<PP&E> 10,199,928
<DEPRECIATION> 1,952,994
<TOTAL-ASSETS> 9,569,833
<CURRENT-LIABILITIES> 445,415
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,124,418
<TOTAL-LIABILITY-AND-EQUITY> 9,569,833
<SALES> 0
<TOTAL-REVENUES> 276,923
<CGS> 0
<TOTAL-COSTS> 90,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 213,687
<INCOME-TAX> 0
<INCOME-CONTINUING> 213,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,687
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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 March 31, 1996
-----------------------------------
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
0-15666
----------------------
CNL Income Fund, Ltd.
- --------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2666264
- ---------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- --------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
---------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
--------- ---------
CONTENTS
--------
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-11
Part II
Other Information 12
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1996 1995
---------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $1,952,994
and $1,901,068 $8,246,934 $8,298,860
Investment in and due from joint
ventures 1,005,298 1,007,527
Cash and cash equivalents 246,634 271,575
Receivables, less allowance for
doubtful accounts of $157,741 and
$122,136 11,833 29,143
Prepaid expenses 2,034 3,815
Lease costs, less accumulated
amortization of $17,500 and
$16,875 32,500 33,125
Accrued rental income 24,600 24,833
---------- ----------
$9,569,833 $9,668,878
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,941 $ 2,988
Accrued and escrowed real estate
taxes payable 12,118 10,380
Distributions payable 316,221 316,221
Due to related parties 86,020 75,139
Rents paid in advance and deposits 27,115 37,198
---------- ----------
Total liabilities 445,415 441,926
Partners' capital 9,124,418 9,226,952
---------- ----------
$9,569,833 $9,668,878
========== ==========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1996 1995
-------- --------
Revenues:
Rental income from operating leases $268,164 $283,276
Contingent rental income 5,962 367
Interest and other income 2,797 4,693
-------- --------
276,923 288,336
-------- --------
Expenses:
General operating and administrative 26,554 16,359
Professional services 4,760 2,809
Real estate taxes 1,132 3,656
State and other taxes 5,148 5,091
Depreciation and amortization 52,551 52,551
-------- --------
90,145 80,466
-------- --------
Income Before Equity in Earnings of Joint
Ventures 186,778 207,870
Equity in Earnings of Joint Ventures 26,909 27,124
-------- --------
Net Income $213,687 $234,994
======== ========
Allocation of Net Income:
General partners $ 2,137 $ 2,350
Limited partners 211,550 232,644
-------- --------
$213,687 $234,994
======== ========
Net Income Per Limited Partner Unit $ 7.05 $ 7.75
======== ========
Weighted Average Number of Limited
Partner Units Outstanding 30,000 30,000
======== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1996 1995
------------- ------------
General partners:
Beginning balance $ 299,541 $ 289,920
Net income 2,137 9,621
----------- -----------
301,678 299,541
----------- -----------
Limited partners:
Beginning balance 8,927,411 9,239,813
Net income 211,550 952,481
Distributions ($10.54 and $42.16
per limited partner unit,
respectively) (316,221) (1,264,883)
----------- -----------
8,822,740 8,927,411
----------- -----------
Total partners' capital $ 9,124,418 $ 9,226,952
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1996 1995
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 291,280 $ 287,481
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (316,221) (1,215,906)
----------- -----------
Net cash used in
financing activities (316,221) (1,215,906)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (24,941) (928,425)
Cash and Cash Equivalents at
Beginning of Quarter 271,575 1,253,629
----------- -----------
Cash and Cash Equivalents at End
of Quarter $ 246,634 $ 325,204
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 316,221 $ 316,220
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1996 and 1995
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1996, may not be indicative of the results
that may be expected for the year ending December 31, 1996. Amounts as
of December 31, 1995, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund, Ltd. (the "Partnership") for the year ended December 31,
1995.
Certain items in the prior year's financial statements have been
reclassified to conform to 1996 presentation. These reclassifications
had no effect on partners' capital or net income.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
2. Receivables:
-----------
In March 1996, the Partnership accepted a promissory note from the
tenant of the property in Mesquite, Texas, in the amount of $156,308,
representing past due rental and other amounts, which had been included
in receivables and reserved for in the allowance for doubtful accounts,
and real estate taxes previously recorded as an expense by the
Partnership. Payments are due in 60 monthly installments of $3,492,
including interest at a rate of 11 percent per annum, commencing on June
1, 1996. Due to the uncertainty of the collectibility of this note, the
Partnership established an allowance for doubtful accounts of $157,741,
including accrued interest of $1,433; therefore, no amounts were
included in receivables at March 31, 1996, relating to this note. The
Partnership will recognize any of the amounts reserved as income if
collected.
3. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental income from individual
lessees, each representing more than ten percent of the Partnership's
total rental income (including the Partnership's share of rental income
from joint ventures), for at least one of the quarters ended March 31:
1996 1995
-------- --------
Golden Corral Corporation $113,163 $113,163
Wendy's International, Inc. 50,533 50,614
Restaurant Management
Services, Inc. 31,079 31,079
In addition, the following schedule presents total rental income from
individual restaurant chains, each representing more than ten percent of
the Partnership's total rental income (including the Partnership's share
of rental income from joint ventures), for the quarters ended March 31:
1996 1995
-------- --------
Wendy's Old Fashioned
Hamburger Restaurants $130,361 $139,209
Golden Corral Family
Steakhouse Restaurants 113,163 113,163
Popeyes 31,079 31,709
Although the Partnership's properties are geographically diverse and the
Partnership's lessees operate a variety of restaurant concepts, failure
of any one of these lessees or restaurant chains could significantly
impact the results of operations of the Partnership. However, the
general partners believe that the risk of such a default is reduced due
to the essential or important nature of these properties for the on-
going operations of the lessees.
4. Subsequent Event:
----------------
In April 1996, the Partnership entered into a promissory note with the
corporate general partner for a loan in the amount of $8,100 in
connection with the operations of the Partnership. The loan is
uncollateralized, non-interest bearing and due on demand.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on November 26, 1985, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant properties, as well as land upon which restaurants
were to be constructed, which are leased primarily to operators of national
and regional fast-food restaurant chains (collectively, the "Properties").
The leases generally are triple-net leases, with the lessees responsible for
all repairs and maintenance, property taxes, insurance and utilities. As of
March 31, 1996, the Partnership owned 18 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a co-
venturer.
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary source of capital for the quarters ended March
31, 1996 and 1995, was cash from operations (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $291,280 and
$287,481 for the quarters ended March 31, 1996 and 1995, respectively. The
increase in cash from operations for the quarter ended March 31, 1996, is
primarily a result of changes in the Partnership's working capital.
The Partnership is anticipating entering into a lease amendment with the
tenant of the Property in Mesquite, Texas, to provide for lower initial base
rent with scheduled rent increases. In connection therewith, the Partnership
accepted a promissory note in March 1996, in the amount of $156,308,
representing past due rental and other amounts, which had been included in
receivables and reserved for in the allowance for doubtful accounts, and real
estate taxes previously recorded as an expense by the Partnership. Payments
are due in 60 monthly installments of $3,492, including interest at a rate of
11 percent per annum, commencing on June 1, 1996. Due to the uncertainty of
the collectibility of this note, the Partnership established an allowance for
doubtful accounts of $157,741, including accrued interest of $1,433;
therefore, no amounts were included in receivables at March 31, 1996, relating
to this note. The Partnership will recognize any of the amounts reserved as
income if collected.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments
pending the Partnership's use of such funds to pay Partnership expenses or to
make distributions to the partners. At March 31, 1996, the Partnership had
$246,634 invested in such short-term investments as compared to $271,575 at
December 31, 1995. The funds remaining at March 31, 1996, will be used
towards the payment of distributions for the quarter ended March 31, 1996, and
other liabilities.
In April 1996, the Partnership entered into a promissory note with the
corporate general partner for a loan in the amount of $8,100 in connection
with the operations of the Partnership. The loan is uncollateralized, non-
interest bearing and due on demand.
Total liabilities of the Partnership, including distributions payable,
increased to $445,415 at March 31, 1996, from $441,926 at December 31, 1995.
Liabilities at March 31, 1996, to the extent they exceed cash and cash
equivalents at March 31, 1996, will be paid from future cash from operations,
from collections of amounts received in accordance with the promissory note
described above, from the loan received from the corporate general partner in
April 1996 described above, and in the event the general partners elect to
make additional capital contributions or loans to the Partnership, from future
general partner capital contributions or loans.
Based on current and anticipated future cash from operations, and to a
lesser extent, the loan received from the corporate general partner, the
Partnership declared distributions to limited partners of $316,221 and
$316,220 for the quarters ended March 31, 1996 and 1995, respectively. This
represents distributions of $10.54 per unit for each of the quarters ended
March 31, 1996 and 1995. No distributions were made to the general partners
for the quarters ended March 31, 1996 and 1995. The distribution for the
quarter ended December 31, 1994, which was distributed in January 1995,
included $861,500 as a result of the distribution of net sales proceeds from
the sale of the Property in Fairfield, California. This amount was treated as
a return of capital for purposes of calculating the limited partners' ten
percent preferred return. As a result of this return of capital, the amount
of the limited partners' invested capital contributions (which generally is
the limited partners' capital contributions, less distributions from the sale
of a Property that are considered to be a return of capital) was decreased;
therefore, the amount of the limited partners' invested capital contributions
on which the ten percent preferred return is calculated was lowered
accordingly. No amounts distributed to the limited partners for the quarters
ended March 31, 1996 and 1995, except for $861,500 as described above, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the limited partners' return on their adjusted
capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash
flow in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
- ---------------------
During the quarters ended March 31, 1996 and 1995, the Partnership owned
and leased 15 wholly owned Properties to operators of fast-food and family-
style restaurant chains. In connection therewith, during the quarters ended
March 31, 1996 and 1995, the Partnership earned $268,164 and $283,276,
respectively, in rental income from these Properties. The decrease in rental
income for the quarter ended March 31, 1996, as compared to the quarter ended
March 31, 1995, was primarily attributable to the fact that the Partnership
received approximately $5,700 during the quarter ended March 31, 1996, as
compared to $18,000 during the quarter ended March 31, 1995, from the former
tenant of three Properties. The rental payments from this former tenant
represented the difference between (i) the original leases entered into
between the Partnership and the former tenant and (ii) the current leases on
the Properties between the Partnership and new tenants (two of which were re-
leased to the corporate franchisor). Effective February 1, 1996, the
Partnership ceased receiving any additional rental amounts from this former
tenant; therefore, rental income during the remainder of 1996 and in future
years will decrease accordingly.
In addition, rental income decreased approximately $3,000 during the
quarter ended March 31, 1996, as compared to the quarter ended March 31, 1995,
as a result of the fact that the lease relating to the Wendy's Property in
Payson, Arizona, was amended in September 1995, to reduce annual base rent and
to provide for a change in the percentage rent calculation.
During the quarters ended March 31, 1996 and 1995, the Partnership also
earned $5,962 and $367, respectively, in contingent rental income. The
increase in contingent rental income was primarily attributable to an increase
in contingent rent relating to the Property in Payson, Arizona.
In addition, for the quarters ended March 31, 1996 and 1995, the
Partnership owned and leased three Properties indirectly through joint venture
arrangements. In connection therewith, during the quarter ended March 31,
1996 and 1995, the Partnership earned $26,909 and $27,124, respectively,
attributable to net income earned by these joint ventures.
During the quarter ended March 31, 1996, three lessees of the
Partnership, Golden Corral Corporation, Wendy's International, Inc. and
Restaurant Management Services, Inc., each contributed more than ten percent
of the Partnership's total rental income (including the Partnership's share of
the rental income from three Properties owned by joint ventures). As of March
31, 1996, Golden Corral Corporation was the lessee under leases relating to
five restaurants, Wendy's International, Inc. was the lessee under leases
relating to three restaurants and Restaurant Management Services, Inc. was the
lessee under leases relating to two restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, Golden Corral
Corporation, Wendy's International, Inc. and Restaurant Management Services,
Inc. each will continue to contribute more than ten percent of the Partnership
total rental income during the remainder of 1996 and subsequent years. In
addition, during the quarter ended March 31, 1996, three restaurant chains,
Golden Corral Family Steakhouse Restaurants, Wendy's Old Fashioned Hamburger
Restaurants and Popeyes, each accounted for more than ten percent of the
Partnership's total rental income. During the remainder of 1996 and
subsequent years, it is anticipated that these three restaurant chains each
will continue to account for more than ten percent of the Partnership's total
rental income to which the Partnership is entitled under the terms of the
leases. Any failure of these lessees or restaurant chains could materially
affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $90,145 and $80,466 for the quarters ended March 31, 1996 and 1995,
respectively. The increase in operating expenses during the quarter ended
March 31, 1996, as compared to the quarter ended March 31, 1995, is primarily
attributable to an increase in (i) accounting and administrative expenses
associated with operating the Partnership and its Properties and (ii)
insurance expense as a result of the general partners' obtaining contingent
liability and property coverage for the Partnership, effective May 1995. This
insurance policy is intended to reduce the Partnership's exposure in the
unlikely event a tenant's insurance policy lapses or is insufficient to cover
a claim relating to the Property. Operating expenses also increased due to
the fact that during the quarter ended March 31, 1996, the Partnership
incurred professional services as a result of appraisal updates obtained to
prepare an annual statement of unit valuation to qualified plans in accordance
with the Partnership's partnership agreement. During 1995, these professional
services were incurred during the quarter ended June 30, 1995.
The increase in operating expenses for the quarter ended March 31, 1996,
as compared to the quarter ended March 31, 1995, was partially offset by the
fact that operating expenses for the quarter ended March 31, 1995, included
approximately $2,500 for real estate taxes relating to the Property in
Mesquite, Texas. The general partners anticipate that the tenant will pay
these taxes in 1996 and future years.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of May, 1996.
CNL INCOME FUND, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
