<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund, Ltd. at June 30, 1996, and its statement of income for
the six months then ended and is qualified in its entirety by reference to the
Form 10-Q of CNL Income Fund, Ltd. for the six months ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 237,099
<SECURITIES> 0
<RECEIVABLES> 163,493
<ALLOWANCES> 157,289
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,199,928
<DEPRECIATION> 2,004,920
<TOTAL-ASSETS> 9,501,320
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,056,411
<TOTAL-LIABILITY-AND-EQUITY> 9,501,320
<SALES> 0
<TOTAL-REVENUES> 556,944
<CGS> 0
<TOTAL-COSTS> 168,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 461,901
<INCOME-TAX> 0
<INCOME-CONTINUING> 461,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 461,901
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund, Ltd. has an unclassified
balance sheet; therefore, no values are shown above for current assets and
current liabilities.
</FN>
</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 June 30, 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 8-12
Part II
Other Information 13
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
---------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $2,004,920
and $1,901,068 $8,195,008 $8,298,860
Investment in and due from joint
ventures 1,001,049 1,007,527
Cash and cash equivalents 237,099 271,575
Receivables, less allowance for
doubtful accounts of $157,289 and
$122,136 6,204 29,143
Prepaid expenses 5,819 3,815
Lease costs, less accumulated
amortization of $18,125 and
$16,875 31,875 33,125
Accrued rental income 24,266 24,833
---------- ----------
$9,501,320 $9,668,878
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,378 $ 2,988
Accrued and escrowed real estate
taxes payable 4,978 10,380
Distributions payable 316,221 316,221
Due to related parties 94,217 75,139
Rents paid in advance and deposits 27,115 37,198
---------- ----------
Total liabilities 444,909 441,926
Partners' capital 9,056,411 9,226,952
---------- ----------
$9,501,320 $9,668,878
========== ==========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Revenues:
Rental income from
operating leases $266,525 $278,427 $540,651 $562,070
Interest and other
income 13,496 3,060 16,293 7,753
-------- -------- -------- --------
280,021 281,487 556,944 569,823
-------- -------- -------- --------
Expenses:
General operating and
administrative 23,220 19,279 49,774 35,638
Professional services 1,785 5,710 6,545 8,519
Real estate taxes 1,133 4,101 2,265 7,757
State and other taxes 112 265 5,260 5,356
Depreciation and
amortization 52,551 52,548 105,102 105,099
-------- -------- -------- --------
78,801 81,903 168,946 162,369
-------- -------- -------- --------
Income Before Equity in
Earnings of Joint
Ventures and Gain on
Sale of Land 201,220 199,584 387,998 407,454
Equity in Earnings of
Joint Ventures 27,994 27,571 54,903 54,695
Gain on Sale of Land 19,000 - 19,000 -
-------- -------- -------- --------
Net Income $248,214 $227,155 $461,901 $462,149
======== ======== ======== ========
Allocation of Net
Income:
General partners $ 2,292 $ 2,271 $ 4,429 $ 4,621
Limited partners 245,922 224,884 457,472 457,528
-------- -------- -------- --------
$248,214 $227,155 $461,901 $462,149
======== ======== ======== ========
Net Income Per Limited
Partner Unit $ 8.20 $ 7.50 $ 15.25 $ 15.25
======== ======== ======== ========
Weighted Average Number
of Limited Partner
Units Outstanding 30,000 30,000 30,000 30,000
======== ======== ======== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---------------- ------------
General partners:
Beginning balance $ 299,541 $ 289,920
Net income 4,429 9,621
----------- -----------
303,970 299,541
----------- -----------
Limited partners:
Beginning balance 8,927,411 9,239,813
Net income 457,472 952,481
Distributions ($21.08 and $42.16
per limited partner unit,
respectively) (632,442) (1,264,883)
----------- -----------
8,752,441 8,927,411
----------- -----------
Total partners' capital $ 9,056,411 $ 9,226,952
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1996 1995
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 577,966 $ 559,267
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of
land 20,000 -
----------- -----------
Net cash provided by
investing activities 20,000 -
----------- -----------
Cash Flows from Financing
Activities:
Proceeds from loan from
corporate general partner 8,100 -
Repayment of loan from
corporate general partner (8,100) -
Distributions to limited
partners (632,442) (1,532,127)
----------- -----------
Net cash used in
financing activities (632,442) (1,532,127)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (34,476) (972,860)
Cash and Cash Equivalents at
Beginning of Period 271,575 1,253,629
----------- -----------
Cash and Cash Equivalents at End
of Period $ 237,099 $ 280,769
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of period $ 316,221 $ 316,221
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 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 and six months ended June 30, 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.
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. Land and Buildings:
------------------
In June 1996, the Partnership sold a small, undeveloped portion of the
land relating to its property in Mesquite, Texas. In connection
therewith, the Partnership received net sales proceeds, and recognized a
gain for financial reporting purposes, of $19,000.
3. 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 for which the Partnership had established an
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 $157,289, including accrued interest
of $4,298 and late fees of $175, and will recognize income as collected.
Receivables at June 30, 1996, include $3,492 relating to this note,
which was collected by the Partnership in July 1996.
4. 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 June 30:
1996 1995
-------- --------
Golden Corral Corporation $113,163 $113,163
Wendy's International, Inc. 39,346 45,346
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 at least one of the quarters
ended June 30:
1996 1995
-------- --------
Wendy's Old Fashioned
Hamburger Restaurants $122,914 $134,632
Golden Corral Family
Steakhouse Restaurants 113,163 113,163
Popeyes Famous Fried Chicken 31,079 31,079
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.
5. Subsequent Event:
----------------
In July 1996, the Partnership entered into a promissory note with the
corporate general partner for a loan in the amount of $32,000 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
June 30, 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 six months ended
June 30, 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 $577,966 and
$559,267 for the six months ended June 30, 1996 and 1995, respectively. The
increase in cash from operations for the six months ended June 30, 1996, is
primarily a result of changes in the Partnership's working capital.
In August 1996, the Partnership entered into a lease amendment with the
tenant of the Property in Mesquite, Texas, to provide for lower initial base
rent with scheduled rent increases effective March 1996. In anticipation of
entering into this lease amendment, 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 for which the
Partnership had established an 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 $157,289, including accrued interest of $4,298 and late
fees of $175, and will recognize amounts as income as collected. Receivables
at June 30, 1996, include $3,492 relating to this note, which was collected by
the Partnership in July 1996.
Other sources and uses of capital included the following during the six
months ended June 30, 1996 and 1995.
In June 1996, the Partnership sold a small, undeveloped portion of the
land relating to its Property in Mesquite, Texas. In connection therewith, the
Partnership received net sales proceeds, and recognized a gain for financial
reporting purposes, of $19,000. Proceeds from the sale will be used for
operating activities of the Partnership.
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 was uncollateralized, non-
interest bearing and due on demand. As of June 30, 1996, the Partnership had
repaid the loan in full to the corporate general partner.
In addition, in July 1996, the Partnership entered into a promissory
note with the corporate general partner for a loan in the amount of $32,000 in
connection with the operations of the Partnership. The note is
uncollateralized, non-interest bearing and due on demand.
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 June 30, 1996, the Partnership had
$237,099 invested in such short-term investments as compared to $271,575 at
December 31, 1995. The funds remaining at June 30, 1996, after payment of
distributions and other liabilities, will be used towards the payment of
distributions and other liabilities.
Total liabilities of the Partnership, including distributions payable,
increased to $444,909 at June 30, 1996, from $441,926 at December 31, 1995.
Liabilities at June 30, 1996, to the extent they exceed cash and cash
equivalents at June 30, 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
July 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 described
above, the Partnership declared distributions to limited partners of $632,442
for each of the six months ended June 30, 1996 and 1995 ($316,221 for each of
the quarters ended June 30, 1996 and 1995). This represents distributions of
$21.08 per unit for each of the six months ended June 30, 1996 and 1995
($10.54 for each of the quarters ended June 30, 1996 and 1995). No
distributions were made to the general partners for the quarters and six
months ended June 30, 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 six
months ended June 30, 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 six months ended June 30, 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 six
months ended June 30, 1996 and 1995, the Partnership earned $540,651 and
$562,070, respectively, in rental income from these Properties, $266,525 and
$278,427 of which was earned during the quarters ended June 30, 1996 and 1995,
respectively. The decrease in rental income for the six months ended June 30,
1996, was primarily attributable to the fact that the Partnership received
approximately $5,700 during the six months ended June 30, 1996, as compared to
$35,800 during the six months ended June 30, 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 and $6,000
during the quarter and six months ended June 30, 1996, respectively, 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.
The decrease in rental income was partially offset by an increase of
approximately $9,000 as a result of the fact that the Partnership increased
its allowance for doubtful accounts during the six months ended June 30, 1995,
relating to the Property in Mesquite, Texas. During the six months ended June
30, 1996, the Partnership did not increase this allowance in anticipation of
the Partnership entering into a new lease with the tenant as described in
"Liquidity and Capital Resources" and due to the fact that the tenant is
paying in accordance with the new lease.
In addition, for the six months ended June 30, 1996 and 1995, the
Partnership owned and leased three Properties indirectly through joint venture
arrangements. In connection therewith, during the six months ended June 30,
1996 and 1995, the Partnership earned $54,903 and $54,695, respectively,
attributable to net income earned by these joint ventures, $27,994 and $27,571
of which was earned during the quarters ended June 30, 1996 and 1995,
respectively.
During the six months ended June 30, 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 June
30, 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 six months ended June 30, 1996, three restaurant chains,
Golden Corral Family Steakhouse Restaurants, Wendy's Old Fashioned Hamburger
Restaurants and Popeyes Famous Fried Chicken, 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 $168,946 and $162,369 for the six months ended June 30, 1996 and 1995,
respectively, of which $78,801 and $81,903 were incurred for the quarters
ended June 30, 1996 and 1995, respectively. The increase in operating
expenses during the six months ended June 30, 1996, is primarily due to an
increase in accounting and administrative expenses associated with operating
the Partnership and its Properties and 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.
As a result of the sale of the portion of land related to the Property
in Mesquite, Texas, as described in "Liquidity and Capital Resources," the
Partnership recognized a gain of $19,000 for financial reporting purposes
during the six months ended June 30, 1996. No Properties were sold during the
six months ended June 30, 1995.
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
June 30, 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 9th day of August, 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)
