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, 1997
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 juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
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
<PAGE>
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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-8
Part II
Other Information 9
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
---------- ------------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $2,212,626
and $2,108,774 $7,987,302 $8,091,154
Investment in and due from joint
ventures 978,746 990,307
Cash and cash equivalents 267,575 159,379
Receivables, less allowance for
doubtful accounts of $2,518 and
$1,413 3,665 180,248
Prepaid expenses 5,781 4,465
Lease costs, less accumulated
amortization of $20,625 and
$19,375 29,375 30,625
Accrued rental income 25,502 23,599
---------- ----------
$9,297,946 $9,479,777
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,618 $ 2,131
Accrued and escrowed real estate
taxes payable 4,936 525
Distributions payable 316,221 316,221
Due to related parties 100,520 95,012
Rents paid in advance and deposits 34,845 20,711
---------- ----------
Total liabilities 458,140 434,600
Commitment (Note 2)
Partners' capital 8,839,806 9,045,177
---------- ----------
$9,297,946 $9,479,777
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C>
Revenues:
Rental income from
operating leases $267,223 $266,525 $527,028 $540,651
Interest and other
income 2,747 13,496 7,797 16,293
-------- -------- -------- --------
269,970 280,021 534,825 556,944
-------- -------- -------- --------
Expenses:
General operating and
administrative 23,141 23,220 44,356 49,774
Professional services 2,556 1,785 5,909 6,545
Real estate taxes 1,102 1,133 2,204 2,265
State and other taxes 114 112 3,538 5,260
Depreciation and
amortization 52,551 52,551 105,102 105,102
-------- -------- -------- --------
79,464 78,801 161,109 168,946
-------- -------- -------- --------
Income Before Equity in
Earnings of Joint
Ventures and Gain on
Sale of Land 190,506 201,220 373,716 387,998
Equity in Earnings of
Joint Ventures 27,041 27,994 53,355 54,903
Gain on Sale of Land - 19,000 - 19,000
-------- -------- -------- --------
Net Income $217,547 $248,214 $427,071 $461,901
======== ======== ======== ========
Allocation of Net Income:
General partners $ 2,176 $ 2,292 $ 4,271 $ 4,429
Limited partners 215,371 245,922 422,800 457,472
-------- -------- -------- --------
$217,547 $248,214 $427,071 $461,901
======== ======== ======== ========
Net Income Per Limited
Partner Unit $ 7.18 $ 8.20 $ 14.09 $ 15.25
======== ======== ======== ========
Weighted Average Number
of Limited Partner
Units Outstanding 30,000 30,000 30,000 30,000
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- ------------
<S> <C>
General partners:
Beginning balance $ 310,182 $ 299,541
Net income 4,271 10,641
----------- -----------
314,453 310,182
----------- -----------
Limited partners:
Beginning balance 8,734,995 8,927,411
Net income 422,800 1,072,468
Distributions ($21.08
and $42.16 per limited
partner unit, respectively) (632,442) (1,264,884)
----------- -----------
8,525,353 8,734,995
----------- -----------
Total partners' capital $ 8,839,806 $ 9,045,177
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
--------- ---------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 740,638 $ 577,966
--------- ---------
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 81,000 8,100
Repayment of loan from corporate
general partner (81,000) (8,100 )
Distributions to limited partners (632,442) (632,442 )
--------- ---------
Net cash used in financing
activities (632,442) (632,442 )
--------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 108,196 (34,476 )
Cash and Cash Equivalents at Beginning
of Period 159,379 271,575
--------- ---------
Cash and Cash Equivalents at End of
Period $ 267,575 $ 237,099
========= =========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 316,221 $ 316,221
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1997 and
1996
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, 1997, may not be indicative
of the results that may be expected for the year ending December 31,
1997. Amounts as of December 31, 1996, 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,
1996.
2. Commitment:
In addition, in June 1997, the Partnership entered into a sales
contract with an unrelated third party to sell the property in Casa
Grande, Arizona. The general partners believe that the anticipated
sales price exceeds the Partnership's cost attributable to the
property. The sale of the property had not occurred as of July 31,
1997.
5
<PAGE>
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, 1997,
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, 1997 and 1996, 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 $740,638 and
$577,966 for the six months ended June 30, 1997 and 1996, respectively. The
increase in cash from operations for the six months ended June 30, 1997, is
primarily a result of changes in the Partnership's working capital.
In March 1996, the Partnership accepted a promissory note from the
tenant of the Property in Mesquite, Texas, in the amount of $156,308, for past
due rental and other amounts, and real estate taxes previously paid by the
Partnership on behalf of the tenant. Payments were due in 60 monthly
installments of $3,492, including interest at a rate of 11 percent per annum,
and collections commenced on June 1, 1996. During January 1997, the Partnership
collected the full amount of the promissory note.
Other sources and uses of capital included the following during the six
months ended June 30, 1997.
In January 1997, the Partnership entered into a promissory note with
the corporate general partner for a loan in the amount of $81,000 in connection
with the operations of the Partnership. The loan was uncollateralized,
non-interest bearing and due on demand. As of June 30, 1997, the Partnership had
repaid the loan in full to the corporate general partner.
In addition, in June 1997, the Partnership entered into a sales
contract with an unrelated third party to sell the Property in Casa Grande,
Arizona. The general partners believe that the anticipated sales price exceeds
the Partnership's cost attributable to the Property. The sale of the Property
had not occurred as of July 31, 1997.
6
<PAGE>
Liquidity and Capital Resources - Continued
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, 1997, the Partnership had $267,575
invested in such short-term investments, as compared to $159,379 at December 31,
1996. The increase in cash and cash equivalents during the six months ended June
30, 1997 is primarily the result of the Partnership collecting the full amount
of the promissory note from the tenant of the Property in Mesquite, Texas, as
discussed above. The funds remaining at June 30, 1997, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
Total liabilities of the Partnership, including distributions payable,
increased to $458,140 at June 30, 1997, from $434,600 at December 31, 1996,
primarily as a result of an increase in rents paid in advance during the six
months ended June 30, 1997. Liabilities at June 30, 1997, to the extent they
exceed cash and cash equivalents at June 30, 1997, will be paid from future cash
from operations 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, 1997 and 1996 ($316,221 for each of
the quarters ended June 30, 1997 and 1996). This represents distributions of
$21.08 per unit for each of the six months ended June 30, 1997 and 1996 ($10.54
per unit for each of the quarters ended June 30, 1997 and 1996). No
distributions were made to the general partners for the quarters and six months
ended June 30, 1997 and 1996. No amounts distributed to the limited partners for
the six months ended June 30, 1997 and 1996, 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.
7
<PAGE>
Results of Operations
During the six months ended June 30, 1997 and 1996, 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, 1997 and 1996, the Partnership earned $527,028 and $540,651,
respectively, in rental income from these Properties, $267,223 and $266,525 of
which was earned for the quarters ended June 30, 1997 and 1996, respectively.
The decrease in rental income during the six months ended June 30, 1997, as
compared to the six months ended June 30, 1996, is partially attributable to a
decrease of approximately $5,700 due to the fact that effective February 1,
1996, the Partnership ceased receiving additional rental amounts 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 the new tenants (two of which were
re-leased to the corporate franchisor). Rental income during 1997 and in future
years will decrease accordingly.
Rental income also decreased by approximately $4,200 during the six
months ended June 30, 1997, as a result of the fact that the lease relating to
the Wendy's Property in Oklahoma City, Oklahoma, was amended, effective January
1, 1997, to provide for lower base rental income and a change in the percentage
rent calculation.
In addition, for the six months ended June 30, 1997 and 1996, the
Partnership owned and leased three Properties indirectly through joint venture
arrangements. In connection therewith, during the six months ended June 30, 1997
and 1996, the Partnership earned $53,355 and $54,903, respectively, attributable
to net income earned by these joint ventures, $27,041 and $27,994 of which was
earned during the quarters ended June 30, 1997 and 1996, respectively.
Operating expenses, including depreciation and amortization expense,
were $161,109 and $168,946 for the six months ended June 30, 1997 and 1996,
respectively, of which $79,464 and $78,801 were incurred for the quarters ended
June 30, 1997 and 1996, respectively. The decrease in operating expenses during
the six months ended June 30, 1997, as compared to the six months ended June 30,
1996, is primarily attributable to a decrease in accounting and administrative
expenses associated with operating the Partnership and its Properties.
8
<PAGE>
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, 1997.
9
<PAGE>
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 6th day of August, 1997.
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)
<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, 1997, 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, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JAN-01-1997
<CASH> 267,575
<SECURITIES> 0
<RECEIVABLES> 6,183
<ALLOWANCES> 2,518
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,199,928
<DEPRECIATION> 2,212,626
<TOTAL-ASSETS> 9,297,946
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,839,806
<TOTAL-LIABILITY-AND-EQUITY> 9,297,946
<SALES> 0
<TOTAL-REVENUES> 534,825
<CGS> 0
<TOTAL-COSTS> 161,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 427,071
<INCOME-TAX> 0
<INCOME-CONTINUING> 427,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,071
<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>
