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, 1998
------------------------
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
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
March 31, December 31,
ASSETS 1998 1997
---------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $2,225,939
and $2,172,913 $8,132,439 $8,185,465
Investment in joint ventures 911,865 919,476
Cash and cash equivalents 283,981 184,130
Restricted cash - 129,257
Receivables, less allowance for
doubtful accounts of $3,460 and
$3,092 19,388 21,331
Prepaid expenses 3,513 4,989
Lease costs, less accumulated
amortization of $22,500 and
$21,875 27,500 28,125
Accrued rental income 28,897 27,305
---------- ----------
$9,407,583 $9,500,078
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,788 $ 2,595
Accrued and escrowed real estate
taxes payable 2,879 734
Distributions payable 316,221 316,221
Due to related parties 124,943 115,741
Rents paid in advance and deposits 35,384 35,737
---------- ----------
Total liabilities 481,215 471,028
Partners' capital 8,926,368 9,029,050
---------- ----------
$9,407,583 $9,500,078
========== ==========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1998 1997
-------- ----------
Revenues:
Rental income from operating leases $273,609 $259,805
Interest and other income 3,129 5,050
-------- --------
276,738 264,855
-------- --------
Expenses:
General operating and administrative 22,148 21,215
Professional services 2,785 3,353
Real estate taxes 1,081 1,102
State and other taxes 4,407 3,424
Depreciation and amortization 53,651 52,551
-------- --------
84,072 81,645
-------- --------
Income Before Equity in
Earnings of Joint Ventures 192,666 183,210
Equity in Earnings of Joint Ventures 20,873 26,314
-------- --------
Net Income $213,539 $209,524
======== ========
Allocation of Net Income:
General partners $ 2,135 $ 2,095
Limited partners 211,404 207,429
-------- --------
$213,539 $209,524
======== ========
Net Income Per Limited Partner Unit $ 7.05 $ 6.91
======== ========
Weighted Average Number of Limited
Partner Units Outstanding 30,000 30,000
======== ========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1998 1997
------------- ------------
General partners:
Beginning balance $ 321,759 $ 310,182
Net income 2,135 11,577
----------- -----------
323,894 321,759
----------- -----------
Limited partners:
Beginning balance 8,707,291 8,734,995
Net income 211,404 1,237,180
Distributions ($10.54
and $42.16 per limited
partner unit, respectively) (316,221) (1,264,884)
----------- -----------
8,602,474 8,707,291
----------- -----------
Total partners' capital $ 8,926,368 $ 9,029,050
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1998 1997
--------- ------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 290,063 $ 454,261
--------- ---------
Cash Flows from Investing
Activities:
Decrease in restricted cash 126,009 -
--------- --------
Net cash provided by
investing activities 126,009 -
--------- --------
Cash Flows from Financing
Activities:
Proceeds from loan from
corporate general partner - 81,000
Repayment of loan from
corporate general partner - (81,000)
Distributions to limited
partners (316,221) (316,221)
--------- ---------
Net cash used in
financing activities (316,221) (316,221)
--------- ---------
Net Increase in Cash and Cash
Equivalents 99,851 138,040
Cash and Cash Equivalents at
Beginning of Quarter 184,130 159,379
--------- ---------
Cash and Cash Equivalents at
End of Quarter $ 283,981 $ 297,419
========= =========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 316,221 $ 316,221
========= =========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership) NOTES
TO CONDENSED FINANCIAL STATEMENTS Quarters
Ended March 31, 1998 and 1997
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, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, 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,
1997.
2. Subsequent Event:
In April 1998, the Partnership sold its property in Kissimmee, Florida,
to the tenant for $680,000 and received net sales proceeds of $661,300,
resulting in a gain of $256,204 for financial reporting purposes.
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 March 31, 1998,
the Partnership owned 18 Properties, including interests in two Properties owned
by joint ventures in which the Partnership is a co-venturer and one Property
owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1998 and 1997, 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 $290,063 and
$454,261 for the quarters ended March 31, 1998 and 1997, respectively. The
decrease in cash from operations for the quarter ended March 31, 1998, is
primarily a result of changes in the Partnership's working capital.
In April 1998, the Partnership sold its Property in Kissimmee, Florida,
to the tenant for $680,000 and received net sales proceeds of $661,300,
resulting in a gain of $256,204 for financial reporting purposes. The
Partnership intends to reinvest the net sales proceeds in an additional
Property.
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, 1998, the Partnership had $283,981
invested in such short-term investments, as compared to $184,130 at December 31,
1997. The increase in cash and cash equivalents is primarily due to the
remaining net sales proceeds from the 1997 sale of the Property in Casa Grande,
Arizona, being released from escrow during the quarter ended March 31, 1998. The
funds remaining at March 31, 1998, will be used to pay distributions and other
liabilities.
Total liabilities of the Partnership, including distributions payable,
increased to $481,215 at March 31, 1998, from $471,028 at December 31, 1997,
primarily as a result of an increase in amounts due to related parties at March
31, 1998, as compared to December 31, 1997. Liabilities at March 31, 1998, to
the extent they exceed
6
<PAGE>
Liquidity and Capital Resources - Continued
cash and cash equivalents at March 31, 1998, 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, the
Partnership declared distributions to limited partners of $316,221 for each of
the quarters ended March 31, 1998 and 1997. This represents distributions of
$10.54 per unit for each of the quarters ended March 31, 1998 and 1997. No
distributions were made to the general partners for the quarters ended March 31,
1998 and 1997. No amounts distributed to the limited partners for the quarters
ended March 31, 1998 and 1997, 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 quarter ended March 31, 1997, the Partnership owned and
leased 15 wholly owned Properties (including one Property in Casa Grande,
Arizona, which was sold in August 1997) and during the quarter ended March 31,
1998, 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, 1998 and 1997, the Partnership earned $273,609 and
$259,805, respectively, in rental income from these Properties. The increase in
rental income during the quarter ended March 31, 1998, as compared to the
quarter ended March 31, 1997, is primarily attributable to the fact that in
October 1997, the Partnership reinvested the majority of the net sales proceeds
from the August 1997 sale of the Property in Casa Grande, Arizona, in a Property
in Camp Hill, Pennsylvania.
In addition, for the quarter ended March 31, 1997, the Partnership
owned and leased three Properties indirectly through joint venture arrangements
(including one Property sold in August 1997 which was previously owned and
leased by Seventh Avenue Joint Venture) and for the quarter ended March 31,
1998, the Partnership
7
<PAGE>
Results of Operations - Continued
owned and leased two Properties indirectly through joint venture arrangements
and one Property with affiliates as tenants-in-common. In connection therewith,
during the quarters ended March 31, 1998 and 1997, the Partnership earned
$20,873 and $26,314, respectively, attributable to net income earned by these
joint ventures. The decrease in net income earned by joint ventures is primarily
attributable to the fact that in August 1997, Seventh Avenue Joint Venture, in
which the Partnership owned a 50 percent interest, sold its Property. The
decrease is partially offset by the fact that in December 1997, the Partnership
reinvested a portion of its pro-rata share of the net sales proceeds in a
Property located in Vancouver, Washington, as tenants-in-common with affiliates
of the general partners.
Operating expenses, including depreciation and amortization expense,
were $84,072 and $81,645 for the quarters ended March 31, 1998 and 1997,
respectively.
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 March 31, 1998.
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 12th day of May, 1998.
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 schedul contains summary financial information extracted from the balance
sheet of CNL Income Fund, Ltd. at March 31, 1998, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10Q of CNL Income Fund, Ltd. for the three months ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 283,981
<SECURITIES> 0
<RECEIVABLES> 22,848
<ALLOWANCES> 3,460
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,358,378
<DEPRECIATION> 2,225,939
<TOTAL-ASSETS> 9,407,583
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,926,368
<TOTAL-LIABILITY-AND-EQUITY> 9,407,583
<SALES> 0
<TOTAL-REVENUES> 276,738
<CGS> 0
<TOTAL-COSTS> 84,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 213,539
<INCOME-TAX> 0
<INCOME-CONTINUING> 213,539
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,539
<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 liabilites.
</FN>
</TABLE>
