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, 2000
--------------------------------------
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
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CNL Income Fund, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Florida 59-2666264
- ------------------------------------------------------ ------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<S> <C>
450 South Orange Avenue
Orlando, Florida 32801
- ------------------------------------------------------ ------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
------------------------------------------------
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 _________
</TABLE>
<PAGE>
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets
Condensed Statements of Income
Condensed Statements of Partners' Capital
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Part II.
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
<S> <C> ------------------ -------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $2,248,172 and
$2,202,683, respectively $ 6,825,114 $ 6,870,603
Investment in joint ventures 818,595 822,993
Cash and cash equivalents 981,610 1,048,174
Receivables, less allowance for doubtful accounts
of $1,236 in 1999 50 18,768
Due from related party 5,549 --
Prepaid expenses 4,142 8,322
Lease costs, less accumulated amortization of
$27,500 and $26,875, respectively 22,500 23,125
Accrued rental income 34,743 33,700
------------------ -------------------
$ 8,692,303 $ 8,825,685
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 17,676 $ 61,890
Escrowed real estate taxes payable 4,462 11,031
Distributions payable 266,982 266,982
Due to related parties 125,335 123,477
Rents paid in advance and deposits 46,166 27,443
------------------ -------------------
Total liabilities 460,621 490,823
Partners' capital 8,231,682 8,334,862
------------------ -------------------
$ 8,692,303 $ 8,825,685
================== ===================
See accompanying notes to condensed financial statements
</TABLE>
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended
March 31,
2000 1999
<S> <C> ---------------- ----------------
Revenues:
Rental income from operating leases $ 225,617 $ 233,666
Interest and other income 23,211 1,598
---------------- ----------------
248,828 235,264
---------------- ----------------
Expenses:
General operating and administrative 28,394 21,676
Professional services 8,888 2,265
Real estate taxes -- 1,091
State and other taxes 9,289 5,667
Depreciation and amortization 46,114 51,430
Transaction costs 16,247 31,116
---------------- ----------------
108,932 113,245
---------------- ----------------
Income Before Equity in Earnings of Joint Ventures 139,896 122,019
Equity in Earnings of Joint Ventures 23,906 23,890
---------------- ----------------
Net Income $ 163,802 $ 145,909
================ ================
Allocation of Net Income:
General partners $ 1,638 $ 1,459
Limited partners 162,164 144,450
---------------- ----------------
$ 163,802 $ 145,909
================ ================
Net Income Per Limited Partner Unit $ 5.41 $ 4.82
================ ================
Weighted Average Number of Limited Partner
Units Outstanding 30,000 30,000
================ ================
See accompanying notes to condensed financial statements
</TABLE>
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
2000 1999
-------------------- ------------------
<S> <C>
General partners:
Beginning balance $ 340,768 $ 330,430
Net income 1,638 10,338
-------------------- ------------------
342,406 340,768
-------------------- ------------------
Limited partners:
Beginning balance 7,994,094 7,996,589
Net income 162,164 1,065,433
Distributions ($8.90 and $35.60 per
limited partner unit, respectively) (266,982 ) (1,067,928 )
-------------------- ------------------
7,889,276 7,994,094
-------------------- ------------------
Total partners' capital $ 8,231,682 $ 8,334,862
==================== ==================
See accompanying notes to condensed financial statements
</TABLE>
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
March 31,
2000 1999
-------------- --------------
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 200,418 $ 244,246
-------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (266,982 ) (266,982 )
-------------- --------------
Net cash used in financing activities (266,982 ) (266,982 )
-------------- --------------
Net Decrease in Cash and Cash Equivalents (66,564 ) (22,736 )
Cash and Cash Equivalents at Beginning of Quarter 1,048,174 252,521
-------------- --------------
Cash and Cash Equivalents at End of Quarter $ 981,610 $ 229,785
============== ==============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
quarter $ 266,982 $ 266,982
============== ==============
See accompanying notes to condensed financial statements
</TABLE>
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 2000 and 1999
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, 2000 may not be indicative of the results
that may be expected for the year ending December 31, 2000. Amounts as
of December 31, 1999, 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,
1999.
2. Termination of Merger
On March 1, 2000, the general partners and CNL American Properties
Fund, Inc. ("APF") mutually agreed to terminate the Agreement and Plan
of Merger entered into in March 1999. The general partners are
continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the limited partners.
<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, 2000,
the Partnership owned 16 Properties, which included 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.
Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 2000 and 1999, 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). For the quarters ended March 31, 2000
and 1999, the Partnership generated cash from operations of $200,418 and
$244,246, respectively. The decrease in cash from operations for the quarter
ended March 31, 2000 was primarily a result of changes in the Partnership's
working capital.
Currently, rental income from the Partnership's Properties and net
sales proceeds held by the Partnership are invested in money market accounts or
other short-term, highly liquid investments such as demand deposit accounts at
commercial banks, certificates of deposit and money market accounts with less
than a 30-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses, to make distributions to the partners and, if determined
appropriate, to invest in an additional property. At March 31, 2000, the
Partnership had $981,610 invested in such short-term investments, as compared to
$1,048,174 at December 31, 1999. The funds remaining at March 31, 2000 will be
used to reinvest in an additional Property, or for the payment of distributions
and other liabilities.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
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.
Total liabilities of the Partnership, including distributions payable,
decreased to $460,621 at March 31, 2000, from $490,823 at December 31, 1999,
primarily as a result of a decrease in accounts payable at March 31, 2000, as
compared to December 31, 1999. The general partners believe that the Partnership
has sufficient cash on hand to meet current working capital needs.
Based on current and anticipated future cash from operations, the
Partnership declared distributions to limited partners of $266,982 for each of
the quarters ended March 31, 2000 and 1999. This represents distributions of
$8.90 per unit for each applicable quarter. No distributions were made to the
general partners for the quarters ended March 31, 2000 and 1999. No amounts
distributed to the limited partners for the quarters ended March 31, 2000 and
1999 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.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During the quarter ended March 31, 1999, the Partnership owned and
leased 14 wholly owned Properties (which included one Property in Kent Island,
Maryland, which was sold in October 1999) and during the quarter ended March 31,
2000, the Partnership owned and leased 13 wholly owned Properties to operators
of fast-food and family-style restaurant chains. In connection therewith, during
the quarters ended March 31, 2000 and 1999, the Partnership earned $225,617 and
$233,666, respectively, in rental income from these Properties. Rental income
decreased during the quarter ended March 31, 2000, as compared to the quarter
ended March 31, 1999, by approximately $23,200 as a result of the sale of the
Kent Island, Maryland Property in October 1999. The Partnership intends to use
the net sales proceeds to pay liabilities of the Partnership, to reinvest in an
additional Property or to distribute to the limited partners.
For the quarters ended March 31, 2000 and 1999, the Partnership 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, 2000 and 1999, the Partnership earned $23,906 and
$23,890, respectively, attributable to net income earned by these joint
ventures.
Operating expenses, including depreciation and amortization expense,
were $108,932 and $113,245 for the quarters ended March 31, 2000 and 1999,
respectively. The decrease in operating expenses was primarily attributable to
the fact that the Partnership incurred less transaction costs related to the
general partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed Merger with CNL American Properties
Fund, Inc. ("APF"), as described in "Termination of Merger," during the quarter
ended March 31, 2000.
<PAGE>
Termination of Merger
On March 1, 2000, the general partners and APF mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
general partners are continuing to evaluate strategic alternatives for the
Partnership, including alternatives to provide liquidity to the limited
partners.
Dismissal of Legal Action
As described in greater detail in Part II, Item 1 ("Legal
Proceedings"), in 1999 two groups of limited partners in several CNL Income
Funds filed purported class action suits against the general partners and APF
alleging, among other things, that the general partners had breached their
fiduciary duties in connection with the proposed Merger. These actions were
later consolidated into one action. On April 25, 2000, the judge in the
consolidated action issued a Stipulated Final Order of Dismissal of Consolidated
Action, dismissing the action without prejudice, with each party to bear its own
costs and attorneys' fees.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On May 11, 1999, four limited partners in several CNL Income Funds
served a derivative and purported class action lawsuit filed April
22, 1999 against the general partners and APF in the Circuit Court
of the Ninth Judicial Circuit of Orange County, Florida, alleging
that the general partners breached their fiduciary duties and
violated provisions of certain of the CNL Income Fund partnership
agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8,
1999, the plaintiffs filed an amended complaint which, in addition
to naming three additional plaintiffs, includes allegations of
aiding and abetting and conspiring to breach fiduciary duties,
negligence and breach of duty of good faith against certain of the
defendants and seeks additional equitable relief. As amended, the
caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and
Margaret Berol Trust, and Vicky Berol v. James M. Seneff, Jr.,
Robert A. Bourne, CNL Realty Corporation, and CNL American
Properties Fund, Inc., Case No. CIO-99-0003561.
On June 22, 1999, a limited partner of several CNL Income Funds
served a purported class action lawsuit filed April 29, 1999
against the general partners and APF, Ira Gaines, individually and
on behalf of a class of persons similarly situated, v. CNL
American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL
Financial Corporation a/k/a CNL Financial Corp., CNL Financial
Services, Inc. and CNL Group, Inc., Case No. CIO-99-3796, in the
Circuit Court of the Ninth Judicial Circuit of Orange County,
Florida, alleging that the general partners breached their
fiduciary duties and that APF aided and abetted their breach of
fiduciary duties in connection with the proposed Merger. The
plaintiff is seeking unspecified damages and equitable relief.
On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income
Funds Litigation, Case No. 99-3561. Pursuant to this order, the
plaintiffs in these cases filed a consolidated and amended
complaint on November 8, 1999. On December 22, 1999, the general
partners and CNL Group, Inc. filed motions to dismiss and motions
to strike. On December 28, 1999, APF and CNL Fund Advisors, Inc.
filed motions to dismiss. On March 6, 2000, all of the defendants
filed a Joint Notice of Filing Form 8-K Reports and Suggestion of
Mootness.
On April 25, 2000, Judge Kirkwood issued a Stipulated Final Order
of Dismissal of Consolidated Action, dismissing the action without
prejudice, with each party to bear its own costs and attorneys'
fees.
Item 2. Changes in Securities. Inapplicable.
<PAGE>
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
3.1 Certificate of Limited Partnership of CNL Income Fund,
Ltd., as amended. (Included as Exhibit 3.1 to Amendment
No. 1 to Registration Statement No. 33-2850 on Form S-11
and incorporated herein by reference.)
3.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 27, 1998, and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund,
Ltd., as amended. (Included as Exhibit 4.1 to Amendment
No. 1 to Registration Statement No. 33-2850 on Form S-11
and incorporated herein by reference.)
4.2 Form of Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd. (Included as
Exhibit 3.2 to Form 10-K filed with the Securities and
Exchange Commission on March 27, 1998, and incorporated
herein by reference.)
10.1 Property Management Agreement. (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on March 27, 1998, and incorporated herein by
reference.)
10.2 Assignment of Property Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995, and
incorporated herein by reference.)
10.3 Assignment of Property Management Agreement from CNL
Income Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on March 29, 1996, and
incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
<PAGE>
(b) Reports on Form 8-K
A Current Report on Form 8-K dated February 23, 2000 and
was filed on March 1, 2000, describing the termination of
the proposed merger of the Partnership with and into a
subsidiary of CNL American Properties Fund, Inc.
<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 10th day of May, 2000.
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 March 31, 2000, 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, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 981,610
<SECURITIES> 0
<RECEIVABLES> 50
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,073,286
<DEPRECIATION> 2,248,172
<TOTAL-ASSETS> 8,692,303
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,231,682
<TOTAL-LIABILITY-AND-EQUITY> 8,692,303
<SALES> 0
<TOTAL-REVENUES> 248,828
<CGS> 0
<TOTAL-COSTS> 108,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 163,802
<INCOME-TAX> 0
<INCOME-CONTINUING> 163,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,802
<EPS-BASIC> 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>
