<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund II, Ltd. at March 31, 1995, and its statement of income
for the quarter then ended and is qualified in its entirety by reference to the
Form 10-Q of CNL Income Fund II, Ltd. for the quarter ended March 31, 1995."
</LEGEND>
<CIK> 0000806510
<NAME> CNL INCOME FUND II, LTD.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 564,643
<SECURITIES> 0
<RECEIVABLES> 140,701
<ALLOWANCES> 90,132
<INVENTORY> 0
<CURRENT-ASSETS> 617,805
<PP&E> 20,579,247
<DEPRECIATION> 3,085,104
<TOTAL-ASSETS> 19,570,771
<CURRENT-LIABILITIES> 743,735
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,827,036
<TOTAL-LIABILITY-AND-EQUITY> 19,570,771
<SALES> 0
<TOTAL-REVENUES> 552,803
<CGS> 0
<TOTAL-COSTS> 149,602
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,537
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 436,745
<INCOME-TAX> 0
<INCOME-CONTINUING> 436,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436,745
<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, 1995
-----------------------------------
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
0-16824
----------------------
CNL Income Fund II, Ltd.
- - - - - - ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2733859
- - - - - - ----------------------------- -------------------------------
(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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-9
Part II
Other Information 10
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
----------- ------------
<S> <C> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $3,085,104
and $2,980,701 $17,494,143 $17,597,718
Investment in joint ventures 1,365,542 1,376,218
Cash and cash equivalents 564,643 584,565
Receivables, less allowance for
doubtful accounts of $90,132
and $98,362 50,569 89,307
Prepaid expenses 2,593 1,038
Lease costs, less accumulated
amortization of $15,000 and
$14,375 35,000 35,625
Accrued rental income 58,281 50,037
Other assets - 1,750
----------- -----------
$19,570,771 $19,736,258
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 13,258 $ 18,219
Accrued real estate taxes payable 8,357 13,512
Distributions payable 594,000 594,000
Due to related parties 77,646 76,104
Rents paid in advance and deposits 50,474 50,132
----------- -----------
Total liabilities 743,735 751,967
Partners' capital 18,827,036 18,984,291
----------- -----------
$19,570,771 $19,736,258
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Quarter Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
Revenues:
Rental income from operating leases $547,559 $522,307
Interest and other income 5,244 3,922
-------- --------
552,803 526,229
-------- --------
Expenses:
General operating and administrative 31,503 33,880
Professional services 4,890 5,853
Bad debt expense 3,537 9,035
Real estate taxes 3,527 9,770
Other taxes 4,654 -
Depreciation and amortization 105,028 110,948
-------- --------
153,139 169,486
-------- --------
Income Before Equity in Earnings of
Joint Ventures 399,664 356,743
Equity in Earnings of Joint Ventures 37,081 29,843
-------- --------
Net Income $436,745 $386,586
======== ========
Allocation of Net Income:
General partners $ 4,367 $ 3,866
Limited partners 432,378 382,720
-------- --------
$436,745 $386,586
======== ========
Net Income Per Limited Partner Unit $ 8.65 $ 7.65
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1995 1994
------------- ------------
<S> <C> <C>
General partners:
Beginning balance $ 305,320 $ 125,697
Contributions - 161,000
Net income 4,367 18,623
----------- -----------
309,687 305,320
----------- -----------
Limited partners:
Beginning balance 18,678,971 19,148,077
Net income 432,378 1,906,894
Distributions (594,000) (2,376,000)
----------- -----------
18,517,349 18,678,971
----------- -----------
Total partners' capital $18,827,036 $18,984,291
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Quarter Ended
March 31,
1995 1994
--------- ---------
<S> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 577,300 $ 537,850
--------- ---------
Cash Flows from Investing
Activities:
Additions to land and buildings
on operating leases (3,101 ) -
Investment in joint venture (121 ) -
--------- ---------
Net cash used in investing
activities (3,222 ) -
--------- ---------
Cash Flows from Financing
Activities:
Distributions to limited
partners (594,000 ) (656,500)
--------- ---------
Net cash used in
financing activities (594,000 ) (656,500)
--------- ---------
Net Decrease in Cash and Cash Equivalents (19,922 ) (118,650)
Cash and Cash Equivalents at Beginning
of Quarter 584,565 532,791
--------- ---------
Cash and Cash Equivalents at End of
Quarter $ 564,643 $ 414,141
========= =========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 594,000 $ 594,000
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
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, 1995, may not be indicative of the
results that may be expected for the year ending December 31, 1995.
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 II, Ltd. (the "Partnership") for the year ended December 31,
1994.
Net income per limited partner unit is calculated based upon the
weighted average number of units of limited partnership interest
outstanding during each period. The weighted average number of
limited partner units outstanding for each of the quarters ended
March 31, 1995 and 1994 was 50,000.
Certain items in the prior year's financial statements have been
reclassified to conform to 1995 presentation. These reclassifications
had no effect on partners' capital or net income.
In March 1995, the Financial Accounting Standards Board issued 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, which is effective for fiscal years beginning after December
15, 1995, 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. The Partnership plans to adopt this
standard in 1996 and does not expect compliance with such standard to
have a material effect, if any, on the Partnership's financial position
or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund II, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on November 13, 1986, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurants, 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,
1995, the Partnership owned 40 Properties, including three Properties owned
by joint ventures in which the Partnership is a co-venturer and one Property
owned with an affiliate as tenants-in-common.
Liquidity and Capital Resources
- - - - - - -------------------------------
The Partnership's primary source of capital for the quarters ended
March 31, 1995 and 1994, 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 $577,300 and $537,850 for the quarters ended March 31,
1995 and 1994, respectively. The increase in cash from operations for
the quarter ended March 31, 1995, is primarily a result of changes in
income and expenses as discussed in "Results in Operations" below.
During 1994, the Partnership received a judgment in bankruptcy relating
to the former tenant of the Property in Sterling Heights, Michigan, for
approximately $16,000 as payment in full of all amounts owed to the Partner-
ship. Payment was due in 60 monthly installments of $317, including interest
at the rate of seven percent per annum, commencing on November 1, 1994. The
Partnership received no payments relating to this judgment and in March 1995
negotiated with the former tenant a lump-sum settlement of $12,413, which was
paid in March 1995.
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, 1995, the Partnership had $564,643
invested in such short-term investments as compared to $584,565 at December 31,
1994. The funds remaining at March 31, 1995, will be used towards the payment
of distributions and other liabilities.
Total liabilities of the Partnership, including distributions payable,
decreased to $743,735 at March 31, 1995, from $751,967 at December 31, 1994,
primarily as a result of the Partnership's payment during the quarter ended
March 31, 1995, of real estate taxes relating to the Property in Sterling
Heights, Michigan, that had been accrued at December 31, 1994. Liabilities at
March 31, 1995, to the extent they exceed cash and cash equivalents at
March 31, 1995, will be paid from future cash from operations, and, in the
event the general partners elect to make additional capital contributions,
from future general partner capital contributions.
Based on current and anticipated future cash from operations, the
Partnership declared distributions to limited partners of $594,000 for each
of the quarters ended March 31, 1995 and 1994. This represents distributions
for each applicable quarter of $11.88 per unit. No distributions were made
to the general partners for the quarters ended March 31, 1995 and 1994. No
amounts distributed or to be distributed to the limited partners for the
quarters ended March 31, 1995 and 1994, 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'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, 1995 and 1994, the Partnership
earned $547,559 and $522,307, respectively, in base rental income from the
Partnership's wholly owned Properties. Rental income increased approximately
$21,000 during the quarter ended March 31, 1995, as compared to the quarter
ended March 31, 1994, as a result of the Partnership's entering into a new
lease for the Property in Sterling Heights, Michigan, in March 1994, for
which rent commenced in October 1994. In addition, rental income for the
quarter ended March 31, 1995, as compared to the quarter ended March 31, 1994,
increased approximately $17,000 due to the acquisition of two Properties in
Fayetteville and Atlanta, Georgia, in December 1994. The increase in rental
income during the quarter ended March 31, 1995, as compared to March 31, 1994,
was partially offset by a decrease of approximately $27,000 due to the sale
of the Properties in Graham, Texas, and Medina, Ohio, in July and November
1994, respectively.
Rental income during the quarter ended March 31, 1995, as compared to
the quarter ended March 31, 1994, also increased as a result of the Partner-
ship's establishing an allowance for doubtful accounts of $17,400 for rent
receivable amounts relating to the Property in Gainesville, Texas, during
the quarter ended March 31, 1994. The increase in rental income during the
quarter ended March 31, 1995, was also partially offset by a decrease of
$4,500 as a result of the Partnership's reducing base rent for the Property
in Gainesville, Texas, in anticipation of a lease amendment to provide for
lower initial base rent with scheduled rent increases. In addition, the
Partnership anticipates entering into an agreement with the tenant of this
Property to collect past due amounts and will recognize such amounts as
income if collected.
During 1993, the restaurant located on the Property in Littleton,
Colorado, ceased operations. The tenant continued to pay base rent as
required under the terms of the lease until the initial term of the lease
expired in February 1994; however, the tenant did not renew the lease.
As a result, rental income for the quarter ended March 31, 1995, as
compared to the quarter ended March 31, 1994, also decreased approximately
$2,400. In January 1995, the Partnership entered into a new lease for this
Property and rent is expected to commence in May 1995.
For the quarters ended March 31, 1995 and 1994, the Partnership also
earned $37,081 and $29,843, respectively, attributable to net income earned
by joint ventures in which the Partnership is a co-venturer. The increase
in net income earned by joint ventures during the quarter ended March 31,
1995, as compared to the quarter ended March 31, 1994, is primarily
attributable to the acquisition in September 1994 of a Property with an
affiliate of the general partners as tenants-in-common. Income from this
Property is included in equity in earnings of joint ventures.
Operating expenses, excluding depreciation and amortization, were
$48,111 and $58,538 (8.2% and 10.5% of gross revenues, including equity in
earnings of joint ventures) for the quarters ended March 31, 1995 and 1994,
respectively. The decrease in operating expenses during the quarter ended
March 31, 1995, as compared to the quarter ended March 31, 1994, is primarily
attributable to the Partnership's accruing certain expenses for the Property
in Sterling Heights, Michigan, relating to the former tenant during the
quarter ended March 31, 1994. The Partnership entered into a new lease with
a new tenant for this Property in March 1994, under which the new tenant is
responsible for the payment of such expenses.
The decrease in operating expenses during the quarter ended March 31,
1995, as compared to the quarter ended March 31, 1994, was also partially
attributable to the Partnership's increasing its allowance for doubtful
accounts by approximately $9,000 during the quarter ended March 31, 1994,
for amounts previously recorded as income relating to the Property in
Gainesville, Texas. Operating expenses for the quarters ended March 31,
1995 and 1994, also include amounts accrued by the Partnership for real
estate taxes relating to the Property in Gainesville, Texas. Payment of
real estate taxes relating to this Property remains the responsibility of
the tenant; however, because of the financial difficulties this tenant is
experiencing, the general partners believe the tenant's ability to pay
these expenses is doubtful. The Partnership intends to pursue collection
from this tenant of any such amounts paid by the Partnership and will
recognize such amounts as income if collected.
The decrease in operating expenses during the quarter ended March 31,
1995, as compared to the quarter ended March 31, 1994, was partially offset
by an increase due to the Partnership's incurring $7,560 in commission
expense during the quarter ended March 31, 1995, associated with locating a
new tenant for the Property in Sterling Heights, Michigan, in 1994. In
addition, the decrease in operating expenses was partially offset by an
increase as a result of the Partnership's payment of certain taxes relating
to the filing of various state tax returns during the quarter ended March 31,
1995, which in the previous year were paid during the quarter ended June 30,
1994.
During the quarters ended March 31, 1995 and 1994, the Partnership also
incurred certain expenses as a result of the fact that the Properties located
in Lombard, Illinois, and Littleton, Colorado, were not leased. Although the
Partnership is currently seeking a new tenant for the Property located in
Lombard, Illinois, and has entered into a new lease for the Property located
in Littleton, Colorado, for which rent is expected to commence in May 1995,
operating expenses during 1995 are expected to continue to remain at these
higher levels until such time as the Partnership enters into a new lease for
the Property located in Lombard, Illinois, and rent commences under the lease
for the Property located in Littleton, Colorado.
Depreciation and amortization expense was $105,028 and $110,948 for the
quarters ended March 31, 1995 and 1994, respectively. The decrease in
depreciation and amortization expense during the quarter ended March 31, 1995,
as compared to the quarter ended March 31, 1994, is primarily attributable to
the sale of two Properties in Graham, Texas, and Medina, Ohio, in July and
November 1994, respectively.
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, 1995.
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 8th day of May, 1995.
CNL INCOME FUND II, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
------------------------
JAMES M. SENEFF, JR.
President and Principal
Executive Officer
By: /s/ Robert A. Bourne
------------------------
ROBERT A. BOURNE
Treasurer and Principal
Financial Officer
