<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund II, Ltd. at June 30, 1995, 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 II, Ltd. for the six months ended June 30,
1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 426,492
<SECURITIES> 0
<RECEIVABLES> 160,933
<ALLOWANCES> 95,704
<INVENTORY> 0
<CURRENT-ASSETS> 498,920
<PP&E> 20,579,247
<DEPRECIATION> 3,189,508
<TOTAL-ASSETS> 19,361,956
<CURRENT-LIABILITIES> 674,154
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,687,802
<TOTAL-LIABILITY-AND-EQUITY> 19,361,956
<SALES> 0
<TOTAL-REVENUES> 1,119,242
<CGS> 0
<TOTAL-COSTS> 298,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,537
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 891,511
<INCOME-TAX> 0
<INCOME-CONTINUING> 891,511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 891,511
<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 June 30, 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 6-10
Part II
Other Information 11
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
----------- ------------
<S> <C> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $3,189,508
and $2,980,701 $17,389,739 $17,597,718
Investment in joint ventures 1,370,648 1,376,218
Cash and cash equivalents 426,492 584,565
Receivables, less allowance for
doubtful accounts of $95,704
and $98,362 65,229 89,307
Prepaid expenses 7,199 1,038
Lease costs, less accumulated
amortization of $15,625 and
$14,375 34,375 35,625
Accrued rental income 66,524 50,037
Other assets 1,750 1,750
----------- -----------
$19,361,956 $19,736,258
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 10,198 $ 18,219
Accrued and escrowed real estate
taxes payable 10,119 13,512
Distributions payable 594,000 594,000
Due to related parties 24,846 76,104
Rents paid in advance and deposits 34,991 50,132
----------- -----------
Total liabilities 674,154 751,967
Partners' capital 18,687,802 18,984,291
----------- -----------
$19,361,956 $19,736,258
=========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $547,285 $521,542 $1,095,457 $1,045,462
Contingent rental
income 12,813 10,419 12,200 8,806
Interest and other
income 6,341 2,562 11,585 6,484
-------- -------- ---------- ----------
566,439 534,523 1,119,242 1,060,752
-------- -------- ---------- ----------
Expenses:
General operating
and administrative 29,966 40,929 61,469 74,809
Professional services 10,379 10,344 15,269 16,197
Bad debt expense - 1,310 3,537 10,345
Real estate taxes 3,456 10,136 6,983 19,906
Other taxes 178 4,521 4,832 4,521
Depreciation and
amortization 105,029 110,986 210,057 221,934
-------- -------- ---------- ----------
149,008 178,226 302,147 347,712
-------- -------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures 417,431 356,297 817,095 713,040
Equity in Earnings of
Joint Ventures 37,335 29,828 74,416 59,671
-------- -------- ---------- ----------
Net Income $454,766 $386,125 $ 891,511 $ 772,711
======== ======== ========== ==========
Allocation of Net Income:
General partners $ 4,548 $ 3,861 $ 8,915 $ 7,727
Limited partners 450,218 382,264 882,596 764,984
-------- -------- ---------- ----------
$454,766 $386,125 $ 891,511 $ 772,711
======== ======== ========== ==========
Net Income Per Limited
Partner Unit $ 9.00 $ 7.65 $ 17.65 $ 15.30
======== ======== ========== ==========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1995 1994
---------------- ------------
<S> <C> <C>
General partners:
Beginning balance $ 305,320 $ 125,697
Contributions - 161,000
Net income 8,915 18,623
----------- -----------
314,235 305,320
----------- -----------
Limited partners:
Beginning balance 18,678,971 19,148,077
Net income 882,596 1,906,894
Distributions (1,188,000) (2,376,000)
----------- -----------
18,373,567 18,678,971
----------- -----------
Total partners' capital $18,687,802 $18,984,291
=========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30,
1995 1994
----------- -----------
<S> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,033,149 $ 1,037,345
----------- -----------
Cash Flows from Investing
Activities:
Additions to land and buildings
on operating leases (3,101) -
Investment in joint ventures (121) -
----------- -----------
Net cash used in investing
activities (3,222) -
----------- -----------
Cash Flows from Financing
Activities:
Contributions from general
partner - 28,000
Distributions to limited
partners (1,188,000) (1,250,500)
----------- -----------
Net cash used in
financing activities (1,188,000) (1,222,500)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (158,073) (185,155)
Cash and Cash Equivalents at Beginning
of Period 584,565 532,791
----------- -----------
Cash and Cash Equivalents at End of
Period $ 426,492 $ 347,636
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Distributions declared and unpaid
at end of period $ 594,000 $ 594,000
=========== ===========
Lease costs incurred and unpaid at
end of period $ - $ 1,864
=========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1995 and 1994
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, 1995, may not be indicative of the results that
may be expected for the year ending December 31, 1995. Amounts as of
December 31, 1994, 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 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 and six months ended June 30, 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 June 30, 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 six months ended June
30, 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 $1,033,149
and $1,037,345 for the six months ended June 30, 1995 and 1994, respectively.
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. During the six months ended June 30, 1994,
the Partnership also received $28,000 in contributions from the corporate
general partner. No such contributions were received during the six months
ended June 30, 1995.
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 June 30, 1995, the Partnership had $426,492
invested in such short-term investments as compared to $584,565 at December 31,
1994. The funds remaining at June 30, 1995, will be used towards the payment
of distributions and other liabilities.
Total liabilities of the Partnership, including distributions payable,
decreased to $674,154 at June 30, 1995, from $751,967 at December 31, 1994,
primarily as a result of the Partnership's payment during the six months ended
June 30, 1995, of amounts due to related parties that had been accrued at
December 31, 1994. The decrease in total liabilities is also attributable to a
decrease in rents paid in advance for the six months ended June 30, 1995.
Liabilities at June 30, 1995, to the extent they exceed cash and cash
equivalents at June 30, 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 $1,188,000 for each
of the six months ended June 30, 1995 and 1994 ($594,000 for each of the
quarters ended June 30, 1995 and 1994). This represents distributions for each
applicable six months of $23.76 per unit ($11.88 per unit for each applicable
quarter). No distributions were made to the general partners for the quarters
and six months ended June 30, 1995 and 1994. No amounts distributed or to be
distributed to the limited partners for the six months ended June 30, 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.
Results of Operations
---------------------
During each of the six months ended June 30, 1995 and 1994, the
Partnership owned 36 wholly owned Properties. In connection therewith, during
the six months ended June 30, 1995 and 1994, the Partnership earned $1,095,457
and $1,045,462, respectively, in base rental income from these Properties,
$547,285 and $521,542 of which was earned during the quarters ended June 30,
1995 and 1994, respectively. Rental income increased approximately $21,000 and
$42,000 during the quarter and six months ended June 30, 1995, respectively, as
compared to the quarter and six months ended June 30, 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 and six months ended June 30, 1995, as
compared to the quarter and six months ended June 30, 1994, increased
approximately $20,400 and $40,900, respectively, due to the acquisition of
two Properties in Fayetteville and Atlanta, Georgia, in December 1994. The
increase in rental income during the quarter and six months ended June 30,
1995, was partially offset by a decrease of approximately $26,600 and
$53,200, respectively, due to the sale of the Properties in Graham, Texas,
and Medina, Ohio, in July and November 1994, respectively.
Rental income during the quarter and six months ended June 30, 1995, as
compared to the quarter and six months ended June 30, 1994, also increased as a
result of the Partnership's establishing an allowance for doubtful accounts of
$17,400 and $34,800 for rent receivable amounts relating to the Property in
Gainesville, Texas, during the quarter and six months ended June 30, 1994,
respectively. However, the increase in rental income during the quarter and
six months ended June 30, 1995, was also partially offset by a decrease of
$4,500 and $9,000, respectively, as a result of the fact that the Partnership
reduced 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. Currently, the Partnership is in the process of negotiating a new
lease with a new operator for this Property. In addition, the Partnership is
pursuing collection of the past due amounts from the original tenant of this
Property 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. In January 1995,
the Partnership entered into a new lease for this Property and rent commenced
in May 1995. In addition, in February 1993, the lease of the Property in
Lombard, Illinois, expired, and the tenant did not renew the lease. The
Partnership is currently negotiating a lease for this Property with a retail
business.
During the six months ended June 30, 1995 and 1994, the Partnership also
earned $12,200 and $8,806, respectively, in contingent rental income, $12,813
and $10,419 of which was earned during the quarters ended June 30, 1995 and
1994, respectively. The increase in contingent rental income during the
quarter and six months ended June 30, 1995, as compared to the quarter and six
months ended June 30, 1994, is primarily the result of increases in gross sales
relating to certain restaurant Properties.
For the six months ended June 30, 1994, the Partnership also owned and
leased three Properties indirectly through joint venture arrangements. During
the six months ended June 30, 1995, in addition to these three Properties, the
Partnership also owned and leased one Property as tenants-in-common with an
affiliate of the general partners. In connection therewith, during the six
months ended June 30, 1995 and 1994, the Partnership earned $74,416 and
$59,671, respectively, attributable to net income earned by these Properties,
$37,335 and $29,828 of which was earned during the quarters ended June 30, 1995
and 1994, respectively. The increase in net income earned by joint ventures
during the quarter and six months ended June 30, 1995, as compared to the
quarter and six months ended June 30, 1994, is primarily attributable to the
acquisition in September 1994 of the Property with an affiliate as tenants-in-
common.
During the six months ended June 30, 1995, one of the Partnership's
lessees, Golden Corral Corporation, 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 in which the
Partnership is a co-venturer and one Property owned with an affiliate as
tenants-in-common). Golden Corral Corporation is lessee under leases relating
to five restaurants. It is anticipated that, based on the minimum annual
rental payments required by the leases, Golden Corral Corporation will continue
to contribute more than ten percent of the Partnership's total rental income
during the remainder of 1995 and subsequent years. Any failure of Golden
Corral Corporation could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense, were
$302,147 and $347,712 for the six months ended June 30, 1995 and 1994, respec-
tively, of which $149,008 and $178,226 were incurred for the quarters ended
June 30, 1995 and 1994, respectively. The decrease in operating expenses
during the quarter and six months ended June 30, 1995, as compared to the
quarter and six months ended June 30, 1994, is primarily attributable to the
Partnership's accruing approximately $17,800 and $31,000 for certain expenses
for the Property in Sterling Heights, Michigan, relating to the former tenant
during the quarter and six months ended June 30, 1994, respectively. 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; therefore, no such expenses were incurred for this Property during
the quarter and six months ended June 30, 1995.
The decrease in operating expenses during the quarter and six months
ended June 30, 1995, as compared to the quarter and six months ended June 30,
1994, was partially offset by an increase due to the Partnership's incurring
$7,560 in commission expense during the six months ended June 30, 1995,
associated with locating a new tenant for the Property in Sterling Heights,
Michigan, in 1994. In addition, during the six months ended June 30, 1995, the
Partnership wrote-off as bad debt expense the balance of receivables due from
the former tenant of this Property of approximately $3,500 as a result of the
lump-sum settlement received by the Partnership as described above in
"Liquidity and Capital Resources."
The decrease in operating expenses during the six months ended June 30,
1995, as compared to the six months ended June 30, 1994, was also partially
attributable to the Partnership's increasing its allowance for doubtful
accounts by approximately $7,600 during the six months ended June 30, 1994, for
amounts previously recorded as income relating to the Property in Gainesville,
Texas. Operating expenses for the quarters and six months ended June 30, 1995
and 1994, also include amounts accrued by the Partnership for real estate taxes
relating to the Property in Gainesville, Texas, of approximately $1,900 and
$3,800, respectively. 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 the tenant of any such amounts paid by the Partnership
and will recognize such amounts as income if collected. The Partnership is
currently in the process of negotiating a new lease with a new operator for
this Property. In the event a new lease is entered into, the Partnership
anticipates the new lessee will be responsible for the payment of future real
estate taxes relating to this Property.
During the quarters and six months ended June 30, 1995 and 1994, the
Partnership also incurred certain expenses as a result of the fact that the
Property located in Lombard, Illinois, was not leased. In addition, the
Partnership incurred certain expenses relating to the Property in Littleton,
Colorado, during the quarter and six months ended June 30, 1995, as a result of
the new lease with the new tenant not being effective until May 1995. Although
the Partnership is currently negotiating a new lease with a new tenant for the
Property in Lombard, Illinois, operating expenses during 1995 are expected to
continue to remain at these higher levels until such time as the Partnership
enters into such lease.
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, 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 11th day of August, 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
