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, 1996
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
0-19144
CNL Income Fund VI, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-2922954
(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
<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 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-10
Part II
Other Information 11
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
----------- -----------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $2,959,063
and $2,717,746 $22,369,369 $22,610,686
Net investment in direct
financing leases 4,694,116 4,727,201
Investment in joint ventures 1,031,887 867,708
Mortgage note receivable - 3,056
Cash and cash equivalents 1,019,546 1,120,999
Receivables, less allowance for
doubtful accounts of $110,486
and $194,409 77,906 85,339
Prepaid expenses 7,526 5,250
Lease costs, less accumulated
amortization of $2,746 and $1,801 14,954 15,899
Accrued rental income, less
allowance for doubtful accounts
of $9,697 and $9,160 1,026,655 979,445
Other assets 26,731 26,731
----------- -----------
$30,268,690 $30,442,314
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 15,064 $ 19,846
Accrued and escrowed real estate
taxes payable 6,137 10,424
Due to related parties 5,885 6,024
Distributions payable 787,500 787,500
Rents paid in advance 15,612 4,417
----------- -----------
Total liabilities 830,198 828,211
Minority interest 160,882 153,337
Partners' capital 29,277,610 29,460,766
----------- -----------
$30,268,690 $30,442,314
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $696,372 $680,520 $1,390,419 $1,364,254
Earned income from direct
financing leases 138,782 110,810 281,383 222,006
Contingent rental income 4,171 5,894 10,500 10,719
Interest and other income 14,497 11,274 26,599 22,388
-------- -------- ---------- ----------
853,822 808,498 1,708,901 1,619,367
-------- -------- ---------- ----------
Expenses:
General operating and
administrative 42,579 33,998 86,812 62,501
Professional services 4,294 10,841 15,363 16,439
Real estate taxes - 1,224 - 3,987
State and other taxes 114 259 8,128 6,789
Depreciation and
amortization 121,131 124,579 242,262 248,221
-------- -------- ---------- ----------
168,118 170,901 352,565 337,937
-------- -------- ---------- ----------
Income Before Minority
Interest in Income of
Consolidated Joint
Venture, Equity in Earnings
of Unconsolidated Joint
Venture and Gain on Sale
of Land and Building 685,704 637,597 1,356,336 1,281,430
Minority Interest in
Income of Consolidated
Joint Venture (5,465) (4,668) (11,069) (9,214)
Equity in Earnings of
Unconsolidated Joint
Ventures 23,972 20,455 46,577 40,214
Gain on Sale of Land and
Building - 103,283 - 103,283
-------- -------- ---------- ----------
Net Income $704,211 $756,667 $1,391,844 $1,415,713
======== ======== ========== ==========
Allocation of Net Income:
General partners $ 7,042 $ 7,329 $ 13,918 $ 13,919
Limited partners 697,169 749,338 1,377,926 1,401,794
-------- -------- ---------- ----------
$704,211 $756,667 $1,391,844 $1,415,713
======== ======== ========== ==========
Net Income Per Limited
Partner Unit $ 9.96 $ 10.70 $ 19.68 $ 20.03
======== ======== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 70,000 70,000 70,000 70,000
======== ======== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---------------- ------------
<S> <C>
General partners:
Beginning balance $ 175,673 $ 147,262
Net income 13,918 28,411
----------- -----------
189,591 175,673
----------- -----------
Limited partners:
Beginning balance 29,285,093 29,602,123
Net income 1,377,926 2,832,970
Distributions ($22.50 and
$45.00 per limited partner
unit, respectively) (1,575,000) (3,150,000)
----------- -----------
29,088,019 29,285,093
----------- -----------
Total partners' capital $29,277,610 $29,460,766
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
----------- -----------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,650,988 $ 1,571,973
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of land and
building - 899,574
Increase in restricted cash - (894,574)
Investment in joint ventures (173,650) -
Collections on mortgage note receivable 3,033 -
Payment of lease costs (3,300) -
----------- -----------
Net cash provided by (used in)
investing activities (173,917) 5,000
----------- -----------
Cash Flows from Financing Activities:
Distributions to limited partners (1,575,000) (1,575,000)
Distributions to holder of minority
interest (3,524) (4,526)
----------- ------------
Net cash used in financing
activities (1,578,524) (1,579,526)
----------- -----------
Net Decrease in Cash and Cash Equivalents (101,453) (2,553)
Cash and Cash Equivalents at Beginning
of Period 1,120,999 926,481
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,019,546 $ 923,928
=========== ===========
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Building costs incurred and unpaid at
end of period $ - $ 25,646
=========== ===========
Lease costs incurred and unpaid at
end of period $ - $ 16,500
=========== ===========
Distributions declared and unpaid
at end of period $ 787,500 $ 787,500
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1996 and 1995
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, 1996, may not be indicative
of the results that may be expected for the year ending December 31,
1996. Amounts as of December 31, 1995, 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 VI, Ltd. (the "Partnership") for the year ended December
31, 1995.
The Partnership accounts for its 66 percent interest in the accounts of
Caro Joint Venture using the consolidation method. Minority interest
represents the minority joint venture partner's proportionate share of
the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been
eliminated.
Effective January 1, 1996, the Partnership adopted 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 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. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
2. Investment in Joint Ventures:
In January 1996, the Partnership acquired an approximate 18 percent
interest in a Golden Corral property in Clinton, North Carolina, as
tenants-in-common with affiliates of the general partners. The
Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with affiliates, and
amounts relating to its investment are included in investment in joint
ventures.
5
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1996 and 1995
2. Investment in Joint Ventures - Continued:
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
<S> <C>
Land and buildings on
operating leases,
less accumulated
depreciation $3,502,728 $2,726,011
Net investment in
direct financing
lease 405,432 408,936
Cash 154,956 1,950
Receivables 12,042 18,298
Accrued rental income 182,187 170,695
Other assets 45,807 47,283
Liabilities 1,380 2,208
Partners' capital 4,301,772 3,370,965
Revenues 252,909 432,218
Net income 207,203 363,865
</TABLE>
The Partnership recognized income totalling $46,577 and $40,214 for the
six months ended June 30, 1996 and 1995, respectively, from these joint
ventures, $23,972 and $20,455 of which was earned during the quarters
ended June 30, 1996 and 1995, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, 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 selected national and
regional fast-food and family-style restaurant chains (collectively, the
"Properties"). The leases are triple-net leases, with the lessees generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of June 30, 1996, the Partnership owned 43 Properties, including
four Properties owned by joint ventures in which the Partnership is a
co-venturer and two Properties owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1996 and 1995, 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 $1,650,988 and
$1,571,973 for the six months ended June 30, 1996 and 1995, respectively. The
increase in cash from operations for the six months ended June 30, 1996, is
primarily a result of changes in income and expenses, (excluding gain on sale)
as discussed below in "Results of Operations".
Other sources and uses of capital included the following during the six
months ended June 30, 1996.
In January 1996, the Partnership reinvested the remaining net sales
proceeds from the 1995 sale of the Property in Little Canada, Minnesota, in a
Golden Corral Property located in Clinton, North Carolina, with affiliates of
the general partners as tenants-in-common. In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the Property in proportion
to its applicable percentage interest. The Partnership owns an approximate 18
percent interest in this Property.
In connection with the 1995 sale of a small parcel of vacant land
adjacent to the Partnership's Property in Orlando, Florida, the Partnership
accepted a promissory note for $6,000. The note was collateralized by a mortgage
on the Property, bore interest at a rate of nine percent per annum and was
collected in six monthly installments of $1,026. The note was collected in full
in February 1996.
In March 1996, the Partnership entered into an agreement with the
tenant of the Properties in Chester, Pennsylvania, and Orlando, Florida, for
payment of certain rental payment deferrals the Partnership had granted to the
tenant through March 31, 1996.
7
<PAGE>
Liquidity and Capital Resources - Continued
Under the agreement, the Partnership agreed to abate approximately $42,700 of
the rental payment deferral amounts. The tenant made the first payment of
approximately $18,600 in April 1996 in accordance with the terms of the
agreement, and has agreed to pay the Partnership the remaining balance due of
approximately $109,500 in six remaining annual installments through 2002.
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, 1996, the Partnership had $1,019,546
invested in such short-term investments as compared to $1,120,999 at December
31, 1995. The decrease in cash and cash equivalents during the six months ended
June 30, 1996, is primarily the result of the Partnership investing
approximately $173,700 in a Golden Corral Property, as described above. The
funds remaining at June 30, 1996, 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 $830,198 at June 30, 1996, from $828,211 at December 31, 1995. The
general partners believe the Partnership has sufficient cash on hand to meet the
Partnership's current working capital needs.
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $1,575,000 for each of the six months
ended June 30, 1996 and 1995 ($787,500 for each of the quarters ended June 30,
1996 and 1995). This represents distributions for each applicable six months of
$22.50 per unit ($11.25 per unit for each applicable quarter). No distributions
were made to the general partners for the quarters and six months ended June 30,
1996 and 1995. No amounts distributed or to be distributed to the limited
partners for the six months ended June 30, 1996 and 1995, 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 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 Partner- ship'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.
8
<PAGE>
Results of Operations
During the six months ended June 30, 1995, the Partnership and its
consolidated joint venture, Caro Joint Venture, owned and leased 38 wholly owned
Properties (including one Property in Little Canada, Minnesota, which was sold
in June 1995) and during the six months ended June 30, 1996, the Partnership and
Caro Joint Venture owned and leased 39 wholly owned Properties, to operators of
fast-food and family-style restaurant chains. In connection therewith, the
Partnership and Caro Joint Venture earned $1,671,802 and $1,586,260, during the
six months ended June 30, 1996 and 1995, respectively, in rental income from
operating leases and earned income from direct financing leases from these
Properties, $835,154 and $791,330 of which was earned during the quarters ended
June 30, 1996 and 1995. Rental and earned income increased approximately $20,300
and $36,600, respectively, for the quarter and six months June 30, 1996, due to
the acquisition of a Property located in Broken Arrow, Oklahoma, in August 1995
with the net sales proceeds from the sale of the Property in Little Canada,
Minnesota, in June 1995. The increase in rental income was partially offset by a
decrease of approximately $8,200 during the six months ended June 30, 1996, due
to the sale of the Property in Little Canada, Minnesota, in June 1995.
Rental and earned income also increased during the six months ended
June 30, 1996, as a result of the fact that the Partnership collected and
recorded as income approximately $18,600 in rental payment deferrals for the two
Properties leased by the same tenant in Chester, Pennsylvania, and Orlando,
Florida. Previously, the Partnership had established an allowance for doubtful
accounts for these amounts. These amounts were collected in accordance with the
agreement entered into in March 1996, with the tenant to collect the remaining
balance of the rental payment deferral amounts as discussed above in "Liquidity
and Capital Resources." If such amounts are collected, the Partnership will
reverse the remaining related allowance for doubtful accounts and record such
amounts as income. Rental and earned income also increased during the quarter
ended June 30, 1996, as a result of the fact that during the quarter ended June
30, 1995, the Partnership established an allowance for doubtful accounts of
approximately $13,300 for rental payment deferral amounts deemed uncollectible.
No such allowance was established during the quarter ended June 30, 1996.
In addition, rental and earned income increased approximately $9,600
and $31,100 during the quarter and six months ended June 30, 1996, respectively,
as a result of the fact that in April 1995 the Partnership entered into a new
lease for the Property in Hermitage, Tennessee, for which rent commenced in June
1995.
For the six months ended June 30, 1996 and 1995, the Partnership also
earned $10,500 and $10,719 respectively, in contingent rental income $4,171 and
$5,894 of which was earned during the quarters ended June 30, 1996 and 1995,
respectively.
9
<PAGE>
Results of Operations - Continued
During the six months ended June 30, 1996 and 1995, the Partnership
also owned and leased three Properties indirectly through joint venture
arrangements and one Property with an affiliate as tenants-in-common, and for
the six months ended June 30, 1996, owned and leased one additional Property as
tenants-in-common with affiliates of the general partners. In connection
therewith, during the six months ended June 30, 1996 and 1995, the Partnership
earned $46,577 and $40,214, respectively, attributable to the net income earned
by these unconsolidated joint ventures, $23,972 and $20,455 of which was earned
during the quarters ended June 30, 1996 and 1995, respectively. The increase in
net income earned by unconsolidated joint ventures is primarily attributable to
the Partnership investing in a Golden Corral Property in Clinton, North
Carolina, with affiliates as tenants-in-common in January 1996.
Operating expenses, including depreciation and amortization expense,
were $352,565 and $337,937 for the six months ended June 30, 1996 and 1995,
respectively, of which $168,118 and $170,901 were incurred for the quarters
ended June 30, 1996 and 1995, respectively. The increase in operating expenses
during the six months ended June 30, 1996, is primarily the result of an
increase in accounting and administrative expenses associated with operating the
Partnership and its Properties and insurance expense as a result of the general
partners obtaining contingent liability and property coverage for the
Partnership, effective May 1995. This insurance policy is intended to reduce the
Partnership's exposure in the unlikely event a tenant's insurance policy lapses
or is insufficient to cover a claim relating to the Property.
The increase in operating expenses was partially offset by a decrease
in depreciation expense as a result of the sale of the Property in Little
Canada, Minnesota, in June 1995. Operating expenses also decreased due to the
fact that during the six months ended June 30, 1995, the Partnership incurred
real estate taxes relating to the Property in Hermitage, Tennessee, as a result
of the former tenant exercising its option to terminate its lease in August
1994. No real estate taxes were incurred during 1996 as a result of the
Partnership entering into a new lease for this Property in April 1995, under
which the tenant is responsible for real estate taxes in accordance with the
terms of the lease.
As a result of the sale of the Property in Little Canada, Minnesota, in
June 1995, the Partnership recognized a gain for financial reporting purposes of
$103,283 during the quarter and six months ended June 30, 1995. No Properties
were sold during the quarter and six months ended June 30, 1996.
10
<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, 1996.
11
<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 August, 1996.
CNL INCOME FUND VI, 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 VI, Ltd. at June 30, 1996, 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 VI, Ltd. for the
six months ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,019,546
<SECURITIES> 0
<RECEIVABLES> 188,392
<ALLOWANCES> 110,486
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,328,432
<DEPRECIATION> 2,959,063
<TOTAL-ASSETS> 30,268,690
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 29,277,610
<TOTAL-LIABILITY-AND-EQUITY> 30,268,690
<SALES> 0
<TOTAL-REVENUES> 1,708,901
<CGS> 0
<TOTAL-COSTS> 352,565
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,391,844
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,391,844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,391,844
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund VI, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for
current assets and current liabilities.
</FN>
</TABLE>
