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, 1997
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
0-19139
CNL Income Fund VIII, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-2963338
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-8
Part II
Other Information 9
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
------ ----------- --------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $1,334,048 and,
$1,229,563 $14,064,718 $14,169,203
Net investment in direct financing
leases 10,136,738 10,223,225
Investment in joint ventures 2,904,211 2,940,826
Mortgage notes receivable 1,860,873 1,862,262
Cash and cash equivalents 1,417,742 1,476,274
Receivables, less allowance for
doubtful accounts of $15,507 and
$4,775 27,650 25,675
Prepaid expenses 10,199 4,377
Accrued rental income, less allow-
ance for doubtful accounts of
$3,001 in 1997 1,746,524 1,682,593
Other assets 52,671 52,671
----------- -----------
$32,221,326 $32,437,106
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,469 $ 7,693
Escrowed real estate taxes payable 24,406 15,138
Distributions payable 787,501 1,050,000
Due to related parties 58,336 56,880
Rents paid in advance 81,019 74,502
----------- -----------
Total liabilities 956,731 1,204,213
Minority interest 108,200 108,059
Partners' capital 31,156,395 31,124,834
----------- -----------
$32,221,326 $32,437,106
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 444,764 $ 473,722 $ 901,608 $ 945,536
Earned income from direct
financing leases 303,521 333,932 608,322 669,025
Contingent rental income 2,552 2,317 31,940 7,670
Interest and other income 62,054 23,938 121,796 49,190
---------- ---------- ---------- ----------
812,891 833,909 1,663,666 1,671,421
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 36,296 39,227 70,089 82,206
Professional services 5,186 4,592 10,410 13,988
State and other taxes 59 16 5,081 4,756
Depreciation and
amortization 52,242 52,242 104,485 104,485
---------- ---------- ---------- ----------
93,783 96,077 190,065 205,435
---------- ---------- ---------- ----------
Income Before Minority
Interest in Income of
Consolidated Joint
Venture and Equity in
Earnings of Unconsoli-
dated Joint Ventures 719,108 737,832 1,473,601 1,465,986
Minority Interest in
Income of Consolidated
Joint Venture (3,441) (3,484) (6,830) (6,943)
Equity in Earnings of
Unconsolidated Joint
Ventures 71,542 63,312 139,791 123,702
---------- ---------- ---------- ----------
Net Income $ 787,209 $ 797,660 $1,606,562 $1,582,745
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 7,872 $ 7,976 $ 16,066 $ 15,827
Limited partners 779,337 789,684 1,590,496 1,566,918
---------- ---------- ---------- ----------
$ 787,209 $ 797,660 $1,606,562 $1,582,745
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.022 $ 0.023 $ 0.045 $ 0.045
========== ========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 35,000,000 35,000,000 35,000,000 35,000,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.,
2
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- --------
<S> <C>
General partners:
Beginning balance $ 194,025 $ 162,612
Net income 16,066 31,413
----------- -----------
210,091 194,025
----------- -----------
Limited partners:
Beginning balance 30,930,809 31,277,730
Net income 1,590,496 3,065,579
Distributions ($0.045 and
$0.098 per limited
partner unit, respectively) (1,575,001) (3,412,500)
----------- -----------
30,946,304 30,930,809
----------- -----------
Total partners' capital $31,156,395 $31,124,834
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------- -------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,784,279 $ 1,720,991
----------- -----------
Cash Flows from Investing
Activities:
Additions to land and
building on operating leases - (1,135)
Investment in direct financing
leases - (1,326)
Investment in joint venture - (235,611)
Collections on mortgage notes
receivable 1,378 1,247
----------- -----------
Net cash provided by (used
in) investing activities 1,378 (236,825)
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,837,500) (1,750,000)
Distributions to holder of
minority interest (6,689) (6,747)
----------- -----------
Net cash used in financing
activities (1,844,189) (1,756,747)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (58,532) (272,581)
Cash and Cash Equivalents at Beginning
of Period 1,476,274 1,620,865
----------- -----------
Cash and Cash Equivalents at End
of Period $ 1,417,742 $ 1,348,284
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 787,501 $ 787,500
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1997 and 1996
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, 1997, may not be indicative
of the results that may be expected for the year ending December 31,
1997. Amounts as of December 31, 1996, 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 CNL Income Fund
VIII, Ltd.'s Form 10-K for the year ended December 31, 1996.
CNL Income Fund VIII, Ltd. (the "Partnership") accounts for its 88
percent interest in Woodway 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.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund VIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 18, 1989, 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 (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are generally triple-net leases, with the lessees responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of June 30, 1997,
the Partnership owned 36 Properties, including interests in nine Properties
owned by joint ventures in which the Partnership is a co-venturer.
Liquidity and Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1997 and 1996, 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 $1,784,279 and
$1,720,991 for the six months ended June 30, 1997 and 1996, respectively. The
increase in cash from operations for the six months ended June 30, 1997, is
primarily a result of changes in income and expenses as discussed in "Results of
Operations" below, and changes in the Partnership's working capital.
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, 1997, the Partnership had $1,417,742
invested in such short-term investments, as compared to $1,476,274 at December
31, 1996. The decrease in cash and cash equivalents during the six months ended
June 30, 1997, was primarily attributable to the payment of a special
distribution to the limited partners of $262,500 in January 1997 of cumulative
excess operating reserves. The funds remaining at June 30, 1997, after payment
of distributions for the six months ended June 30, 1997, and other liabilities,
will be used to meet the Partnership's working capital and other needs.
Total liabilities of the Partnership, including distributions payable,
decreased to $956,731 at June 30, 1997, from $1,204,213 at December 31, 1996,
primarily as the result of the Partnership's accruing a special distribution
payable to the limited partners of $262,500 at December 31, 1996, as described
above, which was paid in January 1997. The general partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
6
<PAGE>
Liquidity and Capital Resources - Continued
Based on cash from operations, the Partnership declared distributions
to the limited partners of $1,575,001 and $1,575,000 for the six months ended
June 30, 1997 and 1996, respectively ($787,501 and $787,500 for the quarters
ended June 30, 1997 and 1996, respectively). This represents distributions for
each applicable six months of $0.045 per unit ($0.023 per unit for each
applicable quarter). No distributions were made to the general partners for the
quarters and six months ended June 30, 1997 and 1996. No amounts distributed or
to be distributed to the limited partners for the six months ended June 30, 1997
and 1996, are required to be or have been treated by the Partnership as a return
of capital for purposes of calculating the limited partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the six months ended June 30, 1996, the Partnership and its
consolidated joint venture, Woodway Joint Venture, owned and leased 29 wholly
owned Properties (including one Property in Orlando, Florida, which was sold in
October 1996) and during the six months ended June 30, 1997, the Partnership and
its consolidated joint venture owned and leased 28 wholly owned Properties to
operators of fast-food and family-style restaurant chains. In connection
therewith, during the six months ended June 30, 1997 and 1996, the Partnership
and Woodway Joint Venture earned $1,509,930 and $1,614,561, respectively, in
rental income from operating leases and earned income from direct financing
leases, $748,285 and $807,654 of which was earned during the quarters ended June
30, 1997 and 1996, respectively. The decrease in rental and earned income during
the quarter and six months ended June 30, 1997, as compared to the quarter and
six months ended June 30, 1996, is primarily attributable to a decrease of
approximately $43,300 and $86,600, respectively, as a result of the sale of the
Property in Orlando, Florida, in October 1996. However, as a result of the
Partnership accepting a mortgage note for this property, interest income
increased during the quarter and six months ended June 30, 1997, as discussed
below.
For the six months ended June 30, 1997 and 1996, the Partnership also
earned $31,940 and $7,670, respectively, in contingent rental income, $2,552 and
$2,317 of which was earned
7
<PAGE>
Results of Operations - Continued
during the quarters ended June 30, 1997 and 1996, respectively. The increase in
contingent rental income during the six months ended June 30, 1997, as compared
to the six months ended June 30, 1996, is primarily attributable to (i) the
Partnership adjusting estimated contingent rental amounts accrued at December
31, 1996, to actual amounts as of the six months ended June 30, 1997, and (ii)
increased gross sales of certain restaurant Properties requiring the payment of
contingent rental income.
Interest and other income were $121,796 and $49,190 for the six months
ended June 30, 1997 and 1996, respectively, $62,054 and $23,938 of which was
earned during the quarters ended June 30, 1997 and 1996, respectively. The
increase in interest and other income during the quarter and six months ended
June 30, 1997, as compared to the quarter and six months ended June 30, 1996, is
primarily attributable to the interest earned on the mortgage note receivable
accepted in connection with the sale of the Property located in Orlando,
Florida, in October 1996.
For the six months ended June 30, 1997 and 1996, the Partnership owned
and leased eight Properties indirectly through joint venture arrangements. In
connection therewith, during the six months ended June 30, 1997 and 1996, the
Partnership earned $139,791 and $123,702, respectively, attributable to net
income earned by these unconsolidated joint ventures, $71,542 and $63,312 of
which was earned during the quarters ended June 30, 1997 and 1996, respectively.
The increase in net income earned by joint ventures is primarily due to the fact
that the Partnership invested in Middleburg Joint Venture in May 1996.
Operating expenses, including depreciation and amortization expense,
were $190,065 and $205,435 for the six months ended June 30, 1997 and 1996,
respectively, of which $93,783 and $96,077 were incurred for the quarters ended
June 30, 1997 and 1996, respectively. The decrease in operating expenses during
the quarter and six months ended June 30, 1997, as compared to the quarter and
six months ended June 30, 1996, is primarily attributable to a decrease in
accounting and administrative expenses associated with operating the Partnership
and its Properties and a decrease in professional services as a result of the
Partnership incurring the cost of the 1996 appraisal updates obtained to prepare
an annual statement of unit valuation to qualified plans in accordance with the
partnership agreement during the quarter ended December 31, 1996. The
Partnership incurred the cost of the 1995 appraisal updates during the six
months ended June 30, 1996.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the
quarter ended June 30, 1997.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 4th day of August, 1997.
CNL INCOME FUND VIII, 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 VIII, Ltd. at June 30, 1997, and its statement of
income for the six months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund VIII, Ltd. for the six months ended
June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,417,742
<SECURITIES> 0
<RECEIVABLES> 43,157
<ALLOWANCES> 15,507
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,398,766
<DEPRECIATION> 1,334,048
<TOTAL-ASSETS> 32,221,326
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,156,395
<TOTAL-LIABILITY-AND-EQUITY> 32,221,326
<SALES> 0
<TOTAL-REVENUES> 1,663,666
<CGS> 0
<TOTAL-COSTS> 190,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,606,562
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,606,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,606,562
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund VIII, LTD has an
unclassified balance sheet, therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
