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, 1997
--------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
0-19139
CNL Income Fund VIII, Ltd.
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(Exact name of registrant as specified in its charter)
Florida 59-2963338
- ----------------------------- ------------------------
(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
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<PAGE>
CONTENTS
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Part I Page
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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
</TABLE>
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CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
------ ----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $1,281,806 and
$1,229,563 $14,116,960 $14,169,203
Net investment in direct financing
leases 10,180,621 10,223,225
Investment in joint ventures 2,919,216 2,940,826
Mortgage notes receivable 1,861,576 1,862,262
Cash and cash equivalents 1,364,440 1,476,274
Receivables, less allowance for
doubtful accounts of $5,614 and
$4,775 26,189 25,675
Prepaid expenses 6,835 4,377
Accrued rental income 1,716,060 1,682,593
Other assets 52,671 52,671
----------- -----------
$32,244,568 $32,437,106
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 6,958 $ 7,693
Escrowed real estate taxes payable 21,139 15,138
Distributions payable 787,500 1,050,000
Due to related parties 58,675 56,880
Rents paid in advance 105,521 74,502
----------- -----------
Total liabilities 979,793 1,204,213
Minority interest 108,088 108,059
Partners' capital 31,156,687 31,124,834
----------- -----------
$32,244,568 $32,437,106
=========== ===========
See accompanying notes to condensed financial statements.
1
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CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1997 1996
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<S> <C>
Revenues:
Rental income from operating leases $ 456,844 $ 471,814
Earned income from direct financing
leases 304,801 335,093
Contingent rental income 29,388 5,353
Interest and other income 59,742 25,252
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850,775 837,512
---------- ----------
Expenses:
General operating and administrative 33,793 42,979
Professional services 5,224 9,396
State and other taxes 5,022 4,740
Depreciation and amortization 52,243 52,243
---------- ----------
96,282 109,358
---------- ----------
Income Before Minority Interest in
Income of Consolidated Joint
Venture and Equity in Earnings
of Unconsolidated Joint Ventures 754,493 728,154
Minority Interest in Income of
Consolidated Joint Venture (3,389) (3,459)
Equity in Earnings of Unconsolidated
Joint Ventures 68,249 60,390
---------- ----------
Net Income $ 819,353 $ 785,085
========== ==========
Allocation of Net Income:
General partners $ 8,194 $ 7,851
Limited partners 811,159 777,234
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$ 819,353 $ 785,085
========== ==========
Net Income Per Limited Partner Unit $ 0.023 $ 0.022
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 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>
Quarter Ended Year Ended
March 31, December 31,
1997 1996
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<S> <C>
General partners:
Beginning balance $ 194,025 $ 162,612
Net income 8,194 31,413
----------- -----------
202,219 194,025
----------- -----------
Limited partners:
Beginning balance 30,930,809 31,277,730
Net income 811,159 3,065,579
Distributions ($0.023 and
$0.098 per limited
partner unit, respectively) (787,500) (3,412,500)
----------- -----------
30,954,468 30,930,809
----------- -----------
Total partners' capital $31,156,687 $31,124,834
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
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CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1997 1996
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 940,846 $ 836,188
----------- -----------
Cash Flows from Investing
Activities:
Collections on mortgage notes
receivable 680 615
Additions to land and
building on operating leases - (1,135)
Investment in direct financing
leases - (1,326)
----------- -----------
Net cash provided by (used
in) investing activities 680 (1,846)
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,050,000) (962,500)
Distributions to holder of
minority interest (3,360) (3,432)
----------- -----------
Net cash used in financing
activities (1,053,360) (965,932)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (111,834) (131,590)
Cash and Cash Equivalents at Beginning
of Quarter 1,476,274 1,620,865
----------- -----------
Cash and Cash Equivalents at End
of Quarter $ 1,364,440 $ 1,489,275
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 787,500 $ 787,500
=========== ===========
See accompanying notes to condensed financial statements.
4
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CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership) NOTES
TO CONDENSED FINANCIAL STATEMENTS Quarters
Ended March 31, 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 ended March 31, 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 March 31, 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 quarters ended
March 31, 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 $940,846 and
$836,188 for the quarters ended March 31, 1997 and 1996, respectively. The
increase in cash from operations for the quarter ended March 31, 1997, is
primarily a result of changes in income and expenses as discussed in "Results of
Operation" 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 March 31, 1997, the Partnership had $1,364,440
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 quarter ended
March 31, 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 March 31, 1997, after payment
of distributions for the quarter ended March 31, 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 $979,793 at March 31, 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 $787,500 for each of the quarters ended March 31,
1997 and 1996. This represents distributions for each applicable quarter of
$0.023 per unit. No distributions were made to the general partners for the
quarters ended March 31, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the quarters ended March 31, 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 quarter ended March 31, 1996, the Partnership and its
consolidated joint venture, Woodway Joint Venture, owned and leased 29 wholly
owned Properties and during the quarter ended March 31, 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 quarters ended March 31, 1997 and 1996, the Partnership
and Woodway Joint Venture earned $761,645 and $806,907, respectively, in rental
income from operating leases and earned income from direct financing leases. The
decrease in rental and earned income during the quarter ended March 31, 1997, as
compared to the quarter ended March 31, 1996, is primarily attributable to a
decrease of approximately $43,400 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 ended March 31, 1997, as discussed below.
For the quarters ended March 31, 1997 and 1996, the Partnership also
earned $29,388 and $5,353, respectively, in contingent rental income. The
increase in contingent rental income during the quarter ended March 31, 1997, as
compared to the quarter ended March 31, 1996, is primarily attributable to (i)
the Partnership adjusting estimated contingent rental amounts accrued
7
<PAGE>
Results of Operations - Continued
at December 31, 1996, to actual amounts as of the quarter ended March 31, 1997,
and (ii) increased gross sales of certain restaurant Properties requiring the
payment of contingent rental income.
Interest and other income were $59,742 and $25,252 for the quarters
ended March 31, 1997 and 1996, respectively. The increase in interest and other
income during the quarter ended March 31, 1997, as compared to the quarter ended
March 31, 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 quarter ended March 31, 1996, the Partnership owned and leased
seven Properties indirectly through joint venture arrangements. During the
quarter ended March 31, 1997, the Partnership owned and leased eight Properties
indirectly through joint venture arrangements. In connection therewith, during
the quarters ended March 31, 1997 and 1996, the Partnership earned $68,249 and
$60,390, respectively, attributable to net income earned by these unconsolidated
joint ventures. 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 $96,282 and $109,358 for the quarters ended March 31, 1997 and 1996,
respectively. The decrease in operating expenses during the quarter ended March
31, 1997, as compared to the quarter ended March 31, 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 quarter ended March 31, 1996.
8
<PAGE>
PART II. OTHER INFORMATION
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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, 1997.
</TABLE>
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 9th day of May, 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)
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the balance sheet of CNL Income Fund VIII, Ltd. at March 31, 1997, 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
VIII, Ltd. for the three months ended March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,364,440
<SECURITIES> 0
<RECEIVABLES> 31,803
<ALLOWANCES> 5,614
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,398,766
<DEPRECIATION> 1,281,806
<TOTAL-ASSETS> 32,244,568
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,156,687
<TOTAL-LIABILITY-AND-EQUITY> 32,244,568
<SALES> 0
<TOTAL-REVENUES> 850,775
<CGS> 0
<TOTAL-COSTS> 96,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 819,353
<INCOME-TAX> 0
<INCOME-CONTINUING> 819,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 819,353
<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>
