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, 1998
--------------------------
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 jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street
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 7-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
------ ----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,490,776 and
$1,438,534 $13,907,990 $13,960,232
Net investment in direct financing
leases 9,997,012 10,044,975
Investment in joint ventures 2,855,649 2,877,717
Mortgage notes receivable 1,843,383 1,853,386
Cash and cash equivalents 1,811,192 1,602,236
Receivables, less allowance for
doubtful accounts of $21,416 and
$19,228 13,196 51,393
Prepaid expenses 7,662 4,357
Accrued rental income 1,842,017 1,811,329
Other assets 52,671 52,671
----------- -----------
$32,330,772 $32,258,296
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,650 $ 8,359
Escrowed real estate taxes payable 29,429 24,459
Distributions payable 1,137,500 787,501
Due to related parties 59,464 59,649
Rents paid in advance 101,595 53,556
----------- -----------
Total liabilities 1,335,638 933,524
Minority interest 108,428 108,374
Partners' capital 30,886,706 31,216,398
----------- -----------
$32,330,772 $32,258,296
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1998 1997
---------- ----------
Revenues:
Rental income from operating leases $ 455,556 $ 456,844
Earned income from direct financing
leases 299,442 304,801
Contingent rental income 18,486 29,388
Interest and other income 65,084 59,742
---------- ----------
838,568 850,775
---------- ----------
Expenses:
General operating and administrative 32,443 33,793
Professional services 5,506 5,224
State and other taxes 5,269 5,022
Depreciation and amortization 52,242 52,243
---------- ----------
95,460 96,282
---------- ----------
Income Before Minority Interest in
Income of Consolidated Joint
Venture and Equity in Earnings
of Unconsolidated Joint Ventures 743,108 754,493
Minority Interest in Income of
Consolidated Joint Venture (3,404) (3,389)
Equity in Earnings of Unconsolidated
Joint Ventures 68,104 68,249
---------- ----------
Net Income $ 807,808 $ 819,353
========== ==========
Allocation of Net Income:
General partners $ 8,078 $ 8,194
Limited partners 799,730 811,159
---------- ----------
$ 807,808 $ 819,353
========== ==========
Net Income Per Limited Partner Unit $ 0.023 $ 0.023
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 35,000,000 35,000,000
========== ==========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1998 1997
------------- ------------
General partners:
Beginning balance $ 226,441 $ 194,025
Net income 8,078 32,416
----------- -----------
234,519 226,441
----------- -----------
Limited partners:
Beginning balance 30,989,957 30,930,809
Net income 799,730 3,209,151
Distributions ($0.033 and
$0.090 per limited
partner unit, respectively) (1,137,500 ) (3,150,003 )
----------- -----------
30,652,187 30,989,957
----------- -----------
Total partners' capital $30,886,706 $31,216,398
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1998 1997
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 989,892 $ 940,846
----------- -----------
Cash Flows from Investing
Activities:
Collections on mortgage notes
receivable 9,915 680
----------- -----------
Net cash provided by
investing activities 9,915 680
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (787,501) (1,050,000)
Distributions to holder of
minority interest (3,350) (3,360)
----------- -----------
Net cash used in financing
activities (790,851) (1,053,360)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 208,956 (111,834)
Cash and Cash Equivalents at Beginning
of Quarter 1,602,236 1,476,274
----------- -----------
Cash and Cash Equivalents at End
of Quarter $ 1,811,192 $ 1,364,440
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 1,137,500 $ 787,500
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership) NOTES
TO CONDENSED FINANCIAL STATEMENTS Quarters
Ended March 31, 1998 and 1997
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, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, 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, 1997.
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.
2. Concentration of Credit Risk:
The following schedule presents total rental income from individual
lessees, or group of affiliated lessees, each representing more than
ten percent of the Partnerships' total rental income (including the
Partnership's share of total rental income from the unconsolidated
joint ventures) for at least one of the quarters ended March 31:
1998 1997
-------- ---------
Golden Corral Corporation $169,691 $167,540
Restaurant Management
Services, Inc. 132,209 133,105
Carrols Corporation 130,030 131,370
Burger King Corporation 86,280 88,452
Flagstar Enterprises, Inc.
and Quincy's Restaurants,
Inc. 57,826 89,035
5
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership) NOTES
TO CONDENSED FINANCIAL STATEMENTS Quarters
Ended March 31, 1998 and 1997
2. Concentration of Credit Risk - Continued:
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees
could significantly impact the results of operations of the
Partnership. However, the general partners believe that the risk of
such a default is reduced due to the essential or important nature of
these properties for the on-going operations of the lessees.
6
<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 triple-net leases, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of March 31, 1998, 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, 1998 and 1997, 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 $989,892 and
$940,846 for the quarters ended March 31, 1998 and 1997, respectively. The
increase in cash from operations for the quarter ended March 31, 1998, is
primarily a result of 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, 1998, the Partnership had $1,811,192
invested in such short-term investments, as compared to $1,602,236 at December
31, 1997. The funds remaining at March 31, 1998, after payment of distributions
for the quarter ended March 31, 1998, 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 $1,335,638 at March 31, 1998, from $933,524 at December 31, 1997,
primarily as the result of the Partnership's accruing a special distribution of
accumulated, excess operating reserves payable to the limited partners of
$350,000 at March 31, 1998 as compared to December 31, 1997. The increase in
liabilities was also partially due to an increase in rents paid in advance at
March 31, 1998, as compared to December 31, 1997. The general partners believe
that the Partnership has sufficient cash on hand to meet its current working
capital needs.
7
<PAGE>
Liquidity and Capital Resources - Continued
Based on cash from operations, and for the quarter ended March 31,
1998, accumulated excess operating reserves, the Partnership declared
distributions to the limited partners of $1,137,500 and $787,500 for the
quarters ended March 31, 1998 and 1997, respectively. This represents
distributions for each applicable quarter of $0.033 and $0.023 per unit,
respectively. No distributions were made to the general partners for the
quarters ended March 31, 1998 and 1997. No amounts distributed to the limited
partners for the quarters ended March 31, 1998 and 1997, 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 quarters ended March 31, 1998 and 1997, the Partnership and
its consolidated joint venture, Woodway 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, 1998 and
1997, the Partnership and Woodway Joint Venture earned $754,998 and $761,645,
respectively, in rental income from operating leases and earned income from
direct financing leases.
For the quarters ended March 31, 1998 and 1997, the Partnership also
earned $18,486 and $29,388, respectively, in contingent rental income. The
decrease in contingent rental income during the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997, is primarily attributable to the
Partnership adjusting estimated contingent rental amounts accrued at December
31, 1996, to actual amounts during the quarter ended March 31, 1997.
For the quarters ended March 31, 1998 and 1997, the Partnership owned
and leased eight Properties indirectly through joint venture arrangements. In
connection therewith, during the quarters ended March 31, 1998 and 1997, the
Partnership earned $68,104 and $68,249, respectively, attributable to net income
earned by these unconsolidated joint ventures.
8
<PAGE>
Results of Operations - Continued
During at least one of the quarters ended March 31, 1998 and 1997, five
lessees, or group of affiliated lessees, of the Partnership and its consolidated
joint venture, (i) Golden Corral Corporation, (ii) Carrols Corporation (iii)
Restaurant Management Services, Inc., (iv) Flagstar Enterprises, Inc and
Quincy's Inc. (which are affiliated entities under common control of Flagstar
Corporation) (herein after referred to as Flagstar Corporation) and (v) Burger
King Corporation, each contributed more than ten percent of the Partnership's
total rental income (including rental income from the Partnership's consolidated
joint venture and the Partnership's share of rental income from eight Properties
owned by unconsolidated joint ventures). As of March 31, 1998, Golden Corral
Corporation was the lessee under leases relating to four restaurants, Carrols
Corporation was the lessee under leases relating to five restaurants, Restaurant
Management Services, Inc. was the lessee under leases relating to five
restaurants, Flagstar Corporation was the lessee under leases relating to three
restaurants and Burger King Corporation was the lessee under leases relating to
seven restaurants. It is anticipated that, based on the minimum annual rental
payments required by the leases, Golden Corral Corporation, Carrols Corporation
and Restaurant Management Services, each will continue to contribute more than
ten percent of the Partnership's total rental income during the remainder of
1998 and subsequent years. Any failure of these lessees, or group of lessees,
could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $95,460 and $96,282 for the quarters ended March 31, 1998 and 1997,
respectively.
9
<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 March 31, 1998.
10
<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 8th day of May, 1998.
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 March 31, 1998, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund VIII, Ltd. for the three months
ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,811,192
<SECURITIES> 0
<RECEIVABLES> 34,612
<ALLOWANCES> 21,416
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,398,766
<DEPRECIATION> 1,490,776
<TOTAL-ASSETS> 32,330,772
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,886,706
<TOTAL-LIABILITY-AND-EQUITY> 32,330,772
<SALES> 0
<TOTAL-REVENUES> 838,568
<CGS> 0
<TOTAL-COSTS> 95,460
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 807,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 807,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 807,808
<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>
