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, 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
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
June 30, December 31,
ASSETS 1998 1997
------ ----------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $1,543,019 and
$1,438,534 $13,855,747 $13,960,232
Net investment in direct financing
leases 9,947,605 10,044,975
Investment in joint ventures 2,840,274 2,877,717
Mortgage notes receivable 1,833,110 1,853,386
Cash and cash equivalents 1,564,249 1,602,236
Receivables, less allowance for
doubtful accounts of $23,066 and
$19,228 3,030 51,393
Prepaid expenses 11,220 4,357
Accrued rental income 1,872,704 1,811,329
Other assets 52,671 52,671
----------- -----------
$31,980,610 $32,258,296
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,189 $ 8,359
Escrowed real estate taxes payable 17,826 24,459
Distributions payable 787,501 787,501
Due to related parties 59,389 59,649
Rents paid in advance 112,033 53,556
----------- -----------
Total liabilities 981,938 933,524
Minority interest 108,498 108,374
Partners' capital 30,890,174 31,216,398
----------- -----------
$31,980,610 $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
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 455,192 $ 444,764 $ 910,748 $ 901,608
Earned income from direct
financing leases 297,998 303,521 597,440 608,322
Contingent rental income 2,547 2,552 21,033 31,940
Interest and other income 70,242 62,054 135,326 121,796
---------- ---------- ---------- ----------
825,979 812,891 1,664,547 1,663,666
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 43,649 36,296 76,092 70,089
Professional services 6,857 5,186 12,363 10,410
State and other taxes 103 59 5,372 5,081
Depreciation and
amortization 52,243 52,242 104,485 104,485
---------- ---------- ---------- ----------
102,852 93,783 198,312 190,065
---------- ---------- ---------- ----------
Income Before Minority
Interest in Income of
Consolidated Joint
Venture and Equity in
Earnings of Unconsoli-
dated Joint Ventures 723,127 719,108 1,466,235 1,473,601
Minority Interest in
Income of Consolidated
Joint Venture (3,307) (3,441) (6,711) (6,830)
Equity in Earnings of
Unconsolidated Joint
Ventures 71,149 71,542 139,253 139,791
---------- ---------- ---------- ----------
Net Income $ 790,969 $ 787,209 $1,598,777 $1,606,562
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 7,910 $ 7,872 $ 15,988 $ 16,066
Limited partners 783,059 779,337 1,582,789 1,590,496
---------- ---------- ---------- ----------
$ 790,969 $ 787,209 $1,598,777 $1,606,562
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.022 $ 0.022 $ 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
Six Months Ended Year Ended
June 30, December 31,
1998 1997
---------------- ------------
General partners:
Beginning balance $ 226,441 $ 194,025
Net income 15,988 32,416
----------- -----------
242,429 226,441
----------- -----------
Limited partners:
Beginning balance 30,989,957 30,930,809
Net income 1,582,789 3,209,151
Distributions ($0.055 and
$0.090 per limited
partner unit, respectively) (1,925,001) (3,150,003)
----------- -----------
30,647,745 30,989,957
----------- -----------
Total partners' capital $30,890,174 $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
Six Months Ended
June 30,
1998 1997
----------- ----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,873,504 $ 1,784,279
----------- -----------
Cash Flows from Investing
Activities:
Collections on mortgage
notes receivable 20,097 1,378
----------- -----------
Net cash provided by
investing activities 20,097 1,378
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,925,001) (1,837,500)
Distributions to holder
of minority interest (6,587) (6,689)
----------- -----------
Net cash used in
financing activities (1,931,588) (1,844,189)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (37,987) (58,532)
Cash and Cash Equivalents at
Beginning of Period 1,602,236 1,476,274
----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,564,249 $ 1,417,742
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of period $ 787,501 $ 787,501
=========== ===========
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, 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 and six months ended June 30, 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.
The general partners are in the process of analyzing the effects of the
consensus reached by the Financial Accounting Standards Board in EITF
98-9, entitled "Accounting for Contingent Rent in the Interim Financial
Periods," issued in May 1998. The general partners do not expect that
the conclusions reached in this consensus will have a material effect
on the Partnership's financial position or results of operations.
2. Subsequent Event:
In July 1998, the Partnership received $116,354 as partial settlement
from the Florida Department of Transportation for a right of way taking
for a portion of its property in Brooksville, Florida. As of August 11,
1998, the Partnership and the Florida Department of Transportation had
neither determined the final settlement amount nor the total square
footage of the property to be taken by the Florida Department of
Transportation. The Partnership will recognize a gain or loss as a
result of the taking of this right of way when the final proceeds are
determined.
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 triple-net leases, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of June 30, 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 six months ended
June 30, 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 $1,873,504 and
$1,784,279 for the six months ended June 30, 1998 and 1997, respectively. The
increase in cash from operations for the six months ended June 30, 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 June 30, 1998, the Partnership had $1,564,249
invested in such short-term investments, as compared to $1,602,236 at December
31, 1997. The funds remaining at June 30, 1998, after payment of distributions
for the six months ended June 30, 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 $981,938 at June 30, 1998, from $933,524 at December 31, 1997,
primarily as the result of an increase in rents paid in advance at June 30,
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.
In July 1998, the Partnership received $116,354 as partial settlement
from the Florida Department of Transportation for a right of way taking for a
portion of its Property in Brooksville, Florida. As of August 11, 1998, the
Partnership and the Florida Department of Transportation had neither determined
the final settlement amount nor the total square footage of the Property to be
taken by the Florida Department of Transportation. The Partnership will
recognize a gain or loss as a result of the taking of this right of way when the
final proceeds are determined.
6
<PAGE>
Liquidity and Capital Resources - Continued
Based on cash from operations, and for the six months ended June 30,
1998, accumulated excess operating reserves, the Partnership declared
distributions to the limited partners of $1,925,001 and $1,575,001 for the six
months ended June 30, 1998 and 1997, respectively ($787,501 for each of the
quarters ended June 30, 1998 and 1997). This represents distributions of $0.055
and $0.045 per unit for the six months ended June 30, 1998 and 1997,
respectively ($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,
1998 and 1997. No amounts distributed to the limited partners for the six months
ended June 30, 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 six months ended June 30, 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 six months ended June 30, 1998 and
1997, the Partnership and Woodway Joint Venture earned $1,508,188 and
$1,509,930, respectively, in rental income from operating leases and earned
income from direct financing leases, $753,190 and $748,285 of which was earned
during the quarters ended June 30, 1998 and 1997, respectively.
For the six months ended June 30, 1998 and 1997, the Partnership also
earned $21,033 and $31,940, respectively, in contingent rental income, $2,547
and $2,552 of which was earned during the quarters ended June 30, 1998 and 1997.
The decrease in contingent rental income during the six months ended June 30,
1998, as compared to the six months ended June 30, 1997, is primarily
attributable to the Partnership adjusting estimated contingent rental amounts
accrued at December 31, 1996, to actual amounts during the six months ended June
30, 1997.
7
<PAGE>
Results of Operations - Continued
For the six months ended June 30, 1998 and 1997, the Partnership owned
and leased eight Properties indirectly through joint venture arrangements. In
connection therewith, during the six months ended June 30, 1998 and 1997, the
Partnership earned $139,253 and $139,791, respectively, attributable to net
income earned by these unconsolidated joint ventures, $71,149 and $71,542 of
which was earned during the quarters ended June 30, 1998 and 1997, respectively.
Operating expenses, including depreciation and amortization expense,
were $198,312 and $190,065 for the six months ended June 30, 1998 and 1997,
respectively, of which $102,851 and $93,783 were incurred for the quarters ended
June 30, 1998 and 1997, respectively.
The general partners are in the process of analyzing the effects of the
consensus reached by the Financial Accounting Standards Board in EITF 98-9,
entitled "Accounting for Contingent Rent in the Interim Financial Periods,"
issued in May 1998. The general partners do not expect that the conclusions
reached in this consensus will have a material effect on the Partnership's
financial position or results of operations.
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, 1998.
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 11th day of August, 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 June 30, 1998, 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, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,564,249
<SECURITIES> 0
<RECEIVABLES> 26,096
<ALLOWANCES> 23,066
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,398,766
<DEPRECIATION> 1,543,019
<TOTAL-ASSETS> 31,980,610
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,890,174
<TOTAL-LIABILITY-AND-EQUITY> 31,980,610
<SALES> 0
<TOTAL-REVENUES> 1,664,547
<CGS> 0
<TOTAL-COSTS> 198,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,598,777
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,598,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,598,777
<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 shwon above for current
assets and current liabilities.
</FN>
</TABLE>
