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
Commission file number
0-20017
CNL Income Fund IX, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3004138
- ----------------------------- -------------------
(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 IX, 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 $1,309,158 and
$1,246,287 $14,734,678 $14,797,549
Net investment in direct financing
leases 7,935,300 7,964,985
Investment in joint ventures 5,654,443 5,708,555
Cash and cash equivalents 1,251,484 1,288,618
Receivables, less allowance for
doubtful accounts of $83,845 and
$28,983 81,980 75,256
Prepaid expenses 6,312 3,845
Accrued rental income 1,524,215 1,505,039
----------- -----------
$31,188,412 $31,343,847
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 11,194 $ 4,987
Accrued and escrowed real estate
taxes payable 42,109 61,618
Distributions payable 787,501 822,500
Due to related parties 4,235 1,405
Rents paid in advance and deposits 121,732 93,741
----------- -----------
Total liabilities 966,771 984,251
Partners' capital 30,221,641 30,359,596
----------- -----------
$31,188,412 $31,343,847
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1997 1996
---------- ----------
Revenues:
Rental income from operating leases $ 444,367 $ 470,080
Earned income from direct financing
leases 220,754 230,191
Contingent rental income 12,271 6,271
Interest and other income 12,663 11,313
---------- ----------
690,055 717,855
---------- ----------
Expenses:
General operating and administrative 33,240 40,389
Bad debt expense 21,000 -
Professional services 4,352 9,053
Real estate taxes 14,318 4,953
State and other taxes 10,976 9,336
Depreciation and amortization 62,871 63,371
---------- ----------
146,757 127,102
---------- ----------
Income Before Equity in Earnings of
Joint Ventures 543,298 590,753
Equity in Earnings of Joint Ventures 106,248 105,320
---------- ----------
Net Income $ 649,546 $ 696,073
========== ==========
Allocation of Net Income:
General partners $ 6,495 $ 6,961
Limited partners 643,051 689,112
---------- ----------
$ 649,546 $ 696,073
========== ==========
Net Income Per Limited Partner Unit $ 0.18 $ 0.20
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 3,500,000 3,500,000
========== =========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- -------------
General partners:
Beginning balance $ 163,392 $ 133,789
Net income 6,495 29,603
----------- -----------
169,887 163,392
----------- -----------
Limited partners:
Beginning balance 30,196,204 30,450,512
Net income 643,051 2,930,696
Distributions ($0.23 and $0.91
per limited partner unit,
respectively) (787,501) (3,185,004)
----------- -----------
30,051,754 30,196,204
----------- -----------
Total partners' capital $30,221,641 $30,359,596
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND IX, 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 $ 785,366 $ 744,181
---------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (822,500) (822,500)
---------- ----------
Net cash used in
financing activities (822,500) (822,500)
---------- ----------
Net Decrease in Cash and Cash
Equivalents (37,134) (78,319)
Cash and Cash Equivalents at
Beginning of Quarter 1,288,618 1,117,382
---------- ----------
Cash and Cash Equivalents at End
of Quarter $1,251,484 $1,039,063
=========== ==========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 787,501 $ 787,501
=========== ==========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND IX, 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 Form 10-K of CNL
Income Fund IX, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint
ventures), for at least one of the quarters ended March 31:
1997 1996
-------- --------
Burger King Corporation and
BK Acquisition, Inc. $155,039 $154,423
TPI Restaurants, Inc. 139,000 139,119
Carrols Corporation 110,264 110,872
Flagstar Enterprises, Inc. 106,233 108,039
Golden Corral Corporation 83,631 82,244
5
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
2. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures), for at least one of the quarters ended March 31:
1997 1996
-------- --------
Burger King $316,343 $319,201
Shoney's 202,275 224,070
Hardees 106,233 108,039
Golden Corral 83,631 82,244
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 or
restaurant chains 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 IX, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on April 16, 1990, 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
selected 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 40 Properties, including interests in 13
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 $785,366 and
$744,181 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 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 $1,251,484
invested in such short-term investments as compared to $1,288,618 at March 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 $35,000 in January 1997 of cumulative excess operating
reserves. The funds remaining at March 31, 1997, 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,
decreased to $966,771 at March 31, 1997, from $984,251 at March 31, 1996,
primarily as a result of the Partnership's accruing a special distribution
payable to the limited partners of $35,000 at December 31, 1996, as described
above, which was paid in January 1997. The decrease in total liabilities was
partially offset by an increase in rents paid in advance during the quarter
ended March 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 primarily on cash from operations, the Partnership declared
distributions to the limited partners of $787,501 for each of the quarters ended
March 31, 1997 and 1996. This represents distributions for each applicable
quarter of $0.23 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 quarters ended March 31, 1997 and 1996, the Partnership
owned and leased 27 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 earned $665,121 and $700,271,
respectively, in rental income from operating leases and earned income from
direct financing leases from these Properties. The decrease in rental and earned
income was primarily attributable to the Partnership's establishing an allowance
for doubtful accounts of $21,000 relating to the Property in Copley Township,
Ohio, during the quarter ended March 31, 1997. During April 1997, the operator
vacated the Property and ceased operations; however, the Partnership will
continue to pursue the collection of past due amounts and will recognize such
amounts as income if collected. The Partnership is currently seeking either a
replacement tenant or purchaser for this Property.
During the quarter ended March 31, 1997 and 1996, the Partnership also
earned $12,271 and $6,271, respectively, in contingent rental income. The
increase in contingent rental income is primarily attributable to a change in
the contingent rent formula in accordance with the terms of the leases, for
certain restaurant Properties requiring the payment of contingent rental income.
8
<PAGE>
Results of Operations - Continued
For the quarters ended March 31, 1997 and 1996, the Partnership also
owned and leased 13 Properties indirectly through joint venture arrangements. In
connection therewith, during the quarters ended March 31, 1997 and 1996, the
Partnership earned $106,248 and $105,320, respectively, attributable to net
income earned by these joint ventures.
During the quarter ended March 31, 1997, five of the Partnership's
lessees (or group of affiliated lessees), (i) Carrols Corporation, (ii) TPI
Restaurants, Inc., (iii) Flagstar Enterprises, Inc., (iv) Golden Corral
Corporation and (v) Burger King Corporation and BK Acquisition, Inc. (which are
affiliated entities under common control) (hereinafter referred to as Burger
King Corp.), each contributed more than ten percent of the Partnership's total
rental income (including the Partnership's share of rental income from 13
Properties owned by joint ventures). As of March 31, 1997, Carrols Corporation
was the lessee under leases relating to four restaurants, TPI Restaurants, Inc.
was the lessee under leases relating to four restaurants, Flagstar Enterprises,
Inc. was the lessee under leases relating to six restaurants, Golden Corral
Corporation was the lessee under leases relating to two restaurants and Burger
King Corp. was the lessee under leases relating to the 13 restaurants owned by
joint ventures. It is anticipated that, based on the minimum rental payments
required by the leases, these five lessees or groups of affiliated lessees each
will continue to contribute more than ten percent of the Partnership's total
rental income during the remainder of 1997 and subsequent years. In addition,
during the quarter ended March 31, 1997, four restaurant chains, Burger King,
Hardee's, Golden Corral and Shoney's, each accounted for more than ten percent
of the Partnership's total rental income (including the Partnership's share of
the rental income from thirteen Properties owned by joint ventures). During the
remainder of 1997 and subsequent years, it is anticipated that these four
restaurant chains each will continue to account for more than ten percent of the
total rental income to which the Partnership is entitled under the terms of its
leases. Any failure of these lessees or restaurant chains could materially
affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $146,757 and $127,102 for the quarters ended March 31, 1997 and 1996,
respectively. The increase in operating expenses during the quarter ended March
31, 1997, as compared to the quarter ended March 31, 1996, is primarily
attributable to the fact that the Partnership recorded bad debt expense of
$21,000 relating to the Property in Copley Township, Ohio, due to the fact that
the operator vacated the Property and ceased operations, as described above. The
Partnership will continue to pursue the collection of such amounts and will
recognize such amounts as income if collected. In addition, the Partnership
incurred real estate taxes relating to this Property of approximately $14,300
and
9
<PAGE>
Results of Operations - Continued
$5,000 for the quarters ended March 31, 1997 and 1996, respectively. The
increase in operating expenses during the quarter ended March 31, 1997, as
compared to the quarter ended March 31, 1996, is partially offset by 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.
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 March 31, 1997.
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 9th day of May, 1997.
CNL INCOME FUND IX, 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 IX, 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 IX, 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> 1,251,484
<SECURITIES> 0
<RECEIVABLES> 165,825
<ALLOWANCES> 83,845
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 16,043,836
<DEPRECIATION> 1,309,158
<TOTAL-ASSETS> 31,188,412
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,221,641
<TOTAL-LIABILITY-AND-EQUITY> 31,188,412
<SALES> 0
<TOTAL-REVENUES> 690,055
<CGS> 0
<TOTAL-COSTS> 125,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 649,546
<INCOME-TAX> 0
<INCOME-CONTINUING> 649,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 649,546
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund IX, Ltd. has
an unclassified balance sheet; therefore no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
