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
0-20017
CNL Income Fund IX, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3004138
(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 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-12
Part II
Other Information 13
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1997 1996
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,372,029 and
$1,246,287 $14,288,852 $14,797,549
Net investment in direct financing
leases 7,543,839 7,964,985
Investment in joint ventures 5,621,863 5,708,555
Cash and cash equivalents 1,237,116 1,288,618
Restricted cash 1,053,571 -
Receivables, less allowance for
doubtful accounts of $71,236 and
$28,983 85,250 75,256
Prepaid expenses 9,847 3,845
Accrued rental income 1,431,489 1,505,039
----------- -----------
$31,271,827 $31,343,847
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,883 $ 4,987
Accrued and escrowed real estate
taxes payable 43,733 61,618
Distributions payable 787,501 822,500
Due to related parties 3,272 1,405
Rents paid in advance and deposits 116,120 93,741
----------- -----------
Total liabilities 959,509 984,251
Partners' capital 30,312,318 30,359,596
----------- -----------
$31,271,827 $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
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $ 435,520 $ 455,069 $ 879,887 $ 925,149
Earned income from direct
financing leases 202,357 229,607 423,111 459,799
Contingent rental income 17,556 14,227 29,827 20,498
Interest and other income 16,930 21,208 29,593 32,520
---------- ---------- ---------- ----------
672,363 720,111 1,362,418 1,437,966
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 38,007 38,868 71,247 79,257
Bad debt expense - - 21,000 -
Professional services 6,779 4,114 11,131 13,167
Real estate taxes 4,810 4,952 19,128 9,905
State and other taxes 151 265 11,127 9,601
Depreciation and
amortization 62,871 62,927 125,742 126,298
--------- ---------- ---------- ----------
112,618 111,126 259,375 238,228
--------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures
and Gain on Sale of Land
and Building 559,745 608,985 1,103,043 1,199,738
Equity in Earnings of Joint
Ventures 118,790 116,327 225,038 221,647
Gain on Sale of Land and
Building 199,643 - 199,643 -
--------- ---------- ---------- ---------
Net Income $ 878,178 $ 725,312 $1,527,724 $1,421,385
========= ========== ========== ==========
Allocation of Net Income:
General partners $ 6,786 $ 7,253 $ 13,281 $ 14,214
Limited partners 871,392 718,059 1,514,443 1,407,171
--------- ---------- ---------- ----------
$ 878,178 $ 725,312 $1,527,724 $1,421,385
========= ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.25 $ 0.21 $ 0.43 $ 0.40
========= ========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 3,500,000 3,500,000 3,500,000 3,500,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- ------------
General partners:
Beginning balance $ 163,392 $ 133,789
Net income 13,281 29,603
----------- -----------
176,673 163,392
----------- -----------
Limited partners:
Beginning balance 30,196,204 30,450,512
Net income 1,514,443 2,930,696
Distributions ($0.45 and $0.91
per limited partner unit,
respectively) (1,575,002) (3,185,004)
----------- -----------
30,135,645 30,196,204
----------- -----------
Total partners' capital $30,312,318 $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
Six Months Ended
June 30,
1997 1996
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,558,499 $ 1,677,530
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building 1,053,571 -
Increase in restricted cash (1,053,571) -
----------- ----------
Net cash used in investing
activities - -
----------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,610,001) (1,610,001)
----------- -----------
Net cash used in
financing activities (1,610,001) (1,610,001)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (51,502) 67,529
Cash and Cash Equivalents at
Beginning of Period 1,288,618 1,117,382
----------- -----------
Cash and Cash Equivalents at End
of Period $ 1,237,116 $ 1,184,911
=========== ===========
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 IX, 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 Form 10-K of CNL
Income Fund IX, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Land and Buildings on Operating Leases:
In June 1997, the Partnership sold its property in Alpharetta, Georgia,
and received net sales proceeds of $1,053,571, resulting in a gain of
$199,643 for financial reporting purposes. This property was originally
acquired by the Partnership in September 1991 and had a cost of
approximately $711,200, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $342,400 in excess of its original purchase price (See
Note 5).
3. Restricted Cash:
As of June 30, 1997, the net sales proceeds of $1,053,571 from the sale
of the property in Alpharetta, Georgia, were being held in an
interest-bearing escrow account pending the release of funds by the
escrow agent to acquire an additional property on behalf of the
Partnership.
5
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
4. 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 June 30:
1997 1996
-------- --------
Burger King Corporation and
BK Acquisition, Inc. $312,966 $308,847
TPI Restaurants, Inc. 278,200 278,369
Carrols Corporation 220,364 220,589
Flagstar Enterprises, Inc. 216,380 218,378
Golden Corral Corporation 165,875 164,488
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 June 30:
1997 1996
-------- --------
Burger King $635,128 $641,341
Shoney's 404,567 434,110
Hardees 216,380 218,378
Golden Corral 165,875 164,488
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>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
5. Subsequent Event:
In July 1997, the Partnership reinvested the net sales proceeds from
the sale in June 1997, of the property in Alpharetta, Georgia, in an
IHOP property in Englewood, Colorado, as tenants-in-common with an
affiliate of the general partners. In connection therewith, the
Partnership and its affiliate entered into an agreement whereby each
co-venturer will share in the profits and losses of the property in
proportion to each co-venturer's interest. The Partnership owns an
approximate 67 percent interest in the property.
7
<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 June 30,
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 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 $1,558,499 and
$1,677,530 for the six months ended June 30, 1997 and 1996, respectively. The
decrease in cash from operations for the six months ended June 30, 1997, as
compared to the six months ended June 30, 1996, is primarily a result of changes
in the Partnership's working capital.
Other sources and uses of capital included the following during the six
months ended June 30, 1997.
In June 1997, the Partnership sold its Property in Alpharetta, Georgia,
and received net sales proceeds of $1,053,571, resulting in a gain for financial
reporting purposes of $199,643. This Property was originally acquired by the
Partnership in September 1991 and had a cost of approximately $711,200,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Property for approximately $342,400 in excess of its
original purchase price. As of June 30, 1997, the net sales proceeds were being
held in an interest-bearing escrow account. In July 1997, the Partnership
reinvested these net sales proceeds in an IHOP Property in Englewood, Colorado,
as tenants-in-common with an affiliate of the general partners. In connection
therewith, the Partnership and its affiliate entered into an agreement whereby
each co-venturer will share in the profits and losses of the Property in
proportion to each co-venturer's interest. The Partnership owns an approximate
67 percent interest in the Property. The general partners believe that the
transaction, or a portion thereof, relating to the sale of the Property in
Alpharetta, Georgia, and the reinvestment of the proceeds in an IHOP Property in
Englewood, Colorado, will be structured to qualify as a like-kind exchange
transaction for federal income tax purposes.
8
<PAGE>
Liquidity and Capital Resources - Continued
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 $1,237,116 invested in such short-term
investments, as compared to $1,288,618 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 $35,000 in January 1997 of cumulative excess operating reserves. The
funds remaining at June 30, 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 $959,509 at June 30, 1997, from $984,251 at December 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 general partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $1,575,002 for each of the six months
ended June 30, 1997 and 1996 ($787,501 for each of the quarters ended June 30,
1997 and 1996). This represents distributions for each applicable six months of
$0.45 per unit ($0.23 per unit for each of the quarters ended June 30, 1997 and
1996). 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.
9
<PAGE>
Results of Operations
During the six months ended June 30, 1997 and 1996, the Partnership
owned and leased 28 wholly owned Properties (including one Property in
Alpharetta, Georgia, which was sold in June 1997) 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 earned $1,302,998 and $1,384,948,
respectively, in rental income from operating leases and earned income from
direct financing leases from these Properties, $637,877 and $684,676 of which
was earned during the quarters ended June 30, 1997 and 1996, respectively.
Rental and earned income decreased by approximately $7,000 and $28,000 during
the quarter and six months ended June 30, 1997 due to the fact that during April
1997, the operator of the Property in Copley Township, Ohio, ceased operations
of the Property and the Partnership ceased recording rental income and wrote-off
the allowance for doubtful accounts. The Partnership is currently seeking either
a replacement tenant or purchaser for this Property.
Rental and earned income also decreased during the quarter and six
months ended June 30, 1997, as compared to the quarter and six months ended June
30, 1996, due to the fact that the Partnership established an allowance for
doubtful accounts of approximately $35,200 and $45,900 during the quarter and
six months ended June 30, 1997, respectively, relating to the Perkins Properties
in Williamsville and Rochester, New York, which are leased by the same tenant,
due to financial difficulties the tenant is experiencing. No such allowance was
established during the quarter and six months ended June 30, 1996. As of July
31, 1997, the Partnership was negotiating an agreement with the tenant of these
Properties for the collection of past due amounts and will recognize such
amounts as income if collected.
During the six months ended June 30, 1997 and 1996, the Partnership
also earned $29,827 and $20,498, respectively, in contingent rental income,
$17,556 and $14,227 of which was earned during the quarters ended June 30, 1997
and 1996, respectively. 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.
For the six months ended June 30, 1997 and 1996, the Partnership also
owned and leased 13 Properties indirectly through joint venture arrangements. In
connection therewith, during the six months ended June 30, 1997 and 1996, the
Partnership earned $225,038 and $221,647, respectively, attributable to net
income earned by these joint ventures, $118,790 and $116,327 of which was earned
during the quarters ended June 30, 1997 and 1996, respectively.
10
<PAGE>
Results of Operations - Continued
During the six months ended June 30, 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 June 30, 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 six months ended June 30, 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 $259,375 and $238,228 for the six months ended June 30, 1997 and 1996,
respectively, of which $112,618 and $111,126 were incurred for the quarters
ended June 30, 1997 and 1996, respectively. The increase in operating expenses
during the six months ended June 30, 1997, as compared to the six months ended
June 30, 1996, is partially 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 former tenant ceased operating the
Property in April 1997, the general partners believe collection of this amount
is doubtful. In addition, the Partnership incurred real estate taxes relating to
this Property of approximately $19,000 and $10,000 for the six months ended June
30, 1997 and 1996, respectively. The increase in operating expenses during the
six months ended June 30, 1997, as compared to the six months ended June 30,
1996, is partially offset by a decrease in accounting and administrative
expenses associated with operating the Partnership and its Properties.
11
<PAGE>
Results of Operations - Continued
As a result of the sale of the Property in Alpharetta, Georgia, as
described above in "Liquidity and Capital Resources", the Partnership recognized
a gain for financial reporting purposes of $199,643 during the six months ended
June 30, 1997. No Properties were sold during the six months ended June 30,
1996.
12
<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.
13
<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 6th day of August, 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 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 IX, 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> 2,290,687
<SECURITIES> 0
<RECEIVABLES> 156,486
<ALLOWANCES> 71,236
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,660,881
<DEPRECIATION> 1,372,029
<TOTAL-ASSETS> 31,271,827
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,312,318
<TOTAL-LIABILITY-AND-EQUITY> 31,271,827
<SALES> 0
<TOTAL-REVENUES> 1,362,418
<CGS> 0
<TOTAL-COSTS> 238,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,527,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,527,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,527,724
<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>
