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
0-20017
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
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 IX, 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 $1,560,640 and
$1,497,770 $14,100,241 $14,163,111
Net investment in direct financing
leases 7,450,903 7,482,757
Investment in joint ventures 6,560,475 6,619,364
Cash and cash equivalents 1,266,941 1,250,388
Receivables, less allowance for
doubtful accounts of $127,430 and
$108,316 102,302 96,134
Prepaid expenses 7,338 3,924
Lease costs, less accumulated
amortization of $452 and $77 14,548 14,923
Accrued rental income 1,484,062 1,465,820
----------- -----------
$30,986,810 $31,096,421
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,187 $ 4,490
Accrued and escrowed real estate
taxes payable 33,182 45,591
Distributions payable 857,501 787,501
Due to related parties 6,619 4,619
Rents paid in advance and deposits 83,379 106,996
----------- -----------
Total liabilities 987,868 949,197
Partners' capital 29,998,942 30,147,224
----------- -----------
$30,986,810 $31,096,421
=========== ===========
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,
1998 1997
---------- ----------
Revenues:
Rental income from operating leases $ 445,135 $ 444,367
Earned income from direct financing
leases 210,157 220,754
Contingent rental income 31,602 12,271
Interest and other income 11,621 12,663
---------- ----------
698,515 690,055
---------- ----------
Expenses:
General operating and administrative 33,378 33,240
Bad debt expense - 21,000
Professional services 6,336 4,352
Real estate taxes - 14,318
State and other taxes 14,145 10,976
Depreciation and amortization 63,245 62,871
---------- ----------
117,104 146,757
---------- ----------
Income Before Equity in Earnings of
Joint Ventures 581,411 543,298
Equity in Earnings of Joint Ventures 127,808 106,248
---------- ----------
Net Income $ 709,219 $ 649,546
========== ==========
Allocation of Net Income:
General partners $ 7,092 $ 6,495
Limited partners 702,127 643,051
---------- ----------
$ 709,219 $ 649,546
========== ==========
Net Income Per Limited Partner Unit $ 0.20 $ 0.18
========== ==========
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,
1998 1997
------------- --------
General partners:
Beginning balance $ 190,772 $ 163,392
Net income 7,092 27,380
----------- -----------
197,864 190,772
----------- -----------
Limited partners:
Beginning balance 29,956,452 30,196,204
Net income 702,127 2,910,252
Distributions ($0.25 and $0.90
per limited partner unit,
respectively) (857,501) (3,150,004)
----------- -----------
29,801,078 29,956,452
----------- -----------
Total partners' capital $29,998,942 $30,147,224
=========== ===========
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,
1998 1997
---------- ----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 804,054 $ 785,366
---------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (787,501) (822,500)
---------- ----------
Net cash used in
financing activities (787,501) (822,500)
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 16,553 (37,134)
Cash and Cash Equivalents at
Beginning of Quarter 1,250,388 1,288,618
---------- ----------
Cash and Cash Equivalents at End
of Quarter $1,266,941 $1,251,484
========== ==========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 857,501 $ 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, 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 Form 10-K of CNL
Income Fund IX, Ltd. (the "Partnership") for the year ended December
31, 1997.
5
<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, 1998, the Partnership owned 40 Properties, including interests in 13
Properties owned by joint ventures in which the Partnership is a co-venturer and
one Property owned with an affiliate as tenants in common.
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 $804,054 and
$785,366 for the quarters ended March 31, 1998 and 1997, respectively. The
increase in cash from operations for the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997, is primarily a result of changes
in income and expenses as described in "Results of Operations" 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, 1998, the Partnership had $1,266,941
invested in such short-term investments, as compared to $1,250,388 at December
31, 1997. The funds remaining at March 31, 1998, 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,
increased to $987,868 at March 31, 1998, from $949,197 at December 31, 1997,
primarily as a result of the Partnership's accruing a special distribution of
accumulated, excess operating reserves payable to the limited partners of
$70,000 at March 31, 1998. The increase is partially offset by a decrease 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.
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 $857,501 and $787,501 for the quarters
ended March 31, 1998 and 1997, respectively. This represents distributions of
$0.25 and $0.23 per
6
<PAGE>
Liquidity and Capital Resources - Continued
unit. 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 quarter ended March 31, 1997, the Partnership owned and
leased 28 wholly owned Properties (including one Property in Alpharetta,
Georgia, which was sold in June 1997) and during the quarter ended March 31,
1998, 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, 1998 and 1997, the Partnership earned $655,292 and
$665,121, 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 partially attributable to the Partnership establishing an
allowance for doubtful accounts of approximately $14,600 relating to the
Property in Grand Prairie, Texas, during the quarter ended March 31, 1998, due
to continuing financial difficulties the tenant is experiencing. No such
allowance was established during the quarter ended March 31, 1997. The
Partnership intends to pursue collection of past due amounts from this tenant
and will recognize such amounts as income if collected. In addition, rental and
earned income decreased approximately $24,700 during the quarter ended March 31,
1998, as a result of the sale of the Property in Alpharetta, Georgia, in June
1997. The Partnership reinvested the net sales proceeds in an additional
Property as tenants-in-common with affiliates of the general partners, in July
1997, resulting in an increase in equity in earnings of joint ventures as
described below.
The decrease in rental and earned income was partially offset by the
fact that during the quarter ended March 31, 1997, the Partnership established
allowances for doubtful accounts of approximately $10,600 and $21,000, relating
to the Properties in Rochester, New York and Copley Township, Ohio,
respectively, due to
7
<PAGE>
Results of Operations - Continued
financial difficulties the tenants were experiencing. No such allowances were
established for these Properties during the quarter ended March 31, 1998. The
Partnership intends to continue to pursue collection of past due amounts from
the tenant in the Rochester, New York Property, and will recognize such amounts
as income if collected.
In April 1997, the tenant of the Property in Copley Township, Ohio, ceased
operations of the Property; therefore, the Partnership ceased recording rental
income and wrote off the allowance for doubtful accounts. The Partnership
re-leased this Property as a Shells Seafood restaurant in September 1997.
During the quarters ended March 31, 1998 and 1997, the Partnership also
earned $31,602 and $12,271, respectively, in contingent rental income. The
increase in contingent rental income is primarily attributable to increased
gross sales of certain restaurant Properties requiring the payment of contingent
rental income.
For the quarters ended March 31, 1998 and 1997, the Partnership also
owned and leased 13 Properties indirectly through joint venture arrangements and
during the quarter ended March 31, 1998, the Partnership owned and leased one
Property with an affiliate as tenants-in-common. In connection therewith, during
the quarters ended March 31, 1998 and 1997, the Partnership earned $127,808 and
$106,248, respectively, attributable to net income earned by these joint
ventures. The increase in net income earned by joint ventures for the quarter
ended March 31, 1998 is primarily due to the fact that in July 1997, the
Partnership reinvested the net sales proceeds it received from the sale of the
Property in Alpharetta, Georgia, in an IHOP Property located in Englewood,
Colorado, as tenants-in-common, with an affiliate of the general partners.
Operating expenses, including depreciation and amortization expense,
were $117,104 and $146,757 for the quarters ended March 31, 1998 and 1997,
respectively. The decrease in operating expenses during the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is partially
attributable to the fact that the Partnership recorded bad debt expense of
$21,000 relating to the Property in Copley Township, Ohio, during the quarter
ended March 31, 1997, due to the fact that the former tenant ceased operating
the Property in April 1997. The general partners ceased collection efforts
relating to these past due amounts. In addition, the decrease in operating
expenses during the quarter ended March 31, 1998, was due to the fact that the
Partnership recorded past due real estate taxes relating to the Property in
Copley Township, Ohio, of approximately $14,300 during the quarter ended March
31, 1997. No such expenses were recorded during the quarter ended March 31,
1998, due to the fact that the Property was leased to a new tenant in September
1997.
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 March 31, 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 8th day of May, 1998.
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, 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 IX, 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> 1,266,941
<SECURITIES> 0
<RECEIVABLES> 229,732
<ALLOWANCES> 127,430
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,660,881
<DEPRECIATION> 1,560,640
<TOTAL-ASSETS> 30,986,810
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,998,942
<TOTAL-LIABILITY-AND-EQUITY> 30,986,810
<SALES> 0
<TOTAL-REVENUES> 698,515
<CGS> 0
<TOTAL-COSTS> 117,104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 709,219
<INCOME-TAX> 0
<INCOME-CONTINUING> 709,219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 709,219
<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>
