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, 1996
-------------------------
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
0-21560
CNL Income Fund XI, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3078854
(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
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 XI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,844,412 and
$1,604,799 $25,111,193 $25,350,806
Net investment in direct financing
leases 6,718,505 6,748,733
Investment in joint ventures 1,550,325 1,567,594
Cash and cash equivalents 1,216,347 1,222,888
Receivables, less allowance for
doubtful accounts of $17,085 and
$22,860 23,830 121,473
Prepaid expenses 16,770 13,378
Organization costs, less
accumulated amortization of
$8,411 and $7,411 1,589 2,589
Accrued rental income 1,085,539 937,198
Other assets 122,024 122,024
----------- -----------
$35,846,122 $36,086,683
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 899 $ 3,472
Escrowed real estate taxes payable 17,175 16,023
Distributions payable 875,006 915,006
Due to related parties 4,530 6,507
Rents paid in advance and deposits 64,821 80,807
----------- -----------
Total liabilities 962,431 1,021,815
Minority interests 482,970 476,372
Partners' capital 34,400,721 34,588,496
----------- -----------
$35,846,122 $36,086,683
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 698,136 $ 693,869 $ 1,390,982 $ 1,387,737
Earned income from direct
financing leases 210,962 212,702 422,623 425,807
Contingent rental income 51,400 39,896 74,378 57,571
Interest and other income 24,324 17,221 41,548 32,752
--------- --------- ---------- ----------
984,822 963,688 1,929,531 1,903,867
--------- --------- ---------- ----------
Expenses:
General operating and
administrative 47,111 33,955 89,484 59,980
Professional services 3,897 5,466 15,201 11,541
Management fees to related
parties 9,360 9,159 18,184 18,094
State and other taxes 6,367 15,888 25,973 38,996
Depreciation and amorti-
zation 120,307 120,307 240,613 240,613
--------- --------- ---------- ----------
187,042 184,775 389,455 369,224
--------- --------- ---------- ----------
Income Before Minority
Interests in Income of
Consolidated Joint
Ventures and Equity in
Earnings of Unconsoli-
dated Joint Ventures 797,780 778,913 1,540,076 1,534,643
Minority Interests in Income
of Consolidated Joint
Ventures (17,271) (17,267) (34,437) (34,591)
Equity in Earnings of
Unconsolidated Joint
Ventures 30,524 30,787 56,598 56,876
--------- --------- ---------- ----------
Net Income $ 811,033 $ 792,433 $ 1,562,237 $ 1,556,928
========= ========= ========== ==========
Allocation of Net Income:
General partners $ 8,110 $ 7,924 $ 15,622 $ 15,569
Limited partners 802,923 784,509 1,546,615 1,541,359
--------- -------- ---------- ----------
$ 811,033 $ 792,433 $ 1,562,237 $ 1,556,928
========= ========= ========== ==========
Net Income Per Limited
Partner Unit $ .20 $ 0.20 $ .39 $ 0.39
========= ========= ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
========= ========= ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---------------- ------------
General partners:
Beginning balance $ 109,925 $ 77,904
Net income 15,622 32,021
----------- -----------
125,547 109,925
----------- -----------
Limited partners:
Beginning balance 34,478,571 34,848,439
Net income 1,546,615 3,170,155
Distributions ($0.44 and $0.89
per limited partner unit,
respectively) (1,750,012) (3,540,023)
----------- -----------
34,275,174 34,478,571
----------- -----------
Total partners' capital $34,400,721 $34,588,496
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1996 1995
----------- -------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 1,811,310 $ 1,863,225
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,790,012) (1,750,012)
Distributions to holders of
minority interests (27,839) (24,300)
----------- -----------
Net cash used in
financing activities (1,817,851) (1,774,312)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (6,541) 88,913
Cash and Cash Equivalents at
Beginning of Period 1,222,888 1,124,953
----------- -----------
Cash and Cash Equivalents at End
of Period $ 1,216,347 $ 1,213,866
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of period $ 875,006 $ 875,006
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1996 and 1995
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, 1996, may not be indicative
of the results that may be expected for the year ending December 31,
1996. Amounts as of December 31, 1995, 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 XI, Ltd. (the "Partnership") for the year ended December
31, 1995.
The Partnership accounts for its 85 percent interest in Denver Joint
Venture and its 77.33% interest in CNL/Airport Joint Venture using the
consolidation method. Minority interests represent the minority joint
venture partners' proportionate share of equity in the Partnership's
consolidated joint ventures. All significant intercompany accounts and
transactions have been eliminated.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 20, 1991, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as properties 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, 1996, the
Partnership owned 39 Properties, including interests in four 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, 1996 and 1995, 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 $1,811,310 and
$1,863,225 for the six months ended June 30, 1996 and 1995, respectively. The
decrease in cash from operations for the six months ended June 30, 1996, 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, 1996, the Partnership had $1,216,347
invested in such short-term investments as compared to $1,222,888 at December
31, 1995. The funds remaining at June 30, 1996, 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 $962,431 at June 30, 1996, from $1,021,815 at December 31, 1995,
primarily as the result of the Partnership's accruing a special distribution
payable to the limited partners of $40,000 at December 31, 1995, which was paid
in January 1996. The general partners believe that the Partnership has
sufficient cash on hand to meet its current working capital needs.
6
<PAGE>
Liquidity and Capital Resources - Continued
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $1,750,012 for each of the six months
ended June 30, 1996 and 1995 ($875,006 for each of the quarters ended June 30,
1996 and 1995). This represents distributions of $.44 per unit for each of the
six months ended June 30, 1996 and 1995 ($.22 per unit for each of the quarters
ended June 30, 1996 and 1995). No distributions were made to the general
partners for the quarters and six months ended June 30, 1996 and 1995. No
amounts distributed or to be distributed to the limited partners for the six
months ended June 30, 1996 and 1995, 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 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, 1996 and 1995, the Partnership and
its consolidated joint ventures, Denver Joint Venture and CNL/Airport Joint
Venture, owned and leased 37 wholly owned Properties to operators of fast-food
and family-style restaurant chains. In connection therewith, during the six
months ended June 30, 1996 and 1995, the Partnership, Denver Joint Venture and
CNL/Airport Joint Venture earned $1,813,605 and $1,813,544, respectively, in
rental income from operating leases and earned income from direct financing
leases, $909,098 and $906,571 of which was earned during the quarters ended June
30, 1996 and 1995, respectively.
In addition, during the six months ended June 30, 1996 and 1995, the
Partnership earned $74,378 and $57,571, respectively, in contingent rental
income, $51,400 and $39,896 of which was earned during the quarters ended June
30, 1996 and 1995, respectively. The increase in contingent rental income during
the quarter and six months ended June 30, 1996, as compared to the quarter and
six months ended June 30, 1995, is primarily the result of increases in gross
sales relating to certain restaurant Properties.
7
<PAGE>
Results of Operations - Continued
In addition, for the six months ended June 30, 1996 and 1995, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements. In connection therewith, during the six months ended June
30, 1996 and 1995, the Partnership earned $56,598 and $56,876, respectively,
attributable to net income earned by unconsolidated joint ventures, $30,524 and
$30,787 of which was earned during the quarters ended June 30, 1996 and 1995,
respectively.
Operating expenses, including depreciation and amortization expense,
were $389,455 and $369,224 for the six months ended June 30, 1996 and 1995,
respectively, of which $187,042 and $184,775 were incurred for the quarters
ended June 30, 1996 and 1995, respectively. The increase in operating expenses
during the six months ended June 30, 1996, as compared to the six months ended
June 30, 1995, is primarily the result of an increase in (i) accounting and
administrative expenses associated with operating the Partnership and its
Properties, (ii) professional services as a result of appraisal updates obtained
to prepare an annual statement of unit valuation to qualified plans in
accordance with the Partnership's partnership agreement and (iii) insurance
expense as a result of the general partners' obtaining contingent liability and
property coverage for the Partnership, effective May 1995. This insurance policy
is intended to reduce the Partnership's exposure in the unlikely event a
tenant's insurance policy lapses or is insufficient to cover a claim relating to
the Property.
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, 1996.
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 12th day of August, 1996.
CNL INCOME FUND XI, 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)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XI, Ltd. at Jun 30, 1996, and its
statement of income for the six months then ended and is qualified in its
entirety by reference to the Form 10-Q of CNL Income Fund XI, Ltd. for the
six months ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,216,347
<SECURITIES> 0
<RECEIVABLES> 40,915
<ALLOWANCES> 17,085
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,955,605
<DEPRECIATION> 1,844,412
<TOTAL-ASSETS> 35,846,122
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 34,400,721
<TOTAL-LIABILITY-AND-EQUITY> 35,846,122
<SALES> 0
<TOTAL-REVENUES> 1,929,531
<CGS> 0
<TOTAL-COSTS> 389,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,562,237
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,562,237
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,562,237
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XI, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
