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
0-21560
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 1998 1997
----------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $2,684,459 and
$2,455,129 $23,331,687 $23,561,017
Net investment in direct financing
leases 6,564,290 6,611,661
Investment in joint ventures 2,535,467 2,567,786
Cash and cash equivalents 1,485,806 1,272,386
Receivables, less allowance for
doubtful accounts of $195 in 1998 28,999 119,575
Prepaid expenses 17,041 13,363
Accrued rental income 1,580,642 1,517,726
Other assets 122,024 122,024
----------- -----------
$35,665,956 $35,785,538
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,901 $ 6,508
Escrowed real estate taxes payable 16,399 19,410
Distributions payable 875,006 875,006
Due to related parties 5,996 6,648
Rents paid in advance and deposits 117,461 68,333
----------- -----------
Total liabilities 1,019,763 975,905
Commitment (Note 2)
Minority interests 500,495 501,401
Partners' capital 34,145,698 34,308,232
----------- -----------
$35,665,956 $35,785,538
=========== ===========
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,
1998 1997 1998 1997
---------- ---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 675,491 $ 675,491 $1,350,982 $1,351,185
Earned income from direct
financing leases 206,345 208,934 413,405 420,751
Contingent rental income 42,996 44,440 62,764 69,083
Interest and other income 85,643 12,001 98,048 27,456
---------- ---------- ---------- ----------
1,010,475 940,866 1,925,199 1,868,475
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 44,999 40,998 74,457 74,858
Professional services 9,241 10,946 14,193 17,405
Management fees to
related parties 9,710 8,249 19,052 18,248
State and other taxes 1,036 2,056 24,370 25,779
Depreciation and
amortization 114,665 114,754 229,330 229,919
---------- ---------- ---------- ----------
179,651 177,003 361,402 366,209
---------- ---------- ---------- ----------
Income Before Minority
Interests in Income of
Consolidated Joint
Ventures and Equity in
Earnings of Unconsoli-
dated Joint Ventures 830,824 763,863 1,563,797 1,502,266
Minority Interests in
Income of Consolidated
Joint Ventures (16,906) (17,396) (33,924) (34,598)
Equity in Earnings of
Unconsolidated Joint
Ventures 57,604 58,359 97,605 105,163
---------- ---------- ---------- ----------
Net Income $ 871,522 $ 804,826 $1,627,478 $1,572,831
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 8,715 $ 8,048 $ 16,275 $ 15,728
Limited partners 862,807 796,778 1,611,203 1,557,103
---------- ---------- ---------- ----------
$ 871,522 $ 804,826 $1,627,478 $1,572,831
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.22 $ 0.20 $ 0.40 $ 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,
1998 1997
---------------- --------
General partners:
Beginning balance $ 176,232 $ 143,281
Net income 16,275 32,951
----------- -----------
192,507 176,232
----------- -----------
Limited partners:
Beginning balance 34,132,000 34,369,896
Net income 1,611,203 3,262,128
Distributions ($0.45 and $0.88
per limited partner unit,
respectively) (1,790,012) (3,500,024)
----------- -----------
33,953,191 34,132,000
----------- -----------
Total partners' capital $34,145,698 $34,308,232
=========== ===========
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,
1998 1997
----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 2,038,262 $ 1,792,914
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint ventures - (1,044,750)
Decrease in restricted cash - 1,044,750
----------- -----------
Net cash provided by
investing activities - -
----------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,790,012) (1,790,012)
Distributions to holders
of minority interests (34,830) (29,095)
----------- -----------
Net cash used in
financing activities (1,824,842) (1,819,107)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 213,420 (26,193)
Cash and Cash Equivalents at
Beginning of Period 1,272,386 1,225,860
----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,485,806 $ 1,199,667
=========== ===========
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, 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 Form 10-K of CNL
Income Fund XI, Ltd. (the "Partnership") for the year ended December
31, 1997.
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.
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. Commitment:
During 1996, the Partnership entered into an agreement with an
unrelated third party to sell the Burger King property in Nashua, New
Hampshire. The general partners believe that the anticipated sales
price will exceed the Partnership's cost attributable to the property;
however, as of July 22, 1998, the sale had not occurred.
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, 1998, the
Partnership owned 39 Properties, including four 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 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 $2,038,262 and
$1,792,914 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 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 June 30, 1998, the Partnership had $1,485,806
invested in such short-term investments, as compared to $1,272,386 at December
31, 1997. The funds remaining at June 30, 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 $1,019,763 at June 30, 1998, from $975,905 at December 31, 1997,
partially as a 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.
During 1996, the Partnership entered into an agreement with an
unrelated third party to sell the Burger King Property in Nashua, New Hampshire.
The general partners believe that the anticipated sales price will exceed the
Partnership's cost attributable to the Property; however, as of July 22, 1998,
the sale had not occurred.
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 $1,790,012 and $1,750,012 for the six
months ended June 30, 1998 and 1997, respectively ($875,006 for each of the
quarters ended June 30, 1998 and 1997). This represents distributions of $0.45
and $0.44 per unit for the six months ended June 30, 1998 and 1997, respectively
($0.22 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 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 ventures, Denver Joint Venture and CNL/Airport Joint
Venture, owned and leased 36 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, Denver Joint Venture and
CNL/Airport Joint Venture earned $1,764,387 and $1,771,936, respectively, in
rental income from operating leases and earned income from direct financing
leases, $881,836 and $884,425 of which was earned during the quarters ended June
30, 1998 and 1997, respectively. In addition, during the six months ended June
30, 1998 and 1997, the Partnership earned $62,764 and $69,083, respectively, in
contingent rental income, $42,996 and $44,440 of which was earned during the
quarters ended June 30, 1998 and 1997, respectively.
In addition, for the six months ended June 30, 1998 and 1997, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements and owned and leased one Property with an affiliate as
tenants-in-common. In connection therewith, during the six months ended June 30,
1998 and 1997, the Partnership earned $97,605 and $105,163, respectively,
attributable to net income earned by unconsolidated joint ventures, $57,604 and
$58,359
7
<PAGE>
Results of Operations - Continued
of which was earned during the quarters ended June 30, 1998 and 1997,
respectively. Net income earned by joint ventures decreased during the six
months ended June 30, 1998, as compared to the six months ended June 30, 1997,
due to Ashland Joint Venture adjusting estimated contingent rental amounts
accrued at December 31, 1997, to actual amounts billed during the six months
ended June 30, 1998.
During the six months ended June 30, 1998 and 1997, the Partnership
earned $98,048 and $27,456, respectively, in interest and other income, $85,643
and $12,001 of which was earned during the quarters ended June 30, 1998 and
1997, respectively. The increase in interest and other income during the quarter
and six months ended June 30, 1998, was primarily attributable to the
Partnership collecting and recognizing $60,000 in other income as a result of
executing an amendment to a purchase and sale agreement with a third party to
extend the closing date for the Burger King Property located in Nashua, New
Hampshire. In accordance with the terms of the amendment, the Partnership was
deemed to have earned the $60,000 upon execution of the amendment to extend the
closing date of this Property.
Operating expenses, including depreciation and amortization expense,
were $361,402 and $366,209 for the six months ended June 30, 1998 and 1997,
respectively, $179,651 and $177,003 of which were incurred during 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 10th day of August, 1998.
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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XI, 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 XI, 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> 1,485,806
<SECURITIES> 0
<RECEIVABLES> 29,194
<ALLOWANCES> 195
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,016,146
<DEPRECIATION> 2,684,459
<TOTAL-ASSETS> 35,665,956
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,145,698
<TOTAL-LIABILITY-AND-EQUITY> 35,665,956
<SALES> 0
<TOTAL-REVENUES> 1,925,199
<CGS> 0
<TOTAL-COSTS> 361,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,627,478
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,627,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,627,478
<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>
