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
0-21558
CNL Income Fund XII, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3078856
(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 XII, 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 $985,800 and
$939,415 $21,240,367 $22,308,784
Net investment in direct financing
leases 13,849,518 14,652,991
Investment in joint ventures 2,496,330 841,822
Cash and cash equivalents 1,677,520 1,716,203
Receivables, less allowance for
doubtful accounts of $29,088 and
$39,791 221,894 259,320
Prepaid expenses 12,817 1,924
Organization costs, less accumu-
lated amortization of $7,465
and $6,465 2,535 3,535
Accrued rental income 1,703,804 1,444,553
----------- -----------
$41,204,785 $41,229,132
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,029 $ 7,655
Accrued and escrowed real
estate taxes payable 21,166 7,609
Distributions payable 956,252 1,001,252
Due to related parties 5,306 7,250
Rents paid in advance 3,043 33,295
----------- -----------
Total liabilities 991,796 1,057,061
Partners' capital 40,212,989 40,172,071
----------- -----------
$41,204,785 $41,229,132
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XII, 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 $ 611,972 $ 651,384 $1,260,485 $1,302,460
Earned income from
direct financing
leases 425,691 435,636 859,185 872,090
Contingent rental
income 13,409 21,998 22,218 32,931
Interest and other
income 54,218 23,077 78,523 45,092
---------- ---------- ---------- ----------
1,105,290 1,132,095 2,220,411 2,252,573
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 47,250 34,723 90,214 60,192
Professional services 10,305 6,239 15,932 13,101
Management fees to
related parties 10,033 10,274 20,087 20,437
Real estate taxes 5,806 - 5,806 -
State and other taxes 514 516 18,472 18,679
Depreciation and
amortization 74,471 81,949 156,420 163,898
---------- ---------- ---------- ----------
148,379 133,701 306,931 276,307
---------- ---------- ---------- ----------
Income Before Equity
in Earnings of Joint
Ventures and Loss on
Sale of Land and
Building 956,911 998,394 1,913,480 1,976,266
Equity in Earnings of
Joint Ventures 35,287 20,477 55,297 40,667
Loss on Sale of Land
and Building (15,355) - (15,355) -
---------- ---------- ---------- ---------
Net Income $ 976,843 $1,018,871 $1,953,422 $2,016,933
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 9,873 $ 10,189 $ 19,639 $ 20,169
Limited partners 966,970 1,008,682 1,933,783 1,996,764
---------- ---------- ---------- ----------
$ 986,843 $1,018,871 $1,953,422 $2,016,933
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.21 $ 0.22 $ 0.43 $ 0.44
========== ========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 4,500,000 4,500,000 4,500,000 4,500,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---------------- ------------
<S> <C>
General partners:
Beginning balance $ 113,356 $ 73,212
Net income 19,639 40,144
------------- -----------
132,995 113,356
------------- -----------
Limited partners:
Beginning balance 40,058,715 39,954,494
Net income 1,933,783 3,974,228
Distributions ($0.43 and $0.86
per limited partner unit,
respectively (1,912,504) (3,870,007)
------------- -----------
40,079,994 40,058,715
------------- -----------
Total partners' capital $ 40,212,989 $40,172,071
============= ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
----------- -----------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,930,975 $ 1,927,261
----------- -----------
Cash Flows From Investing Activities:
Proceeds from sale of land
and building 1,640,000 -
Investment in joint venture (1,655,928) -
Collections on loan to tenant
of joint venture 3,774 3,417
----------- -----------
Net cash provided by (used in)
investing activities (12,154) 3,417
----------- -----------
Cash Flows From Financing
Activities:
Distributions to limited partners (1,957,504) (1,912,504)
----------- -----------
Net cash used in financing
activities (1,957,504) (1,912,504)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (38,683) 18,174
Cash and Cash Equivalents at Beginning of
Period 1,716,203 1,714,840
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,677,520 $ 1,733,014
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Net investment in direct financing
lease reclassified to land and
building on operating lease as a
result of lease termination $ 742,358 $ -
=========== ===========
Distributions declared and unpaid at
end of period $ 956,252 $ 956,252
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XII, 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 XII, Ltd. (the "Partnership") for the year ended December
31, 1995.
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.
2. Land and Buildings:
In April 1996, the Partnership sold its property in Houston, Texas, to
an unrelated third party for $1,640,000. As a result of this
transaction, the Partnership recognized a loss of $15,355 for financial
reporting purposes primarily due to acquisition fees and miscellaneous
acquisition expenses the Partnership had allocated to this property.
5
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1996 and 1995
3. Investment in Joint Ventures:
In May 1996, the Partnership entered into a joint venture arrangement,
Middleburg Joint Venture, with an affiliate of the Partnership which
has the same general partners to hold one restaurant property. As of
June 30, 1996, the Partnership and its co-venture partner had
contributed $1,655,928 and $235,611, respectively, to the joint venture
to acquire the restaurant property. As of June 30, 1996, the
Partnership and its co-venture partner owned approximately an 88
percent and 12 percent interest, respectively, in the profits and
losses of the joint venture. The Partnership accounts for its
investment in this joint venture under the equity method since the
Partnership shares control with the affiliate.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C>
Land and buildings on
operating leases, less
accumulated depreciation $1,811,740 $1,299,844
Net investment in direct
financing leases 2,484,077 1,120,930
Cash 19,237 6,373
Accrued rental income 72,080 61,805
Other assets 233 119
Liabilities 19,319 6,330
Partners' capital 4,368,048 2,482,741
Revenues 151,311 268,393
Net income 134,322 236,811
</TABLE>
The Partnership recognized income totalling $55,297 and $40,667 for the
six months ended June 30, 1996 and 1995, respectively, from these joint
ventures, $35,287 and $20,477 of which was earned during the quarters
ended June 30, 1996 and 1995, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XII, 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 generally responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of June 30, 1996,
the Partnership owned 48 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 $1,930,975 and
$1,927,261 for the six months ended June 30, 1996 and 1995, respectively. The
increase in cash from operations for the six months ended June 30, 1996, as
compared to the six months ended June 30, 1995, 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, 1996.
In April 1996, the Partnership sold its Property in Houston, Texas, to
an unrelated third party for $1,640,000. As a result of this transaction, the
Partnership recognized a loss of $15,355 for financial reporting purposes
primarily due to acquisition fees and miscellaneous acquisition expenses the
Partnership had allocated to this property. In May 1996, the Partnership
reinvested the proceeds from this sale, along with additional funds, for a total
of $1,655,928 in Middleburg Joint Venture. The Partnership has an approximate 88
percent interest in the profits and losses of Middleburg Joint Venture and the
remaining interest in this joint venture is held by an affiliate of the
Partnership which has the same general partners.
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 $1,677,520
invested in such short-term investments as compared to $1,716,203 at December
31, 1995. The decrease in cash and cash equivalents during the six months ended
June 30, 1996 was primarily attributable to the payment of a special
distribution to the limited partners of $45,000 in January 1996 of cumulative
excess operating reserves.
7
<PAGE>
Liquidity and Capital Resources - Continued
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 decreased to $991,796 at June 30,
1996, from $1,057,061 at December 31, 1995, primarily as the result of the
Partnership's accruing a special distribution payable to the limited partners of
$45,000 at December 31, 1995, as described above, which was paid in January
1996. Total liabilities also decreased as a result of a decrease in rents paid
in advance during the six months ended June 30, 1996. The general partners
believe that the Partnership has sufficient cash on hand to meet its current
working capital needs.
Based on cash from operations, the Partnership declared distributions
to the limited partners of $1,912,504 for each of the six months ended June 30,
1996 and 1995 ($956,252 for each of the quarters ended June 30, 1996 and 1995).
This represents distributions of $0.43 per unit for each of the six months ended
June 30, 1996 and 1995 ($0.21 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 generally meet
specified financial standards minimizes the Partner- ship'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
owned and leased 45 wholly owned Properties (including one Property in Houston,
Texas, which was sold in April 1996) 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 earned $2,119,670 and $2,174,550, respectively,
in rental income from operating leases and earned income from direct financing
leases from these Properties, $1,037,663 and $1,087,020 of which was earned
during the quarters ended June 30, 1996 and 1995, respectively.
8
<PAGE>
The decrease in rental and earned income is primarily attributable to a decrease
of approximately $42,300, as a result of the sale of the Property in Houston,
Texas, in April 1996 as discussed above in "Liquidity and Capital Resources".
Rental and earned income also decreased approximately $6,800 during the
quarter ended June 30, 1996, as a result of the fact that the tenant of the
Sizzler's Property in Tempe, Arizona, declared bankruptcy and ceased operations
of the restaurant business located on the Property in June 1996. The Partnership
is currently seeking a replacement tenant for this Property, however, rental
income amounts are expected to be reduced until such time as a replacement
tenant can be located. As a result of the termination of this lease, during the
six months ended June 30, 1996, the Partnership reclassified this lease from a
direct financing lease to an operating lease.
During the six months ended June 30, 1996 and 1995, the Partnership
also earned $22,218 and $32,931, respectively, in contingent rental income,
$13,409 and $21,998 of which was earned during the quarters ended June 30, 1996
and 1995, respectively. The decrease in contingent rental income is primarily
attributable to a change in the contingent rent formula in accordance with the
terms of the leases of two Properties.
Interest and other income was $78,523 and $45,092 for the six months
ended June 30, 1996 and 1995, respectively, of which $54,218 and $23,077 was
earned for the quarters ended June 30, 1996 and 1995, respectively. The increase
in interest and other income is primarily attributable to the Partnership
granting an adjacent landowner to its Property in Black Mountain, North
Carolina, certain easement rights in exchange for $25,000 during the quarter
ended June 30, 1996.
For the six months ended June 30, 1996 and 1995, the Partnership owned
and leased four and three Properties indirectly through joint venture
arrangements, respectively. In connection therewith, during the six months ended
June 30, 1996 and 1995, the Partnership earned $55,297 and $40,667,
respectively, attributable to net income earned by these joint ventures, $35,287
and $20,477 of which was earned during the quarters ended June 30, 1996 and
1995, respectively. The increase in net income earned by joint ventures is
primarily due to the fact that the Partnership invested in Middleburg Joint
Venture in May 1996, as described above in "Liquidity and Capital Resources".
Operating expenses, including depreciation and amortization expense,
were $306,931 and $276,307 for the six months ended June 30, 1996 and 1995,
respectively, of which $148,379 and $133,701 were incurred for the quarters
ended June 30, 1996 and 1995, respectively. The increase in operating expenses
during the quarter and six months ended June 30, 1996, as compared to the
quarter and six months ended June 30, 1995, is primarily attributable to an
increase in (i) accounting and administrative
9
<PAGE>
expenses associated with operating the Partnership and its Properties and (ii)
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. The increase in operating expenses was partially
offset by a decrease in depreciation expense during the quarter and six months
ended June 30, 1996, as a result of the sale of the Property located in Houston,
Texas, in April 1996, as described above in "Liquidity and Capital Resources".
As a result of the sale of the Property in Houston, Texas, as described
above in "Liquidity and Capital Resources," the Partnership recognized a loss of
$15,355 for financial reporting purposes for the quarter and six months ended
June 30, 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 June 30, 1996.
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 12th day of August, 1996.
CNL INCOME FUND XII, 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 XII, Ltd. at June 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 XII, 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> 1,677,520
<SECURITIES> 0
<RECEIVABLES> 250,982
<ALLOWANCES> 29,088
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,226,167
<DEPRECIATION> 985,800
<TOTAL-ASSETS> 41,204,785
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 40,212,989
<TOTAL-LIABILITY-AND-EQUITY> 41,204,785
<SALES> 0
<TOTAL-REVENUES> 2,220,411
<CGS> 0
<TOTAL-COSTS> 306,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,953,422
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,953,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,953,422
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for
current assets and current liabilities.
</FN>
</TABLE>
