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 September 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
0-21558
CNL Income Fund XII, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3078856
(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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
ASSETS 1997 1996
------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,381,329 and
$1,143,698 $20,899,837 $21,082,468
Net investment in direct financing
leases 13,691,013 13,789,036
Investment in joint ventures 2,513,530 2,496,749
Cash and cash equivalents 1,812,974 1,800,601
Receivables, less allowance for
doubtful accounts of $28,360 and
$23,395 190,357 202,908
Prepaid expenses 12,589 6,786
Organization costs, less accumulated
amortization of $9,965 and $8,465 35 1,535
Lease costs, less accumulated
amortization of $879 for 1997 23,173 -
Accrued rental income 2,364,793 1,963,055
----------- -----------
$41,508,301 $41,343,138
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,374 $ 9,303
Accrued and escrowed real
estate taxes payable 18,682 14,706
Distributions payable 956,252 956,252
Due to related parties 10,303 2,981
Rents paid in advance 152,928 69,790
----------- -----------
Total liabilities 1,145,539 1,053,032
Partners' capital 40,362,762 40,290,106
----------- -----------
$41,508,301 $41,343,138
=========== ===========
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $ 621,234 $ 607,197 $1,829,206 $1,867,682
Earned income from direct
financing leases 409,932 415,545 1,231,855 1,274,730
Contingent rental income 11,036 15,586 36,999 37,804
Interest and other income 18,420 21,037 59,394 99,560
---------- ---------- ---------- ----------
1,060,622 1,059,365 3,157,454 3,279,776
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 38,390 44,014 119,166 134,228
Professional services 6,837 11,615 18,999 27,547
Management fees to
related parties 10,041 9,431 30,005 29,518
Real estate taxes 542 1,521 1,952 7,327
State and other taxes - - 18,496 18,472
Depreciation and
amortization 80,459 79,271 240,010 235,691
---------- ---------- ---------- ----------
136,269 145,852 428,628 452,783
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Loss on
Sale of Land and Building 924,353 913,513 2,728,826 2,826,993
Equity in Earnings of
Joint Ventures 71,230 74,806 212,586 130,103
Loss on Sale of Land and
Building - - - (15,355)
---------- ---------- ---------- ----------
Net Income $ 995,583 $ 988,319 $2,941,412 $2,941,741
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 9,956 $ 9,883 $ 29,414 $ 29,520
Limited partners 985,627 978,436 2,911,998 2,912,221
---------- ---------- ---------- ----------
$ 995,583 $ 988,319 $2,941,412 $2,941,741
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.22 $ 0.22 $ 0.65 $ 0.65
========== ========== ========== ==========
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
Nine Months Ended Year Ended
September 30, December 31,
1997 1996
----------------- ------------
General partners:
Beginning balance $ 152,889 $ 113,356
Net income 29,414 39,533
----------- -----------
182,303 152,889
----------- -----------
Limited partners:
Beginning balance 40,137,217 40,058,715
Net income 2,911,998 3,903,510
Distributions ($0.64 and $0.85
per limited partner unit,
respectively) (2,868,756) (3,825,008)
----------- -----------
40,180,459 40,137,217
----------- -----------
Total partners' capital $40,362,762 $40,290,106
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1997 1996
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 2,955,295 $ 3,010,795
----------- -----------
Cash Flows From Investing
Activities:
Proceeds from sale of land and
building - 1,640,000
Additions to land and building
on operating leases (55,000) -
Investment in joint venture - (1,645,024)
Collections on loan to tenant
of joint venture 4,886 5,733
Payment of lease costs (24,052) -
----------- -----------
Net cash provided by (used
in) investing activities (74,166) 709
----------- -----------
Cash Flows From Financing
Activities:
Distributions to limited
partners (2,868,756) (2,913,756)
----------- -----------
Net cash used in
financing activities (2,868,756) (2,913,756)
----------- -----------
Net Increase in Cash and Cash
Equivalents 12,373 97,748
Cash and Cash Equivalents at
Beginning of Period 1,800,601 1,716,203
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,812,974 $ 1,813,951
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 956,252 $ 956,252
=========== ===========
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 Nine Months Ended September 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 nine months ended September 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 XII, Ltd. (the "Partnership") for the year ended December
31, 1996.
5
<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 September 30,
1997, 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 nine months ended
September 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
$2,955,295 and $3,010,795 for the nine months ended September 30, 1997 and 1996,
respectively. The decrease in cash from operations for the nine months ended
September 30, 1997, as compared to the nine months ended September 30, 1996, is
primarily a result of changes in income and expenses as discussed in "Results of
Operations" below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 1997.
In March 1997, the Partnership entered into a new lease for the
Property in Tempe, Arizona. In connection therewith, the Partnership incurred
$55,000 in renovation costs during the nine months ended September 30, 1997. The
renovations were completed in May 1997.
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 September 30, 1997, the Partnership had
$1,812,974 invested in such short-term investments, as compared to $1,800,601 at
December 31, 1996. The funds remaining at September 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 increased to $1,145,539 at
September 30, 1997, from $1,053,032 at December 31, 1996, primarily as the
result of an increase in rents paid in advance during the nine months ended
September 30, 1997. 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 on cash from operations, the Partnership declared distributions
to the limited partners of $2,868,756 for each of the nine months ended
September 30, 1997 and 1996 ($956,252 for each of the quarters ended September
30, 1997 and 1996). This represents distributions for each applicable nine
months of $0.64 per unit ($0.21 per unit for each applicable quarter). No
distributions were made to the general partners for the quarters and nine months
ended September 30, 1997 and 1996. No amounts distributed or to be distributed
to the limited partners for the nine months ended September 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.
Results of Operations
During the nine months ended September 30, 1996, the Partnership owned
and leased 45 wholly owned Properties (including one Property in Houston, Texas,
which was sold in April 1996) and during the nine months ended September 30,
1997, the Partnership owned and leased 44 wholly owned Properties to operators
of fast-food and family-style restaurant chains. In connection therewith, during
the nine months ended September 30, 1997 and 1996, the Partnership earned
$3,061,061 and $3,142,412, respectively, in rental income from operating leases
and earned income from direct financing leases from these Properties, $1,031,166
and $1,022,742 of which was earned during the quarters ended September 30, 1997
and 1996, respectively. The decrease in rental and earned income during the nine
months ended September 30, 1997, as compared to the nine months ended September
30, 1996, is partially attributable to a decrease of approximately $51,800
during the nine months ended September 30, 1997, as a result of the sale of the
Property in Houston, Texas, in April 1996. The Partnership reinvested the net
sales proceeds from the sale of the Property in Houston, Texas, in Middleburg
Joint Venture in May 1996.
Rental and earned income also decreased during the nine months ended
September 30, 1997, by approximately $13,300 as a result of the fact that the
tenant of the Property in Tempe, Arizona, declared bankruptcy and ceased
operations of the restaurant business located on the Property in June 1996. In
March 1997, the
7
<PAGE>
Results of Operations - Continued
Partnership entered into a new lease for the Property in Tempe, Arizona with a
new tenant to operate the Property for which rental payments commenced in July
1997. Consequently, the Partnership expects rental and earned income to increase
during the remainder of 1997 and in subsequent years.
For the nine months ended September 30, 1997 and 1996, the Partnership
also earned $36,999 and $37,804, respectively, in contingent rental income,
$11,036 and $15,586 of which was earned during the quarters ended September 30,
1997 and 1996, respectively.
Interest and other income was $59,394 and $99,560 for the nine months
ended September 30, 1997 and 1996, respectively, of which $18,420 and $21,037
was earned for the quarters ended September 30, 1997 and 1996, respectively. The
decrease in interest and other income is primarily attributable to the
Partnership granting certain easement rights to the owner of the Property
adjacent to the Partnership's Property in Black Mountain, North Carolina, in
exchange for $25,000 during the nine months ended September 30, 1996.
For the nine months ended September 30, 1997 and 1996, the Partnership
owned and leased four Properties indirectly through joint venture arrangements.
In connection therewith, during the nine months ended September 30, 1997 and
1996, the Partnership earned $212,586 and $130,103, respectively, attributable
to net income earned by these joint ventures, $71,230 and $74,806 of which was
earned during the quarters ended September 30, 1997 and 1996, respectively. The
increase in net income earned by joint ventures during the nine months ended
September 30, 1997, as compared to the nine months ended September 30, 1996, is
primarily due to the fact that the Partnership invested in Middleburg Joint
Venture in May 1996.
Operating expenses, including depreciation and amortization expense,
were $428,628 and $452,783 for the nine months ended September 30, 1997 and
1996, respectively, of which $136,269 and $145,852 was incurred for the quarters
ended September 30, 1997 and 1996, respectively. The decrease in operating
expenses during the quarter and nine months ended September 30, 1997, as
compared to the quarter and nine months ended September 30, 1996, is partially
attributable to a decrease in accounting and administrative expenses associated
with operating the Partnership and its Properties.
Operating expenses also decreased during the quarter and nine months
ended September 30, 1997, as a result of the fact that during the quarter and
nine months ended September 30, 1996, the Partnership recorded current and past
due real estate taxes and certain expenses associated with the tenant's
bankruptcy, relating
8
<PAGE>
Results of Operations - Continued
to the Property in Tempe, Arizona. The decrease is partially offset by an
increase in depreciation expense as a result of the reclassification of the
lease from a direct financing lease to an operating lease, during the nine
months ended September 30, 1996, as a result of the termination of the lease
with the former tenant as described above.
As a result of the sale of the Property in Houston, Texas, in April
1996, the Partnership recognized a loss of $15,355 for financial reporting
purposes for the nine months ended September 30, 1996. No Properties were sold
during the nine months ended September 30, 1997.
9
<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 September 30, 1997.
10
<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 November, 1997.
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 September 30, 1997, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XII, Ltd. for the nine months ended
September 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,812,974
<SECURITIES> 0
<RECEIVABLES> 218,717
<ALLOWANCES> 28,360
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,281,166
<DEPRECIATION> 1,381,329
<TOTAL-ASSETS> 41,508,301
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,362,762
<TOTAL-LIABILITY-AND-EQUITY> 41,508,301
<SALES> 0
<TOTAL-REVENUES> 3,157,454
<CGS> 0
<TOTAL-COSTS> 428,628
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,941,412
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,941,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,941,412
<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>
