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, 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 6-8
Part II
Other Information 9
<PAGE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
----------- --------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $1,301,771 and
$1,143,698 $20,979,395 $21,082,468
Net investment in direct financing
leases 13,724,702 13,789,036
Investment in joint ventures 2,504,811 2,496,749
Cash and cash equivalents 1,744,454 1,800,601
Receivables, less allowance for
doubtful accounts of $27,043 and
$23,395 192,902 202,908
Prepaid expenses 14,985 6,786
Organization costs, less accumulated
amortization of $9,465 and $8,465 535 1,535
Lease costs, less accumulated
amortization of $478 for 1997 23,574 -
Accrued rental income 2,225,202 1,963,055
----------- -----------
$41,410,560 $41,343,138
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,702 $ 9,303
Accrued and escrowed real
estate taxes payable 23,785 14,706
Distributions payable 956,252 956,252
Due to related parties 3,383 2,981
Rents paid in advance 95,007 69,790
----------- -----------
Total liabilities 1,087,129 1,053,032
Partners' capital 40,323,431 40,290,106
----------- -----------
$41,410,560 $41,343,138
=========== ===========
</TABLE>
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,
1997 1996 1997 1996
---------- ---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 604,177 $ 611,972 $1,207,972 $1,260,485
Earned income from direct
financing leases 410,956 425,691 821,923 859,185
Contingent rental income 20,546 13,409 25,963 22,218
Interest and other income 20,177 54,218 40,974 78,523
---------- ---------- ---------- ----------
1,055,856 1,105,290 2,096,832 2,220,411
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 42,054 47,250 80,776 90,214
Professional services 5,505 10,305 12,162 15,932
Management fees to
related parties 10,051 10,033 19,964 20,087
Real estate taxes - 5,806 1,410 5,806
State and other taxes 406 514 18,496 18,472
Depreciation and
amortization 80,102 74,471 159,551 156,420
---------- ---------- ---------- ----------
138,118 148,379 292,359 306,931
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Loss on
Sale of Land and Building 917,738 956,911 1,804,473 1,913,480
Equity in Earnings of
Joint Ventures 70,949 35,287 141,356 55,297
Loss on Sale of Land and
Building - (15,355) - (15,355)
---------- ---------- ---------- ----------
Net Income $ 988,687 $ 976,843 $1,945,829 $1,953,422
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 9,887 $ 9,873 $ 19,458 $ 19,639
Limited partners 978,800 966,970 1,926,371 1,933,783
---------- ---------- ---------- ----------
$ 988,687 $ 986,843 $1,945,829 $1,953,422
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.22 $ 0.21 $ 0.43 $ 0.43
========== ========== ========== ==========
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,
1997 1996
---------------- --------
<S> <C>
General partners:
Beginning balance $ 152,889 $ 113,356
Net income 19,458 39,533
----------- -----------
172,347 152,889
----------- -----------
Limited partners:
Beginning balance 40,137,217 40,058,715
Net income 1,926,371 3,903,510
Distributions ($0.43 and $0.85
per limited partner unit,
respectively) (1,912,504) (3,825,008)
----------- -----------
40,151,084 40,137,217
----------- -----------
Total partners' capital $40,323,431 $40,290,106
=========== ===========
</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,
1997 1996
----------- -------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,931,238 $ 1,930,975
----------- -----------
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 - (1,655,928)
Collections on loan to tenant
of joint venture 4,171 3,774
Payment of lease costs (24,052) -
----------- ----------
Net cash used in investing
activities (74,881) (12,154)
----------- -----------
Cash Flows From Financing
Activities:
Distributions to limited
partners (1,912,504) (1,957,504)
----------- -----------
Net cash used in
financing activities (1,912,504) (1,957,504)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (56,147) (38,683)
Cash and Cash Equivalents at
Beginning of Period 1,800,601 1,716,203
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,744,454 $ 1,677,520
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
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, 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 six months ended June 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 June 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 six months ended
June 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 $1,931,238 and
$1,930,975 for the six months ended June 30, 1997 and 1996, respectively.
Other sources and uses of capital included the following during the six
months ended June 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 six months ended June 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 June 30, 1997, the Partnership had $1,744,454
invested in such short-term investments, as compared to $1,800,601 at December
31, 1996. The funds remaining at June 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 $1,087,129 at June
30, 1997, from $1,053,032 at December 31, 1996, primarily as the result of an
increase in rents paid in advance during the six months ended June 30, 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, the Partnership declared distributions
to the limited partners of $1,912,504 for each of the six months ended June 30,
1997 and 1996 ($956,252 for each of the quarters ended June 30, 1997 and 1996).
This represents distributions for each applicable six months of $0.43 per unit
6
<PAGE>
Liquidity and Capital Resources - Continued
($0.21 per unit for each applicable quarter). No distributions were made to the
general partners for the quarters and six months ended June 30, 1997 and 1996.
No amounts distributed or to be distributed to the limited partners for the six
months ended June 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 six months ended June 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 six months ended June 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 six months ended June 30, 1997 and 1996, the Partnership earned $2,029,895
and $2,119,670, respectively, in rental income from operating leases and earned
income from direct financing leases from these Properties, $1,015,133 and
$1,037,663 of which was earned during the quarters ended June 30, 1997 and 1996,
respectively. The decrease in rental and earned income is primarily attributable
to a decrease of approximately $4,700 and $51,800 during the quarter and six
months ended June 30, 1997, respectively, as a result of the sale of the
Property in Houston, Texas, in April 1996.
Rental and earned income also decreased approximately $10,500 and
$27,900 during the quarter and six months ended June 30, 1997, respectively, 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 Partnership entered into a new lease
for the Property in Tempe, Arizona with a new tenant to operate the Property and
rental payments are expected to commence in July 1997. Consequently, the
Partnership expects rental and earned income to increase during the remainder of
1997 and in subsequent years.
7
<PAGE>
Results of Operations - Continued
For the six months ended June 30, 1997 and 1996, the Partnership also
earned $25,963 and $22,218, respectively, in contingent rental income, $20,546
and $13,409 of which was earned during the quarters ended June 30, 1997 and
1996, respectively.
Interest and other income was $40,974 and $78,523 for the six months
ended June 30, 1997 and 1996, respectively, of which $20,177 and $54,218 was
earned for the quarters ended June 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 quarter and six months ended June 30, 1996.
For the six months ended June 30, 1997 and 1996, the Partnership owned
and leased four Properties indirectly through joint venture arrangements. In
connection therewith, during the six months ended June 30, 1997 and 1996, the
Partnership earned $141,356 and $55,297, respectively, attributable to net
income earned by these joint ventures, $70,949 and $35,287 of which was earned
during the quarters ended June 30, 1997 and 1996, 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.
Operating expenses, including depreciation and amortization expense,
were $292,359 and $306,931 for the six months ended June 30, 1997 and 1996,
respectively, of which $138,118 and $148,379 were incurred for the quarters
ended June 30, 1997 and 1996, respectively. The decrease in operating expenses
during the quarter and six months ended June 30, 1997, as compared to the
quarter and six months ended June 30, 1996, is primarily attributable to a
decrease in accounting and administrative expenses associated with operating the
Partnership and its Properties.
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, 1997.
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 6th day of August, 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 June 30, 1997, 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, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,744,454
<SECURITIES> 0
<RECEIVABLES> 219,945
<ALLOWANCES> 27,043
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,281,166
<DEPRECIATION> 1,301,771
<TOTAL-ASSETS> 41,410,560
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,323,431
<TOTAL-LIABILITY-AND-EQUITY> 41,410,560
<SALES> 0
<TOTAL-REVENUES> 2,096,832
<CGS> 0
<TOTAL-COSTS> 292,359
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,945,829
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,945,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,945,829
<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>
