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
0-23968
CNL Income Fund XIII, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3143094
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street
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 XIII, 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 $1,893,038
and $1,697,320 $22,592,900 $22,788,618
Net investment in direct financing
leases 7,864,786 7,910,470
Investment in joint ventures 2,455,231 2,457,810
Cash and cash equivalents 941,877 907,980
Receivables, less allowance for
doubtful accounts of $23,376 in
1998 29,032 23,946
Prepaid expenses 19,062 10,368
Organization costs, less accumu-
lated amortization of $10,000
and $9,422 - 578
Accrued rental income 1,297,186 1,423,820
----------- -----------
$35,200,074 $35,523,590
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 9,069 $ 7,671
Accrued real estate taxes payable 2,888 -
Distributions payable 850,002 850,002
Due to related parties 4,038 6,791
Rents paid in advance 66,799 5,570
----------- -----------
Total liabilities 932,796 870,034
Partners' capital 34,267,278 34,653,556
----------- -----------
$35,200,074 $35,523,590
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XIII, 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 $ 613,911 $ 597,361 $1,232,426 $1,209,976
Adjustments to accrued
rental income (311,118) - (311,118) -
Earned income from direct
financing leases 198,185 238,505 415,220 477,650
Contingent rental income 75,085 58,019 141,008 105,786
Interest and other income 12,991 7,369 33,186 21,285
---------- ---------- ---------- ----------
589,054 901,254 1,510,722 1,814,697
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 40,490 38,796 70,584 81,023
Professional services 6,230 4,874 14,635 12,013
Management fees to
related parties 8,821 8,621 17,774 17,256
Real estate taxes 2,888 - 2,888 -
State and other taxes 231 5,261 16,184 18,301
Depreciation and
amortization 97,995 98,906 196,413 197,265
---------- ---------- ---------- ----------
156,655 156,458 318,478 325,858
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Provision
for Loss on Land and
Net Investment in Direct
Financing Lease 432,399 744,796 1,192,244 1,488,839
Equity in Earnings of
Joint Ventures 57,175 39,489 121,482 70,503
Provision for Loss on
Land and Net Investment
in Direct Financing Lease - (41,202) - (41,202)
---------- ---------- ---------- ---------
Net Income $ 489,574 $ 743,083 $1,313,726 $1,518,140
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 4,895 $ 7,715 $ 13,137 $ 15,466
Limited partners 484,679 735,368 1,300,589 1,502,674
---------- ---------- ---------- ----------
$ 489,574 $ 743,083 $1,313,726 $1,518,140
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.12 $ 0.18 $ 0.33 $ 0.38
========== ========== ========== ==========
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 XIII, 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 $ 137,207 $ 106,517
Net income 13,137 30,690
----------- -----------
150,344 137,207
----------- -----------
Limited partners:
Beginning balance 34,516,349 34,911,420
Net income 1,300,589 3,004,937
Distributions ($0.43 and $0.85
per limited partner unit,
respectively) (1,700,004) (3,400,008)
----------- -----------
34,116,934 34,516,349
----------- -----------
Total partners' capital $34,267,278 $34,653,556
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XIII, 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 $ 1,733,901 $ 1,659,408
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint ventures - (550,000)
Decrease in restricted cash - 550,000
Loan to tenant - (190,997)
----------- -----------
Net cash used in
investing activities - (190,997)
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,700,004) (1,700,004)
----------- -----------
Net cash used in
financing activities (1,700,004) (1,700,004)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 33,897 (231,593)
Cash and Cash Equivalents at Beginning
of Period 907,980 1,103,568
----------- -----------
Cash and Cash Equivalents at End of
Period $ 941,877 $ 871,975
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 850,002 $ 850,002
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XIII, 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 XIII, Ltd. (the "Partnership") for the year ended December
31, 1997.
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.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 25, 1992, 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, 1998,
the Partnership owned 47 Properties, including two Properties owned by joint
ventures in which the Partnership is a co-venturer and three Properties owned
with affiliates 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 $1,733,901 and
$1,659,408 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, as
compared to the six months ended June 30, 1997, is primarily a result of changes
in the Partnership's working capital.
Currently, rental income from the Partnership's Properties are 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 partners. At June 30, 1998, the Partnership had $941,877
invested in such short-term investments, as compared to $907,980 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 $932,796 at June 30, 1998, from $870,034 at December 31, 1997,
primarily 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.
Based on current and future anticipated cash from operations, the
Partnership declared distributions to the limited partners of $1,700,004 for
each of the six months ended June 30, 1998 and 1997 ($850,002 for each
applicable quarter). This represents distributions of $0.43 per unit for each
applicable six months ($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, 1998 and 1997. No amounts distributed to the limited partners for
the six months ended June 30, 1998 and 1997,
6
<PAGE>
Liquidity and Capital Resources - Continued
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 contribution. 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, 1997, the Partnership owned and
leased 43 wholly owned Properties (including one Property in Orlando, Florida,
which was sold in October 1997) and during the six months ended June 30, 1998,
the Partnership owned and leased 42 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 earned $1,336,528
and $1,687,626, respectively, in rental income from operating leases (net of
adjustments to accrued rental income) and earned income from direct financing
leases for these Properties, $500,978 and $835,866 of which was earned during
the quarters ended June 30, 1998 and 1997, respectively. The decrease in rental
and earned income during the quarter and six months ended June 30, 1998, as
compared to the quarter and six months ended June 30, 1997, was primarily
attributable to the fact that in June 1998, the tenant of the Properties in
Philadelphia, Pennsylvania; Tampa, Florida and Overland Park, Kansas filed for
bankruptcy and rejected the leases relating to these Properties. As a result,
during the quarter and six months ended June 30, 1998, the Partnership wrote off
approximately $311,100 of accrued rental income (non-cash accounting adjustment
relating to the straight-lining of future scheduled rent increases over the
lease term in accordance with generally accepted accounting principles). The
Partnership also established an allowance for doubtful accounts during the
quarter and six months ended June 30, 1998, of approximately $23,400 for rental
and earned income amounts due from this tenant due to the fact that collection
of such amounts is questionable. The general partners are currently seeking
either replacement tenants or purchasers for these Properties. The Partnership
will not recognize any rental and earned income from these Properties until
replacement tenants or purchasers for these Properties are located.
7
<PAGE>
Results of Operations - Continued
Rental and earned income also decreased during the six months ended
June 30, 1998, as compared to the six months ended June 30, 1997, due to the
fact that in February 1997, the Partnership discontinued charging rent to the
former tenant of the Denny's Property in Orlando, Florida, as a result of the
former tenant vacating the Property. The Partnership sold this Property in
October 1997, and in December 1997, reinvested the net sales proceeds in a
Property in Miami, Florida, as tenants-in-common, with affiliates of the general
partners.
During the six months ended June 30, 1998 and 1997, the Partnership
also earned $141,008 and $105,786, respectively, in contingent rental income,
$75,085 and $58,019 of which was earned during the quarters ended June 30, 1998
and 1997, respectively. The increase in contingent rental income during the
quarter and six months ended June 30, 1998, is partially attributable to the
Partnership adjusting estimated contingent rental amounts accrued at December
31, 1997, to actual amounts during the quarter and six months ended June 30,
1998. The increase in contingent rental income is also partially due to an
increase in gross sales of certain restaurant Properties whose leases require
the payment of contingent rental income.
During the six months ended June 30, 1997, the Partnership also owned
and leased two Properties indirectly through joint venture arrangements and two
Properties with affiliates of the general partners as tenants-in-common. During
the six months ended June 30, 1998, the Partnership owned and leased three
Properties as tenants-in-common with affiliates of the general partners and two
Properties indirectly through joint venture arrangements. In connection
therewith, during the six months ended June 30, 1998 and 1997, the Partnership
earned $121,482 and $70,503, respectively, attributable to the net income earned
by these joint ventures, $57,175 and $39,489 of which was earned during the
quarters ended June 30, 1998 and 1997, respectively. The increase in net income
earned by these joint ventures during the quarter and six months ended June 30,
1998, as compared to the quarter and six months ended June 30, 1997, is
primarily attributable to the fact that in December 1997, the Partnership
reinvested the net sales proceeds it received from the sale, in October 1997, of
the Property in Orlando, Florida, in a Property located in Miami, Florida, with
affiliates of the general partners as tenants-in-common.
Operating expenses, including depreciation and amortization expense,
were $318,478 and $325,858 for the six months ended June 30, 1998 and 1997,
respectively, of which $156,655 and $156,458 were incurred for the quarters
ended June 30, 1998 and 1997, respectively.
During the quarter and six months ended June 30, 1997, the
Partnership recorded an allowance for loss on land and net
investment in the direct financing lease of $41,202 for financial
reporting purposes relating to a Property in Orlando, Florida. The
8
<PAGE>
Results of Operations - Continued
loss represented the difference between the Property's land carrying value and
the carrying value of the net investment in the direct financing lease, as
compared to the estimated net realizable value, based on the anticipated sales
price of this Property from a third party. The Partnership sold this Property in
October 1997.
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.
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 June 30, 1998.
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 11th day of August, 1998.
CNL INCOME FUND XIII, 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 XIII, 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 XIII, 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> 941,877
<SECURITIES> 0
<RECEIVABLES> 52,408
<ALLOWANCES> 23,376
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,485,938
<DEPRECIATION> 1,893,038
<TOTAL-ASSETS> 35,200,074
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,267,278
<TOTAL-LIABILITY-AND-EQUITY> 35,200,074
<SALES> 0
<TOTAL-REVENUES> 1,510,722
<CGS> 0
<TOTAL-COSTS> 318,478
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,313,726
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,313,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,313,726
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
