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 March 31, 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
0-23974
CNL Income Fund XIV, Ltd.
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3143096
- ---------------------------- -------------------------
(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
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<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 7-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,042,828 and
$958,533 $25,768,189 $25,852,484
Net investment in direct
financing leases 9,105,211 9,125,272
Investment in joint ventures 3,154,102 3,201,156
Cash and cash equivalents 1,511,664 1,462,012
Receivables, less allowance for
doubtful accounts of $56,000
and $22,970 2,155 23,477
Prepaid expenses 11,406 8,243
Organization costs, less
accumulated amortization of
$7,099 and $6,599 2,901 3,401
Accrued rental income 1,492,609 1,369,804
----------- -----------
$41,048,237 $41,045,849
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,902 $ 5,447
Accrued and escrowed real
estate taxes payable 11,454 12,364
Distributions payable 928,130 928,130
Due to related parties 4,273 1,651
Rents paid in advance 101,099 62,520
----------- -----------
Total liabilities 1,048,858 1,010,112
Commitment (Note 3)
Partners' capital 39,999,379 40,035,737
----------- -----------
$41,048,237 $41,045,849
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1997 1996
---------- ----------
Revenues:
Rental income from operating leases $ 723,768 $ 744,176
Earned income from direct financing
leases 255,292 257,443
Interest and other income 14,042 13,885
---------- ----------
993,102 1,015,504
---------- ----------
Expenses:
General operating and administrative 36,215 43,378
Professional services 5,788 5,752
Bad debt expense 14,000 -
Management fees to related parties 9,554 9,783
Real estate taxes 4,170 1,713
State and other taxes 21,827 18,090
Depreciation and amortization 85,022 85,022
---------- ----------
176,576 163,738
---------- ----------
Income Before Equity in Earnings of
Joint Ventures 816,526 851,766
Equity in Earnings of Joint Ventures 75,246 88,916
---------- ----------
Net Income $ 891,772 $ 940,682
========== ==========
Allocation of Net Income:
General partners $ 8,918 $ 9,407
Limited partners 882,854 931,275
---------- ----------
$ 891,772 $ 940,682
========== ==========
Net Income Per Limited Partner Unit $ 0.20 $ 0.21
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,500,000 4,500,000
========== ==========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- -----------
General partners:
Beginning balance $ 109,981 $ 70,818
Net income 8,918 39,163
----------- -----------
118,899 109,981
----------- -----------
Limited partners:
Beginning balance 39,925,756 39,761,112
Net income 882,854 3,877,166
Distributions ($0.21 and
$0.83 per limited partner
unit, respectively) (928,130) (3,712,522)
----------- -----------
39,880,480 39,925,756
----------- -----------
Total partners' capital $39,999,379 $40,035,737
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1997 1996
---------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 923,708 $ 890,198
---------- -----------
Cash Flows from Investing
Activities:
Return of capital from joint
venture 54,074 -
---------- -----------
Net cash provided by
investing activities 54,074 -
---------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (928,130) (928,130)
---------- -----------
Net cash used in
financing activities (928,130) (928,130)
---------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents 49,652 (37,932)
Cash and Cash Equivalents at
Beginning of Quarter 1,462,012 1,475,738
---------- -----------
Cash and Cash Equivalents at
End of Quarter $1,511,664 $1,437,806
========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 928,130 $ 928,130
========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 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 ended March 31, 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 XIV, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Investment in Joint Venture:
In January 1997, Wood-Ridge Real Estate Joint Venture reinvested
$502,598 of the remaining net sales proceeds from the sale of the two
properties in September 1996, in a Taco Bell property in Anniston,
Alabama. In March 1997, the Partnership and the other joint venture
partner each received approximately $54,100, representing a return of
capital, for the remaining unreinvested net sales proceeds. As of March
31, 1997, the Partnership owned a 50 percent interest in the profits
and losses of the joint venture.
5
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
2. Investment in Joint Venture - Continued:
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
March 31, December 31,
1997 1996
--------- ------------
Land and buildings on
operating leases,
less accumulated
depreciation $5,578,389 $5,102,901
Net investment in direct
financing lease 366,909 367,661
Cash 33,258 818
Restricted cash - 595,426
Receivables 122 7,037
Accrued rental income 83,392 62,163
Other assets 160 15,390
Liabilities 39,242 33,565
Partners' capital 6,022,988 6,117,831
Revenues 175,814 690,225
Gain on sale - 261,106
Net income 142,678 887,177
The Partnership recognized income totalling $75,246 and $88,916 for the
quarters ended March 31, 1997 and 1996, respectively, from these joint
ventures.
3. Commitment:
During 1996, the Partnership entered into an agreement with the tenant
of the Checkers property in Richmond, Virginia, to sell the property.
The general partners believe that the anticipated sales price exceeds
the Partnership's cost attributable to the property. As of April 16,
1997, the sale had not occurred.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XIV, 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. Generally,
the leases are triple-net leases, with the lessee responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of March 31, 1997,
the Partnership owned 58 Properties, including interests in eight 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 quarters ended
March 31, 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 $923,708 and
$890,198 for the quarters ended March 31, 1997 and 1996, respectively. The
increase in cash from operations for the quarter ended March 31, 1997, as
compared to the quarter ended March 31, 1996, is primarily a result of changes
in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1997.
In January 1997, Wood-Ridge Real Estate Joint Venture reinvested
$502,598 of the remaining net sales proceeds from the sale of the two properties
in September 1996, in a Taco Bell property in Anniston, Alabama. In March 1997,
the Partnership and the other joint venture partner each received approximately
$54,100, representing a return of capital, for the remaining unreinvested net
sales proceeds. As of March 31, 1997, the Partnership owned a 50 percent
interest in the profits and losses of the joint venture.
Currently, cash reserves and rental income from the Partnership's
Properties is invested in money market accounts or other short-term, highly
liquid investments pending the use of such funds to pay Partnership expenses or
to make distributions to partners. At March 31, 1997, the Partnership had
$1,511,664 invested in such short-term investments, as compared to $1,462,012 at
December 31, 1996. The funds remaining at March 31, 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, including distributions payable,
increased to $1,048,858 at March 31, 1997, from $1,010,112 at December 31, 1996,
primarily as the result of an increase in
7
<PAGE>
Liquidity and Capital Resources - Continued
rents paid in advance during the quarter ended March 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 anticipated future cash from operations, the
Partnership declared distributions to the limited partners of $928,130 for each
of the quarters ended March 31, 1997 and 1996, respectively. This represents
distributions for each applicable quarter of $0.21 per unit. No distributions
were made to the general partners for the quarters ended March 31, 1997 and
1996. No amounts distributed or to be distributed to the limited partners for
the quarters ended March 31, 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 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 each of the quarters ended March 31, 1997 and 1996, the
Partnership owned and leased 50 wholly owned Properties to operators of
fast-food and family-style restaurant chains. In connection therewith, during
the quarters ended March 31, 1997 and 1996, the Partnership earned $979,060 and
$1,001,619, respectively, in rental income from operating leases and earned
income from direct financing leases from these Properties. The decrease in
rental and earned income was primarily attributable to the Partnership's
establishing an allowance for doubtful accounts of $21,000 relating to the
Property in Akron, Ohio, during the quarter ended March 31, 1997. The
Partnership will continue to pursue the collection of past due amounts and will
recognize such amounts as income if collected. The Partnership is currently
seeking either a replacement tenant or purchaser for this Property.
In addition, during the quarter ended March 31, 1996, the Partnership
owned and leased four Properties indirectly through joint venture arrangements
(including two Properties in Wood-Ridge Real Estate Joint Venture, which were
sold in September 1996) and during the quarter ended March 31, 1997, the
Partnership owned and
8
<PAGE>
Results of Operations - Continued
leased eight Properties. In connection therewith, during the quarters ended
March 31, 1997 and 1996, the Partnership earned $75,246 and $88,916,
respectively, attributable to net income earned by these joint ventures. The
decrease in net income earned by these joint ventures is attributable to a
change in the lease terms negotiated for the replacement Properties purchased by
Wood- Ridge Real Estate Joint Venture between October 1996 and January 1997.
Operating expenses, including depreciation and amortization expense,
were $176,576 and $163,738 for the quarters ended March 31, 1997 and 1996,
respectively. The increase in operating expenses during the quarter ended March
31, 1997, as compared to the quarter ended March 31, 1996, is primarily
attributable to the fact that the Partnership recorded bad debt expense of
$14,000 relating to the Property in Akron, Ohio. The operator remains
responsible for payment of this amount; however, due to the current financial
difficulties the operator is experiencing, the general partners believe
collection of this amount is doubtful. The Partnership will continue to pursue
the collection of such amounts and will recognize such amounts as income if
collected. In addition, the Partnership incurred real estate taxes relating to
this Property of approximately $4,200 and $1,700 for the quarters ended March
31, 1997 and 1996, respectively. The increase in operating expenses during the
quarter ended March 31, 1997, as compared to the quarter ended March 31, 1996,
is partially offset by a decrease in accounting and administrative expenses
associated with operating the Partnership and its Properties.
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 March 31, 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 9th day of May, 1997.
CNL INCOME FUND XIV, 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 XIV, Ltd. at March 31, 1997, and
its statement of income for the three months then ended and is qualified
in its entirety by reference to the Form 10-Q of CNL Income Fund XIV, Ltd.
for the three months ended March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,511,664
<SECURITIES> 0
<RECEIVABLES> 58,155
<ALLOWANCES> 56,000
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,811,017
<DEPRECIATION> 1,042,828
<TOTAL-ASSETS> 41,048,237
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,999,379
<TOTAL-LIABILITY-AND-EQUITY> 41,048,237
<SALES> 0
<TOTAL-REVENUES> 993,102
<CGS> 0
<TOTAL-COSTS> 162,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 891,772
<INCOME-TAX> 0
<INCOME-CONTINUING> 891,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 891,772
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XIV, Ltd. has
an unclassified balance sheet; therefore, no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
