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
0-23974
CNL Income Fund XIV, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3143096
(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 5-6
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 XIV, 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 $1,211,418 and
$958,533 $25,599,599 $25,852,484
Net investment in direct
financing leases 9,063,334 9,125,272
Investment in joint ventures 3,228,622 3,201,156
Cash and cash equivalents 1,434,583 1,462,012
Receivables, less allowance for
doubtful accounts of $22,970 for
1996 2,071 23,477
Prepaid expenses 13,032 8,243
Organization costs, less
accumulated amortization of
$8,099 and $6,599 1,901 3,401
Accrued rental income 1,738,220 1,369,804
----------- -----------
$41,081,362 $41,045,849
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,088 $ 5,447
Accrued and escrowed real
estate taxes payable 14,026 12,364
Distributions payable 928,130 928,130
Due to related parties 7,850 1,651
Rents paid in advance 123,845 62,520
----------- -----------
Total liabilities 1,077,939 1,010,112
Commitment (Note 3)
Partners' capital 40,003,423 40,035,737
----------- -----------
$41,081,362 $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
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $ 723,524 $ 744,018 $2,170,802 $2,210,918
Earned income from direct
financing leases 254,117 256,399 764,122 770,762
Interest and other income 12,765 18,789 43,367 46,648
---------- ---------- ---------- ----------
990,406 1,019,206 2,978,291 3,028,328
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 35,386 40,271 111,792 127,272
Professional services 7,006 5,768 18,590 16,858
Bad debt expense - - 14,000 -
Management fees to
related parties 9,573 9,749 28,863 29,101
Real estate taxes 1,384 - 7,192 3,426
State and other taxes - - 21,874 18,109
Depreciation and
amortization 85,053 85,022 255,108 255,066
---------- ---------- ---------- ----------
138,402 140,810 457,419 449,832
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures 852,004 878,396 2,520,872 2,578,496
Equity in Earnings of
Joint Ventures 78,381 227,910 231,204 405,009
---------- ---------- ---------- ----------
Net Income $ 930,385 $1,106,306 $2,752,076 $2,983,505
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 9,304 $ 11,063 $ 27,521 $ 29,835
Limited partners 921,081 1,095,243 2,724,555 2,953,670
---------- ---------- ---------- ----------
$ 930,385 $1,106,306 $2,752,076 $2,983,505
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.20 $ 0.24 $ 0.61 $ 0.66
========== ========== ========== ==========
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 XIV, 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 $ 109,981 $ 70,818
Net income 27,521 39,163
----------- -----------
137,502 109,981
----------- -----------
Limited partners:
Beginning balance 39,925,756 39,761,112
Net income 2,724,555 3,877,166
Distributions ($0.62 and
$0.83 per limited partner
unit, respectively) (2,784,390) (3,712,522)
----------- -----------
39,865,921 39,925,756
----------- -----------
Total partners' capital $40,003,423 $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
Nine Months Ended
September 30,
1997 1996
----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 2,782,288 $ 2,812,597
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint venture (77,277) -
Return of capital from joint
venture 51,950 -
----------- ----------
Net cash used in
investing activities (25,327) -
----------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (2,784,390) (2,784,390)
----------- -----------
Net cash used in
financing activities (2,784,390) (2,784,390)
----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents (27,429) 28,207
Cash and Cash Equivalents at
Beginning of Period 1,462,012 1,475,738
----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,434,583 $ 1,503,945
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of period $ 928,130 $ 928,132
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XIV, 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 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 two
properties in September 1996, in a Taco Bell property in Anniston,
Alabama. As of September 30, 1997, the Partnership and the other joint
venture partner had each received approximately $52,000, representing a
return of capital, for the remaining uninvested net sales proceeds. As
of September 30, 1997, the Partnership owned a 50 percent interest in
the profits and losses of the joint venture.\
In September 1997, the Partnership entered into a joint venture
arrangement, CNL Kingston Joint Venture, with an affiliate of the
Partnership which has the same general partners, to construct and hold
one restaurant property. As of September 30, 1997, the Partnership and
its co-venture partner had contributed $77,277 and $116,206,
respectively, to purchase land relating to the joint venture. The
Partnership and its co-venture partner have agreed to contribute
approximately $130,200 and $195,800, respectively, in construction
costs to the joint venture. When construction is completed, the
Partnership and its co-venture partner expect to have an approximate 40
and 60 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 an affiliate.
5
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 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:
September 30, December 31,
1997 1996
Land and buildings on
operating leases,
less accumulated
depreciation $5,705,169 $5,102,901
Net investment in direct
financing lease 365,319 367,661
Cash 20,587 818
Restricted cash - 595,426
Receivables 2,416 7,037
Accrued rental income 126,320 62,163
Other assets 13,056 15,390
Liabilities 28,668 33,565
Partners' capital 6,204,199 6,117,831
Revenues 530,463 690,225
Gain on sale of land and
buildings - 261,106
Net income 437,893 887,177
The Partnership recognized income totalling $231,204 and $405,009 for
the nine months ended September 30, 1997 and 1996, respectively, from
these joint ventures, $78,381 and $227,910 of which was earned during
the quarters ended September 30, 1997 and 1996, respectively.
3. Commitment:
During 1996, the Partnership entered into an agreement with the tenant
of the Checkers (#1698) 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
October 31, 1997, the sale had not occurred.
4. Subsequent Event:
During October 1997, the Partnership entered into an agreement with an
unrelated third party to sell the Checkers (#486) property in Richmond,
Virginia. The general partners believe that the anticipated sales price
exceeds the Partnership's cost attributable to the property. As of
October 31, 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 September 30,
1997, the Partnership owned 59 Properties, including interests in nine
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
$2,782,288 and $2,812,597 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 below in
"Results of Operations", 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 January 1997, Wood-Ridge Real Estate Joint Venture reinvested
$502,598 of the remaining net sales proceeds from the sale of two Properties in
September 1996, in a Taco Bell Property in Anniston, Alabama. As of September
30, 1997, the Partnership and the other joint venture partner had each received
approximately $52,000, representing a return of capital, for the remaining
uninvested net sales proceeds. As of September 30, 1997, the Partnership owned a
50 percent interest in the profits and losses of the joint venture.
In September 1997, the Partnership entered into a joint venture
arrangement, CNL Kingston Joint Venture, with an affiliate of the Partnership
which has the same general partners, to construct and hold one restaurant
Property. As of September 30, 1997, the Partnership and its co-venture partner
had contributed $77,277 and $116,206, respectively, to purchase land relating to
the joint venture. The Partnership and its co-venture partner have agreed to
contribute approximately $130,200 and $195,800, respectively, in construction
costs to the joint venture. When construction is completed, the Partnership and
its co-venture partner expect to have an approximate 40 and 60 percent interest,
respectively, in the profits and losses of the joint venture.
7
<PAGE>
Liquidity and Capital Resources - Continued
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 September 30, 1997, the Partnership had
$1,434,583 invested in such short-term investments, as compared to $1,462,012 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, including distributions payable,
increased to $1,077,939 at September 30, 1997, from $1,010,112 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.
During 1996, the Partnership entered into an agreement with the tenant
of the Checkers (#1698) 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 October 31, 1997, the
sale had not occurred.
During October 1997, the Partnership entered into an agreement with an
unrelated third party to sell the Checkers (#486) Property in Richmond,
Virginia. The general partners believe that the anticipated sales price exceeds
the Partnership's cost attributable to the Property. As of October 31, 1997, the
sale had not occurred.
Based on current and anticipated future cash from operations, the
Partnership declared distributions to the limited partners of $2,784,390 and
$2,784,392 for the nine months ended September 30, 1997 and 1996, respectively
($928,130 and $928,132 for each of the quarters ended September 30, 1997 and
1996, respectively). This represents distributions for each applicable nine
months of $0.62 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 contribution. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
8
<PAGE>
Liquidity and Capital Resources - Continued
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 nine months ended September 30, 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 nine months ended September 30, 1997 and 1996, the Partnership earned
$2,934,924 and $2,981,680, respectively, in rental income from operating leases
and earned income from direct financing leases from these Properties, $977,641
and $1,000,417 of which was earned during the quarters ended September 30, 1997
and 1996, respectively. Rental and earned income decreased by $21,000 and
$42,000 during the quarter and nine months ended September 30, 1997,
respectively, due to the fact that during May 1997, the operator of the Property
in Akron, Ohio, ceased restaurant operations and vacated the Property. The
Partnership ceased recording rental income and wrote-off the related allowance
for doubtful accounts. The Partnership entered into a long-term, triple-net
lease for this Property with the operator of an Arlington Big Boy in September
1997, with rental income commencing the earlier of (i) the day the restaurant
opens for business, (ii) the day renovations are completed or (iii) December 16,
1997.
In addition, during the nine months ended September 30, 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 nine months ended September
30, 1997, the Partnership owned and leased nine Properties indirectly through
joint venture arrangements. In connection therewith, during the nine months
ended September 30, 1997 and 1996, the Partnership earned $231,204 and $405,009,
respectively, attributable to net income earned by these joint ventures, $78,381
and $227,910 of which was earned during the quarters ended September 30, 1997
and 1996, respectively. The decrease in net income earned by joint ventures is
primarily attributable to the fact that in September 1996, Wood- Ridge Real
Estate Joint Venture, in which the Partnership owns a 50 percent interest,
recognized a gain of approximately $280,800 for financial reporting purposes as
a result of the sale of its two Properties in September 1996. Wood-Ridge Real
Estate Joint Venture reinvested the net sales proceeds from the sales of the two
Properties in five replacement Properties in October 1996, and acquired one
additional replacement Property in January 1997.
9
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $457,419 and $449,832 for the nine months ended September 30, 1997 and
1996, respectively, of which $138,402 and $140,810 were incurred for the
quarters ended September 30, 1997 and 1996, respectively. The increase in
operating expenses during the nine months ended September 30, 1997, as compared
to the nine months ended September 30, 1996, is primarily attributable to the
fact that the Partnership recorded bad debt expense of $14,000 relating to the
Property in Akron, Ohio. Due to the fact that the former tenant ceased operating
the Property in May 1997, the general partners believe collection of this amount
is doubtful. In addition, the Partnership incurred real estate taxes relating to
this Property of approximately $7,200 and $3,400 for the nine months ended
September 30, 1997 and 1996, respectively. The increase in operating expenses
during the nine months ended September 30, 1997, is partially offset by, and the
decrease in operating expenses during the quarter ended September 30, 1997, is
partially attributable to, a decrease in accounting and administrative expenses
associated with operating the Partnership and its Properties.
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 September 30, 1997.
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 10th day of November, 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 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 XIV, 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> 1,434,583
<SECURITIES> 0
<RECEIVABLES> 2,071
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,811,017
<DEPRECIATION> 1,211,418
<TOTAL-ASSETS> 41,081,362
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,003,423
<TOTAL-LIABILITY-AND-EQUITY> 41,081,362
<SALES> 0
<TOTAL-REVENUES> 2,978,291
<CGS> 0
<TOTAL-COSTS> 443,419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,752,076
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,752,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,752,076
<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>
