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, 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
0-23974
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
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
March 31, December 31,
ASSETS 1998 1997
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,380,008
and $1,295,713 $24,529,387 $25,217,725
Net investment in direct
financing leases 8,536,965 9,041,485
Investment in joint ventures 3,349,239 3,271,739
Cash and cash equivalents 1,322,671 1,285,777
Restricted cash 1,532,620 318,592
Receivables 6,570 19,912
Prepaid expenses 12,266 7,915
Organization costs, less
accumulated amortization of
$9,099 and $8,599 901 1,401
Accrued rental income, less reserves
of $7,876 and $6,295 1,882,584 1,820,078
----------- -----------
$41,173,203 $40,984,624
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,997 $ 10,258
Accrued and escrowed real
estate taxes payable 14,225 19,570
Distributions payable 928,130 928,130
Due to related parties 11,220 7,853
Rents paid in advance 179,316 29,656
----------- -----------
Total liabilities 1,139,888 995,467
Commitment (Note 5)
Partners' capital 40,033,315 39,989,157
----------- -----------
$41,173,203 $40,984,624
=========== ===========
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,
1998 1997
---------- ----------
Revenues:
Rental income from operating leases $ 717,277 $ 723,768
Earned income from direct financing
leases 242,219 255,292
Interest and other income 20,979 14,042
---------- ----------
980,475 993,102
---------- ----------
Expenses:
General operating and administrative 36,303 36,215
Professional services 6,182 5,788
Bad debt expense - 14,000
Management fees to related parties 9,506 9,554
Real estate taxes 3,450 4,170
State and other taxes 20,996 21,827
Depreciation and amortization 85,053 85,022
---------- ----------
161,490 176,576
---------- ----------
Income Before Equity in Earnings of
Joint Ventures and Gain on Sale
of Land 818,985 816,526
Equity in Earnings of Joint Ventures 82,505 75,246
Gain on Sale of Land 70,798 -
---------- ---------
Net Income $ 972,288 $ 891,772
========== ==========
Allocation of Net Income:
General partners $ 9,014 $ 8,918
Limited partners 963,274 882,854
---------- ----------
$ 972,288 $ 891,772
========== ==========
Net Income Per Limited Partner Unit $ 0.21 $ 0.20
========== ==========
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,
1998 1997
------------- -----------
General partners:
Beginning balance $ 146,640 $ 109,981
Net income 9,014 36,659
----------- -----------
155,654 146,640
----------- -----------
Limited partners:
Beginning balance 39,842,517 39,925,756
Net income 963,274 3,629,281
Distributions ($0.21 and
$0.83 per limited partner
unit, respectively) (928,130) (3,712,520)
----------- -----------
39,877,661 39,842,517
----------- -----------
Total partners' capital $40,033,315 $39,989,157
=========== ===========
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,
1998 1997
---------- ----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $1,050,016 $ 923,708
---------- ----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building 1,208,732 -
Investment in joint venture (84,992) -
Return of capital from joint
venture - 54,074
Increase in restricted cash (1,208,732) -
---------- ---------
Net cash provided by
(used in) investing
activities (84,992) 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 in Cash and Cash
Equivalents 36,894 49,652
Cash and Cash Equivalents at
Beginning of Quarter 1,285,777 1,462,012
---------- ----------
Cash and Cash Equivalents at
End of Quarter $1,322,671 $1,511,664
========== ==========
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, 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 ended March 31, 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 XIV, Ltd. (the "Partnership") for the year ended December
31, 1997.
2. Land and Buildings on Operating Leases:
In January 1998, the Partnership sold its property in Madison, Alabama,
to a third party for $740,000 and received net sales proceeds of
$696,486. Due to the fact that during 1997, the Partnership wrote off
$13,314 in accrued rental income, representing a portion of the accrued
rental income that the Partnership had recognized since the inception
of the lease relating to the straight-lining of future scheduled rent
increases in accordance with generally accepted accounting principles,
no gain or loss was incurred for financial reporting purposes in
January 1998 relating to this sale. This property was originally
acquired by the Partnership in December 1993 and had a cost of
approximately $659,000, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $37,500 in excess of its original purchase price. The
Partnership intends to reinvest the net sales proceeds in an additional
property.
In January 1998, the Partnership sold one of its properties in
Richmond, Virginia for $512,462 and received net sales proceeds of
$512,246, resulting in a gain of $70,798 for financial reporting
purposes. This property was originally acquired by the Partnership in
March 1994 and had a cost of approximately $382,400, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the property for approximately $129,800 in excess of
its original purchase price. The Partnership intends to reinvest the
net sales proceeds in an additional property.
5
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
3. Net Investment in Direct Financing Leases:
In January 1998, the Partnership sold its property in Madison, Alabama,
for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value) and
unearned income relating to the building were removed from the accounts
(see Note 2).
4. Restricted Cash:
As of March 31, 1998, $318,592 in net proceeds from the sale of the
right of way taking of the Property in Riviera Beach, Florida, and
$1,208,732 in net proceeds from the sales of the properties in Madison,
Alabama and Richmond, Virginia, plus accrued interest of $5,296, were
being held in interest-bearing escrow accounts pending the release of
funds by escrow agents to acquire additional properties.
5. Commitment:
During 1997, the Partnership entered into an agreement with the tenant
of one of the Checkers properties in Richmond, Virginia, to sell the
property. The anticipated sales price exceeds the Partnership's net
carrying value attributable to the property. As of April 30, 1998, the
sale had not occurred.
6. Subsequent Event:
In April 1998, the Partnership reached an agreement to accept $360,000
as the total sales price of the property in Riviera Beach, Florida,
which was taken through a total right of way taking in December 1997.
The Partnership had received $318,592 as of March 31, 1998 (see Note
4). Upon agreement and receipt of the final sales price of $360,000,
the Partnership recognized a gain of approximately $41,400 for
financial reporting purposes.
In April 1998, the Partnership entered into a joint venture
arrangement, Melbourne Joint Venture, with an affiliate of the
Partnership which has the same general partners, to construct and hold
one restaurant property, at a total cost of $1,052,552. The Partnership
and its co-venture partner agreed to each contribute approximately
$526,276. The Partnership and its co-venture partner each expect to
have a 50 percent interest in the profits and losses of the joint
venture.
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. The leases
are triple-net leases, with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of March 31, 1998, the
Partnership owned 56 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 quarters ended
March 31, 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 $1,050,016 and
$923,708 for the quarters ended March 31, 1998 and 1997, respectively. The
increase in cash from operations for the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997, is primarily a result of changes
in income and expenses as described in "Results of Operations" below and changes
in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1998.
In January 1998, the Partnership sold its Property in Madison, Alabama,
to a third party for $740,000 and received net sales proceeds of $696,486. Due
to the fact that during 1997 the Partnership wrote off $13,314 in accrued rental
income, representing a portion of the accrued rental income that the Partnership
had recognized since the inception of the lease relating to the straight-lining
of future scheduled rent increases in accordance with generally accepted
accounting principles, no gain or loss was incurred for financial reporting
purposes in January 1998 relating to this sale. This Property was originally
acquired by the Partnership in December 1993 and had a cost of approximately
$659,000, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the Property for approximately $37,500 in excess
of its original purchase price. As of March 31, 1998, the net sales proceeds of
$696,486 plus accrued interest of $3,948, were being held in an interest-bearing
escrow account pending the release of funds by the escrow agent to acquire an
additional Property.
7
<PAGE>
Liquidity and Capital Resources - Continued
In addition, in January 1998, the Partnership sold one of its
properties in Richmond, Virginia for $512,462 and received net sales proceeds of
$512,246, resulting in a gain of $70,798 for financial reporting purposes. This
Property was originally acquired by the Partnership in March 1994 and had a cost
of approximately $382,400, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Property for
approximately $129,800 in excess of its original purchase price. As of March 31,
1998, the net sales proceeds of $512,246 plus accrued interest of $1,348, were
being held in an interest-bearing escrow account pending the release of funds by
the escrow agent to acquire an additional Property.
In addition, 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 March 31, 1998, the Partnership had contributed
$206,848 to the joint venture. Construction of the restaurant was completed in
January 1998, and as of March 31, 1998 the Partnership owned a 39.94% 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, 1998, the Partnership had
$1,322,671 invested in such short-term investments, as compared to $1,285,777 at
December 31, 1997. The funds remaining at March 31, 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 $1,139,888 at March 31, 1998, from $995,467 at December 31, 1997,
primarily as the result of an increase in rents paid in advance at March 31,
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.
During 1997, the Partnership entered into an agreement with the tenant
of one of the Checkers Properties in Richmond, Virginia, to sell the Property.
The anticipated sales price exceeds the Partnership's net carrying value
attributable to the Property. As of April 30, 1998, the sale had not occurred.
In April 1998, the Partnership reached an agreement to accept $360,000
as the total sales price of the Properties in Riviera Beach, Florida, which was
taken through a total right of way taking in December 1997. The Partnership had
received $318,592 as of March 31, 1998. Upon agreement and receipt of the final
sales price of $360,000, the Partnership recognized a gain of approximately
$41,400 for financial reporting purposes.
8
<PAGE>
Liquidity and Capital Resources - Continued
In April 1998, the Partnership entered into a joint venture
arrangement, Melbourne Joint Venture, with an affiliate of the Partnership which
has the same general partners, to construct and hold one restaurant Property, at
a total cost of $1,052,552. The Partnership and its co-venture partner agreed to
each contribute approximately $526,276. The Partnership and its co-venture
partner each expect to have a 50 percent interest in the profits and losses of
the joint venture.
Based on cash from operations, the Partnership declared distributions
to the limited partners of $928,130 for each of the quarters ended March 31,
1998 and 1997. 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, 1998 and 1997. No amounts distributed to the limited
partners for the quarters ended March 31, 1998 and 1997, 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 quarter ended March 31, 1997, the Partnership owned and
leased 50 wholly owned Properties (including one Property in Riviera Beach,
Florida, sold through a total right of way taking in December 1997) and during
the quarter ended March 31, 1998, the Partnership owned and leased 49 wholly
owned Properties (including two Properties in Madison, Alabama and Richmond,
Virginia, which were sold in January 1998) to operators of fast-food and
family-style restaurant chains. In connection therewith, during the quarters
ended March 31, 1998 and 1997, the Partnership earned $959,496 and $979,060,
respectively, in rental income from operating leases and earned income from
direct financing leases from these Properties. The decrease in rental and earned
income during the quarter ended March 31, 1998, as compared to the quarter ended
March 31, 1997, is primarily attributable to a decrease in rental and earned
income as a result of the 1998 sales of the Properties in Madison, Alabama and
Richmond, Virginia and the 1997 right of way taking of the Property in Riviera
Beach, Florida.
9
<PAGE>
Results of Operations - Continued
In addition, during the quarters ended March 31, 1998 and 1997, the
Partnership owned and leased nine and eight Properties, respectively, indirectly
through joint venture arrangements. In connection therewith, during the quarters
ended March 31, 1998 and 1997, the Partnership earned $82,505 and $75,246,
respectively, attributable to net income earned by these joint ventures. The
increase in net income earned by joint ventures during the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is primarily
attributable to the Partnership investing in Kingston Joint Venture in September
1997.
Operating expenses, including depreciation and amortization expense,
were $161,490 and $176,576 for the quarters ended March 31, 1998 and 1997,
respectively. The decrease in operating expenses during the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is primarily
attributable to the fact that during 1997 the Partnership recorded bad debt
expense of $14,000 relating to the Property in Akron, Ohio due to the tenant
ceasing restaurant operations and vacating the Property. This Property was
re-leased in September 1997 with rental income commencing in December 1997. No
such expense was recorded during the quarter ended March 31, 1998.
As a result of the sale of one of the Properties in Richmond, Virginia,
as described above in "Liquidity and Capital Resources," the Partnership
recognized a gain of $70,798 for financial reporting purposes during the quarter
ended March 31, 1998. No Properties were sold during the quarter ended March 31,
1997.
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 March 31, 1998.
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 12th day of May, 1998.
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, 1998, and its statement of
income for the three months then ended and it qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XIV, Ltd. for the three months
ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,855,291<F2>
<SECURITIES> 0
<RECEIVABLES> 6,570
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,909,395
<DEPRECIATION> 1,380,008
<TOTAL-ASSETS> 41,173,203
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,033,315
<TOTAL-LIABILITY-AND-EQUITY> 41,173,203
<SALES> 0
<TOTAL-REVENUES> 980,475
<CGS> 0
<TOTAL-COSTS> 161,490
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 972,288
<INCOME-TAX> 0
<INCOME-CONTINUING> 972,288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 972,288
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>Cash balance includes $1,532,620 in restricted cash.
<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>
