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
0-26216
CNL Income Fund XV, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3198888
(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 7-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND XV, 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 $924,382 and
$801,601 $22,022,357 $22,145,138
Net investment in direct
financing leases 9,216,563 9,264,307
Investment in joint ventures 2,758,074 2,561,816
Cash and cash equivalents 1,317,627 1,614,708
Receivables, less allowance for
doubtful accounts of $25,566
in 1998 - 26,888
Prepaid expenses 16,922 7,633
Organization costs, less
accumulated amortization
of $8,548 and $7,548 1,452 2,452
Accrued rental income 1,366,893 1,422,781
----------- -----------
$36,699,888 $37,045,723
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,959 $ 6,991
Accrued and escrowed real estate
taxes payable 3,757 6,158
Distributions payable 800,000 800,000
Due to related parties 4,550 4,311
Rents paid in advance 59,247 4,860
----------- -----------
Total liabilities 876,513 822,320
Partners' capital 35,823,375 36,223,403
----------- -----------
$36,699,888 $37,045,723
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XV, 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 $ 618,834 $ 631,815 $1,250,545 $1,262,533
Adjustments to accrued
rental income (265,192) - (265,192) -
Earned income from direct
financing leases 243,835 265,213 507,064 531,048
Interest and other income 19,451 15,695 39,637 30,061
---------- ---------- ---------- ----------
616,928 912,723 1,532,054 1,823,642
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 35,368 37,987 66,963 69,791
Professional services 8,708 4,974 13,509 10,112
Management fees to
related parties 8,525 8,741 17,295 17,465
Real estate taxes 2,646 - 2,646 -
State and other taxes 7,620 6,049 27,763 26,009
Depreciation and
amortization 62,100 62,080 124,200 124,149
---------- ---------- ---------- ----------
124,967 119,831 252,376 247,526
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures 491,961 792,892 1,279,678 1,576,116
Equity in Earnings of
Joint Ventures 60,549 59,675 120,294 117,311
---------- ---------- ---------- ----------
Net Income $ 552,510 $ 852,567 $1,399,972 $1,693,427
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 5,525 $ 8,525 $ 14,000 $ 16,934
Limited partners 546,985 844,042 1,385,972 1,676,493
---------- ---------- ---------- ----------
$ 552,510 $ 852,567 $1,399,972 $1,693,427
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.14 $ 0.21 $ 0.35 $ 0.42
========== ========== ========== ==========
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 XV, 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 $ 117,411 $ 83,062
Net income 14,000 34,349
----------- -----------
131,411 117,411
----------- -----------
Limited partners:
Beginning balance 36,105,992 35,905,436
Net income 1,385,972 3,400,556
Distributions ($0.45 and
$0.80 per limited partner
unit, respectively) (1,800,000) (3,200,000)
----------- -----------
35,691,964 36,105,992
----------- -----------
Total partners' capital $35,823,375 $36,223,403
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XV, 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 $ 1,710,905 $ 1,673,623
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint venture (207,986) -
Return of capital from
joint venture - 51,950
----------- -----------
Net cash provided by
(used in) investing
activities (207,986) 51,950
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,800,000) (1,680,000)
----------- -----------
Net cash used in financing
activities (1,800,000) (1,680,000)
----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents (297,081) 45,573
Cash and Cash Equivalents at
Beginning of Period 1,614,708 1,536,163
----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,317,627 $ 1,581,736
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of period $ 800,000 $ 800,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XV, 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 XV, 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 of results of operations.
2. Investment in Joint Ventures:
In June 1998, the Partnership acquired a 14.93% interest in a property
in Fort Myers, Florida, as tenants-in-common with an affiliate of the
general partners. The Partnership accounts for its investment in this
property using the equity method since the Partnership shares control
with an affiliate, and amounts relating to its investments are included
in investment in joint ventures.
5
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
2. Investment in Joint Ventures - Continued:
Wood-Ridge Real Estate Joint Venture and the Partnership and affiliates
as tenants-in-common in two separate tenancy-in-common arrangements,
own and lease six properties and one property, respectively, to
operators of national fast-food or family-style restaurants. The
following presents the combined, condensed financial information for
all of the Partnership's investments in joint ventures at:
June 30, December 31,
1998 1997
Land and buildings on
operating leases, less
accumulated depreciation $6,120,125 $5,563,722
Net investment in direct
financing lease 831,390 -
Cash 7,840 10,890
Receivables - 5,923
Accrued rental income 103,200 74,001
Other assets 1,289 1,078
Liabilities 8,385 18,195
Partners' capital 7,055,459 5,637,419
Revenues 330,722 650,354
Net income 267,123 522,611
The Partnership recognized income totalling $120,294 and $117,311 for
the six months ended June 30, 1998 and 1997, respectively, from these
joint ventures, $60,549 and $59,675 of which was earned during the
quarters ended June 30, 1998 and 1997, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XV, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 2, 1993, 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 June 30, 1998, the
Partnership owned 50 Properties, including interests in six Properties owned by
a joint venture in which the Partnership is a co-venturer and two 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 $1,710,905 and
$1,673,623 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.
Other sources and uses of capital included the following during the six
months ended June 30, 1998.
In June 1998, the Partnership acquired a Property in Fort Myers,
Florida with an affiliate of the general partners as tenants-in-common. In
connection therewith, the Partnership and the affiliate entered into an
agreement whereby each co-venturer will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of June 30,
1998, the Partnership owned a 14.93% interest in the Property.
Currently, cash reserves and 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 the partners. At June 30, 1998,
the Partnership had $1,317,627 invested in such short-term investments, as
compared to $1,614,708 at December 31, 1997. The decrease in cash and cash
equivalents for the six months ended June 30, 1998, is primarily attributable to
the acquisition of a Property as tenants-in-common with an affiliate of the
general partners, as described above. 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.
7
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
increased to $876,513 at June 30, 1998, from $822,320 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 cash from operations, and for the six months ended June 30,
1998, accumulated excess operating reserves, the Partnership declared
distributions to the limited partners of $1,800,000 and $1,600,000 for the six
months ended June 30, 1998 and 1997, respectively ($800,000 for each of the
quarters ended June 30, 1998 and 1997). This represents distributions of $0.45
and $0.40 per unit for the six months ended June 30, 1998 and 1997, respectively
($0.20 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, 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 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 six months ended June 30, 1998 and 1997, 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 $1,492,417
and $1,793,581, respectively, in rental income from operating leases (net of
adjustments to accrued rental income) and earned income from direct financing
leases from these Properties, $597,477 and $897,028 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, is primarily
attributable to the fact that in June 1998, the tenant of the Properties in
Lexington and Gastonia, North Carolina; Medina, Ohio and Lancaster, South
Carolina filed for bankruptcy and rejected the
8
<PAGE>
Results of Operations - Continued
leases relating to these Properties. As a result, during the quarter and six
months ended June 30, 1998, the Partnership wrote off approximately $265,200 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 $25,600 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
rental and earned income from these Properties until replacement tenants or
purchasers for these Properties are located.
For the six months ended June 30, 1997, the Partnership also owned and
leased six Properties indirectly through one joint venture arrangement and one
Property as tenants-in-common with affiliates of the general partners. For the
six months ended June 30, 1998, the Partnership also owned an additional
Property, held as tenants-in-common with an affiliate of the general partners.
In connection therewith, during the six months ended June 30, 1998 and 1997, the
Partnership earned $120,294 and $117,311, respectively, attributable to net
income earned by these joint ventures, $60,549 and $59,675 of which was earned
during the quarters ended June 30, 1998 and 1997, respectively.
Operating expenses, including depreciation and amortization expense,
were $252,376 and $247,526 for the six months ended June 30, 1998 and 1997,
respectively, $124,967 and $119,831 of which were incurred for the quarters
ended June 30, 1998 and 1997, respectively.
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 XV, 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 XV, 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 XV, 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> 1,317,627
<SECURITIES> 0
<RECEIVABLES> 25,566
<ALLOWANCES> 25,566
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,946,739
<DEPRECIATION> 924,382
<TOTAL-ASSETS> 36,699,888
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,823,375
<TOTAL-LIABILITY-AND-EQUITY> 36,699,888
<SALES> 0
<TOTAL-REVENUES> 1,532,054
<CGS> 0
<TOTAL-COSTS> 252,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,399,972
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,399,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,399,972
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XV, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
