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
0-22485
CNL Income Fund XVII, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3295393
(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 4-5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-10
Part II
Other Information 11
<PAGE>
CNL INCOME FUND XVII, 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 $650,015 and
$553,968 $21,232,822 $21,328,869
Net investment in direct financing
leases 3,048,136 3,056,783
Investment in joint ventures 1,452,744 1,328,067
Cash and cash equivalents 1,176,334 1,238,799
Receivables, less allowance for
doubtful accounts of $2,947 and
$14,333 613 613
Prepaid expenses 3,243 20
Organization costs, less accumulated
amortization of $4,809 and $4,309 5,191 5,691
Accrued rental income 429,930 357,246
Other assets 103,157 104,391
----------- -----------
$27,452,170 $27,420,479
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,217 $ 2,922
Accrued construction costs payable 38,834 38,834
Distributions payable 600,000 600,000
Due to related parties 12,948 2,875
Rents paid in advance 87,312 55,762
Deferred rental income 55,481 64,690
----------- -----------
Total liabilities 796,792 765,083
Minority interest 422,574 419,193
Partners' capital 26,232,804 26,236,203
----------- -----------
$27,452,170 $27,420,479
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1998 1997
--------- ---------
Revenues:
Rental income from operating leases $ 620,816 $ 516,107
Earned income from direct financing
leases 94,335 49,710
Interest and other income 10,675 31,101
--------- ---------
725,826 596,918
--------- ---------
Expenses:
General operating and administrative 26,647 33,900
Professional services 4,196 6,289
Management fees to related party 6,760 5,293
State and other taxes 11,804 6,316
Depreciation and amortization 98,833 95,589
--------- ---------
148,240 147,387
--------- ---------
Income Before Minority Interest in
(Income) Loss of Consolidated Joint
Venture and Equity in Earnings of
Unconsolidated Joint Ventures 577,586 449,531
Minority Interest in (Income) Loss of
Consolidated Joint Venture (15,731) 241
Equity in Earnings of Unconsolidated
Joint Ventures 34,746 18,845
--------- ---------
Net Income $ 596,601 $ 468,617
========= =========
Allocation of Net Income:
General partners $ (34) $ (564)
Limited partners 596,635 469,181
--------- ---------
$ 596,601 $ 468,617
========= =========
Net Income Per Limited Partner Unit $ 0.20 $ 0.16
========= =========
Weighted Average Number of Limited
Partner Units Outstanding 3,000,000 3,000,000
========= =========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1998 1997
------------- ------------
General partners:
Beginning balance $ (551) $ 288
Net income (34) (839)
----------- -----------
(585) (551)
----------- -----------
Limited partners:
Beginning balance 26,236,754 26,319,858
Net income 596,635 2,204,396
Distributions ($0.20 and
$0.76 per limited partner
unit, respectively) (600,000) (2,287,500)
----------- -----------
26,233,389 26,236,754
----------- -----------
Total partners' capital $26,232,804 $26,236,203
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XVII, 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 $ 677,692 $ 568,705
----------- -----------
Cash Flows From Investing
Activities:
Additions to land and
buildings on operating
leases - (1,796,769)
Investment in direct
financing leases - (8,337)
Investment in joint ventures (127,807) (932,003)
----------- -----------
Net cash used in
investing activities (127,807) (2,737,109)
----------- -----------
Cash Flows From Financing
Activities:
Reimbursement of acquisition
costs paid by related
parties on behalf of
the Partnership - (20,504)
Contributions from minority
interest - 134,107
Distributions to limited
partners (600,000) (490,084)
Distribution to holder of
minority interest (12,350) (6,527)
----------- -----------
Net cash used in
financing activities (612,350) (383,008)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (62,465) (2,551,412)
Cash and Cash Equivalents at
Beginning of Quarter 1,238,799 4,716,719
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 1,176,334 $ 2,165,307
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Quarter Ended
March 31,
1998 1997
----------- -----------
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition costs on behalf
of the Partnership as
follows: $ - $ 6,308
=========== ===========
Distributions declared and unpaid
at end of quarter $ 600,000 $ 525,000
=========== ===========
See accompanying notes to condensed financial statements.
5
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1998 and 1997
1. Significant Accounting Policies:
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 XVII, Ltd. (the "Partnership") for the year ended December
31, 1997.
The Partnership accounts for its 80 percent interest in the accounts of
CNL/GC El Cajon Joint Venture using the consolidation method. Minority
interest represents the minority joint venture partner's proportionate
share of the equity in the Partnership's consolidated joint venture.
All significant intercompany accounts and transactions have been
eliminated.
Certain items in the prior year's financial statements have been
reclassified to conform to 1998 presentation. These reclassifications
had no effect on partners' capital or net income.
6
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
2. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income for at least one of the quarters ended March 31:
1998 1997
-------- ------
Golden Corral Corporation $117,826 $113,797
National Restaurant
Enterprises, Inc. 115,328 69,402
DenAmerica Corp. 108,227 103,997
Foodmaker, Inc. 86,957 65,265
San Diego Food Holdings, Inc. 79,105 -
RTM Indianapolis, Inc. and
RTM Southwest, Texas, Inc. 67,117 67,331
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income for at
least one of the quarters ended March 31:
1998 1997
-------- ---------
Golden Corral Family
Steakhouse Restaurants $196,931 $113,797
Burger King 124,605 76,055
Jack in the Box 86,957 65,265
Boston Market 77,442 74,909
Arby's 67,117 67,331
Denny's 63,615 63,026
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the ongoing operations of the lessees.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XVII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on February 10, 1995, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants are to be
constructed, to be leased primarily to operators of national and regional
fast-food, family-style and casual dining restaurant chains (collectively, the
"Properties"). The leases are triple-net leases, with the lessee generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of March 31, 1998, the Partnership owned 28 Properties, including
three 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 is 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 $677,692 and $568,705 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.
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 $311,048 to the
joint venture. Construction of the restaurant was completed in January 1998, and
as of March 31, 1998, the Partnership owned a 60.06% interest in the profits and
losses of the joint venture.
Currently, rental income from the Partnership's Properties is 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 March 31, 1998, the Partnership had $1,176,334
invested in such short-term investments, as compared to $1,238,799 at December
31, 1997. The funds remaining at March 31, 1998, after the payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
8
<PAGE>
Liquidity and Capital Resources
Total liabilities of the Partnership, including distributions payable,
increased to $796,792 at March 31, 1998, from $765,083 at December 31, 1997,
primarily as a 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.
Based on cash from operations, the Partnership declared distributions
to the limited partners of $600,000 and $525,000 for the quarters ended March
31, 1998 and 1997, respectively. This represents distributions of $0.20 and
$0.18 per unit for the quarters ended March 31, 1998 and 1997, respectively. 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 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 generally 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 quarters ended March 31, 1998 and 1997, the Partnership and
its consolidated joint venture, CNL/GC El Cajon Joint Venture, owned and leased
23 wholly owned Properties, 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 $715,151 and $565,817, respectively, in
rental income from operating leases and earned income from direct financing
leases from these Properties. The increase 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 the fact that additional construction amounts
on which rents are calculated, were funded subsequent to the quarter ended March
31, 1997.
9
<PAGE>
Results of Operations - Continued
In addition, during the quarter ended March 31, 1997, the Partnership
owned and leased three Properties with affiliates as tenants-in-common and one
Property indirectly through a joint venture arrangement and during the quarter
ended March 31, 1998, the Partnership owned and leased three Properties with
affiliates as tenants-in-common and two Properties indirectly through joint
venture arrangements. In connection therewith, during the quarters ended March
31, 1998 and 1997, the Partnership earned $34,746 and $18,845, respectively,
attributable to net income earned by these joint ventures. The increase in net
income earned by these joint ventures is primarily due to the fact that the
Properties owned by the joint ventures and the Properties held as
tenants-in-common with affiliates of the general partners, were operational for
the full quarter ended March 31, 1998, as compared to a partial quarter ended
March 31, 1997.
During at least one of the quarters ended March 31, 1998 and 1997, six
lessees, of the Partnership, (i) Golden Corral Corporation, (ii) National
Restaurant Enterprises, Inc., (iii) DenAmerica Corp., (iv) Foodmaker, Inc., (v)
San Diego Food Holdings, Inc. and (vi) RTM Indianapolis, Inc. and RTM Southwest,
Texas, Inc., (hereinafter referred to as RTM, Inc.) each contributed more than
ten percent of the Partnership's total rental income. As of March 31, 1998,
Golden Corral Corporation was the lessee under leases relating to three
restaurants, National Restaurant Enterprises, Inc. was the lessee under leases
relating to two restaurants, DenAmerica Corporation was the lessee under leases
relating to four restaurants, Foodmaker, Inc. was the lessee under leases
relating to four restaurants, San Diego Holdings, Inc. was the lessee under a
lease relating to one restaurant and RTM, Inc. was the lessee under leases
relating to three restaurants. It is anticipated that, based on the minimum
rental payments required by the leases, Golden Corral Corporation, National
Restaurants Enterprises, Inc., DenAmerica, Corp., Foodmaker, Inc. and San Diego
Food Holdings, Inc., each will continue to contribute more than ten percent of
the Partnership's total rental income during the remainder of 1998 and
subsequent years. During at least one of the quarters ended March 31, 1998 and
1997, six restaurant chains, Golden Corral Family Steakhouse Restaurants,
Arby's, Denny's, Jack in the Box, Boston Market and Burger King, each accounted
for more than ten percent of the Partnership's total rental income. During the
remainder of 1998 and subsequent years, it is anticipated that Golden Corral
Family Steakhouse Restaurants, Jack in the Box, Boston Market and Burger King
each will continue to account for more than ten percent of the total rental
income to which the Partnership is entitled under the terms of the leases. Any
failure of these lessees or restaurant chains could materially affect the
Partnership's income.
Operating expenses including depreciation and amortization expense,
were $148,240 and $147,387 for the quarters ended March 31, 1998 and 1997,
respectively.
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 11th day of May, 1998.
CNL INCOME FUND XVII, 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 XVII, Ltd. at March 31, 1998, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XVII, 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> 1,176,334
<SECURITIES> 0
<RECEIVABLES> 3,560
<ALLOWANCES> 2,947
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,882,837
<DEPRECIATION> 650,015
<TOTAL-ASSETS> 27,452,170
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,232,804
<TOTAL-LIABILITY-AND-EQUITY> 27,452,170
<SALES> 0
<TOTAL-REVENUES> 725,826
<CGS> 0
<TOTAL-COSTS> 148,240
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 596,601
<INCOME-TAX> 0
<INCOME-CONTINUING> 596,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 596,601
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
