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, 2002
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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
0-19144
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CNL Income Fund VI, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2922954
- ----------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
----------------------------
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 _________
CONTENTS
Page
Part I.
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 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
11
Item 4. Controls and Procedures 11
Part II.
Other Information 12-13
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------------ -------------------
ASSETS
Land and buildings on operating leases, net $ 15,736,997 $ 16,023,866
Net investment in direct financing leases 2,356,267 2,399,329
Investment in joint ventures 8,556,763 8,387,142
Cash and cash equivalents 737,232 1,126,921
Receivables, less allowance for doubtful accounts
of $9,825 and $150,802, respectively 34,548 124,865
Due from related parties -- 15,981
Accrued rental income, less allowance for doubtful
accounts of $47,718, in 2002 and 2001 642,874 590,190
Other assets 55,502 40,760
------------------ -------------------
$ 28,120,183 $ 28,709,054
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 18,198 $ 16,859
Real estate taxes payable 9,323 13,119
Distributions payable 787,500 787,500
Due to related parties 25,747 11,507
Rents paid in advance and deposits 6,006 37,389
------------------ -------------------
Total liabilities 846,774 866,374
Minority interest 143,673 137,143
Partners' capital 27,129,736 27,705,537
------------------ -------------------
$ 28,120,183 $ 28,709,054
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------------- --------------- -------------- ---------------
Revenues:
Rental income from operating leases $ 548,443 $ 510,480 $ 1,602,813 $ 1,530,083
Earned income from direct financing leases 72,165 42,863 217,756 139,805
Interest and other income 3,496 5,921 12,547 79,560
-------------- --------------- -------------- ---------------
624,104 559,264 1,833,116 1,749,448
-------------- --------------- -------------- ---------------
Expenses:
General operating and administrative 59,817 36,837 196,983 243,677
Property expenses 29,292 10,304 53,123 84,665
State and other taxes 51 -- 28,687 45,398
Depreciation and amortization 95,622 92,526 288,108 278,800
Provision for write-down of assets -- 301,718 -- 565,062
-------------- --------------- -------------- ---------------
184,782 441,385 566,901 1,217,602
-------------- --------------- -------------- ---------------
Income Before Loss on Sale of Assets, Minority
Interest in Income of Consolidated Joint Venture
and Equity in Earnings of Unconsolidated Joint
Ventures 439,322 117,879 1,266,215 531,846
Loss on sale of assets -- -- -- (14,008 )
Minority Interest in Income of Consolidated Joint
Venture (5,669 ) (6,259 ) (18,548 ) (18,653 )
Equity in Earnings of Unconsolidated Joint Ventures 198,605 222,171 539,032 737,463
-------------- --------------- -------------- ---------------
Net Income $ 632,258 $ 333,791 $ 1,786,699 $ 1,236,648
============== =============== ============== ===============
Net Income Per Limited Partner Unit $ 9.03 $ 4.77 $ 25.52 $ 17.67
============== =============== ============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 70,000 70,000 70,000 70,000
============== =============== ============== ===============
See acompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2002 2001
--------------------- ------------------
General partners:
Beginning balance $ 291,599 $ 291,598
Net income -- --
--------------------- ------------------
291,599 291,598
--------------------- ------------------
Limited partners:
Beginning balance 27,413,939 28,530,802
Net income 1,786,699 2,033,137
Distributions ($33.75 and $45.00 per
limited partner unit, respectively) (2,362,500 ) (3,150,000 )
--------------------- ------------------
26,838,138 27,413,939
--------------------- ------------------
Total partners' capital $ 27,129,737 $ 27,705,537
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2002 2001
-------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 2,232,266 $ 2,187,962
-------------- ---------------
Cash Flows from Investing Activities:
Additions to land and building on operating lease -- (2,098,366 )
Investment in joint ventures (247,437 ) (1,367,769 )
Liquidating distribution from joint venture -- 1,273,773
Proceeds from sale of assets -- 83,000
Decrease in restricted cash -- 2,061,560
-------------- ---------------
Net cash used in investing activities (247,437 ) (47,802 )
-------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,362,500 ) (2,362,500 )
Distributions to holder of minority interest (12,018 ) --
-------------- ---------------
Net cash used in financing activities (2,374,518 ) (2,362,500 )
-------------- ---------------
Net Decrease in Cash and Cash Equivalents (389,689 ) (222,340 )
Cash and Cash Equivalents at Beginning of Period 1,126,921 868,873
-------------- ---------------
Cash and Cash Equivalents at End of Period $ 737,232 $ 646,533
============== ===============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
period $ 787,500 $ 787,500
============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
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, 2002 may not be indicative of the results
that may be expected for the year ending December 31, 2002. Amounts as of
December 31, 2001, 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 VI, Ltd. (the "Partnership") for the year ended December 31,
2001.
The Partnership accounts for its approximate 66.14% interest in the
accounts of Caro 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.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets." This statement requires that a long-lived asset be
tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum of
the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. The assessment is based on the carrying amount
of the asset at the date it is tested for recoverability. An impairment
loss is recognized when the carrying amount of a long-lived asset exceeds
its fair value. If an impairment is recognized, the adjusted carrying
amount of a long-lived asset is its new cost basis. The statement also
requires that the results of operations of a component of an entity that
either has been disposed of or is classified as held for sale be reported
as a discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
2. Reclassification:
Certain items in the prior year's financial statements have been
reclassified to conform to 2002 presentation. These reclassifications had
no effect on total partners' capital or net income.
3. Investment in Joint Ventures:
In June 2002, the Partnership and CNL Income Fund XI, Ltd., an affiliate
of the general partners, invested in two properties, one in Universal
City, Texas and one in Schertz, Texas, each as a separate tenancy in
common arrangement. The Partnership and CNL Income Fund XI, Ltd. acquired
these properties from CNL Funding 2001-A, LP, an affiliate of the general
partners (see Note 4). The Partnership and CNL Income Fund XI, Ltd.
entered into agreements whereby each co-tenant will share in the profits
and losses of each property in proportion to its applicable percentage
interest. As of September 30, 2002, the Partnership contributed
approximately $148,500 and $98,900 for a 14.2% and 9.5% interest,
respectively, in these properties.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
3. Investment in Joint Ventures - Continued:
In June 2002, the Partnership and CNL Income Fund XV, Ltd., an affiliate
of the general partners, entered into an agreement with an unrelated
third party to sell the property in Fort Myers, Florida. The Partnership
owns an 85% interest in this property. The contract for the sale of the
property was subsequently terminated and as a result, the tenancy in
common reclassified the asset from real estate held for sale to land and
building on operating leases and accrued rental income.
Auburn Joint Venture, Show Low Joint Venture, Asheville Joint Venture,
Melbourne Joint Venture, Warren Joint Venture, each own and lease one
property to an operator of national fast-food and family-style
restaurants. In addition, the Partnership and affiliates of the general
partners, as tenants-in-common, own and lease one property to an operator
of national fast-food and family-style restaurants in ten separate
tenancy in common arrangements. The following presents the combined,
condensed financial information for the joint ventures and the properties
held as tenants-in-common with affiliates at:
September 30, December 31,
2002 2001
---------------- ----------------
Land and buildings on operating
leases, net $ 15,693,679 $ 13,817,152
Net investment in direct financing
lease 2,727,451 2,750,031
Cash 49,763 86,895
Receivables, less allowance for
doubtful accounts 5,507 31,451
Accrued rental income 611,405 497,023
Other assets 1,032 3,412
Liabilities 13,690 1,057
Partners' capital 19,075,147 17,184,907
Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------ ---------------- --------------- ----------------
Revenues $ 540,500 $ 532,176 $ 1,391,236 $ 1,476,060
Expenses (99,281 ) (79,767 ) (255,531 ) (252,963 )
Gain on sale of assets - - - 158,119
------------ ---------------- --------------- ----------------
Net Income $ 441,219 $ 452,409 $ 1,135,705 $ 1,381,216
============ ================ =============== ================
The Partnership recognized income of $539,032 and $737,463 during the
nine months ended September 30, 2002 and 2001, respectively, of which
$198,605 and $222,171 were earned during the quarters ended September 30,
2002 and 2001, respectively, from these joint ventures and
tenants-in-common.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Related Party Transactions:
In June 2002, the Partnership and CNL Income Fund XI, Ltd. acquired a
property in Universal City, Texas and one in Schertz, Texas, each as a
separate tenancy-in-common arrangement. The Partnership and CNL Income
Fund XI, Ltd. acquired these properties from CNL Funding 2001-A, LP, for
a total purchase price of approximately $2,087,200 (see Note 3). CNL
Funding 2001-A, LP is an affiliate of the general partners. CNL Funding
2001-A, LP had purchased and temporarily held title to the properties in
order to facilitate the acquisition of the properties by the Partnership.
The purchase price paid by the Partnership and CNL Income Fund XI, Ltd.
represented the costs incurred by CNL Funding 2001-A, LP to acquire and
carry the properties.
5. Subsequent Event:
In October 2002, the property in Marietta, Georgia was destroyed by fire.
The property is covered by insurance held by the tenant. The Partnership
anticipates that the insurance proceeds will exceed the carrying value of
the building at September 30, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988 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 were to
be constructed (the "Properties"), which are leased primarily to operators of
selected national and regional fast-food and family-style restaurant chains
(collectively, the "Properties"). The leases are triple-net leases, with the
lessees generally responsible for all repairs and maintenance, property taxes,
insurance, and utilities. As of September 30, 2001, the Partnership owned 24
Properties directly and 15 Properties indirectly through joint venture or
tenancy in common arrangements. As of September 30, 2002, the Partnership owned
25 Properties directly and 15 Properties indirectly through joint venture or
tenancy in common arrangements.
Capital Resources
Cash from operating activities (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses) was $2,232,266 and $2,187,962 for the
nine months ended September 30, 2002 and 2001, respectively. The increase in
cash from operating activities for the nine months ended September 30, 2002 was
a result of changes in the Partnership's working capital and changes in income
and expenses, as described in "Results of Operations."
Other sources and uses of capital included the following during the nine
months ended September 30, 2002.
In June 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sales of the Properties in Round Rock, Texas and
Cheyenne, Wyoming in a Property in Universal City, Texas and a Property in
Schertz, Texas, each as a separate tenants-in-common arrangement with CNL Income
Fund XI, Ltd., a Florida limited partnership and affiliate of the general
partners. The Partnership and CNL Income Fund XI, Ltd. entered into separate
agreements for each Property, whereby each co-tenant will share in the profits
and losses of each property in proportion to its applicable percentage interest.
As of September 30, 2002, the Partnership contributed approximately $148,500 and
$98,900 for a 14.2% and 9.5% interest, in the Property in Universal City, Texas
and Schertz, Texas, respectively. The Partnership and CNL Income Fund XI, Ltd.
acquired Properties from CNL Funding 2001-A, LP, a Delaware limited partnership
and an affiliate of the general partners. CNL Funding 2001-A, LP had purchased
and temporarily held title to the Properties in order to facilitate the
acquisition of the Properties by the Partnership and CNL Income Fund XI, Ltd.
The purchase prices paid by the Partnership and CNL Income Fund XI, Ltd.
represented the costs incurred by CNL Funding 2001-A, LP to acquire and carry
the Properties. The Partnership anticipates that its distributions will be
sufficient to enable the limited partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the general partners), resulting from
the transactions.
In October 2002, the property in Marietta, Georgia was destroyed by
fire. The property is covered by insurance held by the tenant. The Partnership
anticipates that the insurance proceeds will exceed the carrying value of the
building at September 30, 2002.
Currently, rental income from the Partnership's Properties and any net
sales proceeds from the sale of Properties pending reinvestment in additional
Properties are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts at commercial banks, money
market accounts and certificates of deposit with less than a 90-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses or
to make distributions to the partners. At September 30, 2002, the Partnership
had $737,232 invested in such short-term investments as compared to $1,126,921
at December 31, 2001. The decrease in cash and cash equivalents at September 30,
2002 was primarily due to the fact that in June 2002, the Partnership reinvested
the net sales proceeds from the 2001 sale of the Property in Cheyenne, Wyoming.
The funds remaining at September 30, 2002, will be used to pay distributions and
other liabilities of the Partnership.
Short-Term Liquidity
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 generate net cash flow in
excess of operating expenses.
The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
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.
Total liabilities of the Partnership, including distributions payable,
were $846,774 at September 30, 2002 as compared to $866,374 at December 31,
2001. The decrease in liabilities at September 30, 2002, was primarily a result
of a decrease in rents paid in advance and deposits at September 30, 2002, as
compared to December 31, 2001. Total liabilities at September 30, 2002, to the
extent they exceed cash and cash equivalents at September 30, 2002, will be paid
from future cash from operations, and in the event the general partners elect to
make additional loans or contributions, from general partners' loans or
contributions.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, and for the nine
months ended September 2001, a loan from the corporate general partner, the
Partnership declared distributions to the limited partners of $2,362,500 for
each of the nine months ended September 30, 2002 and 2001, ($787,500 for each of
the quarters ended September 30, 2002 and 2001). This represents distributions
of $33.75 per unit for each of the nine months ended September 30, 2002 and
2001, ($11.25 per unit for each applicable quarter). No distributions were made
to the general partners for the quarters and nine months ended September 30,
2002 and 2001. No amounts distributed to the limited partners for the nine
months ended September 30, 2002 and 2001, 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 to the
limited partners on a quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $1,820,569 for the nine months ended
September 30, 2002, as compared to $1,669,888 in the same period of 2001, of
which $620,608 and $553,343 were earned during the third quarter of 2002 and
2001, respectively. Rental revenues increased during the quarter and nine months
ended September 30, 2002, as compared to the same periods of 2001, as a result
of the Partnership reinvesting a portion of the net sales proceeds from the
sales of several Properties in three additional Properties during 2001.
In addition, the increase in rental revenues during the quarter and nine
months ended September 30, 2002, as compared to the same periods of 2001, was
partially due to the fact that Phoenix Restaurant Group, Inc. ("PRG"), the
tenant of two of the Partnership's Properties, experienced financial
difficulties during 2000. As a result, during the nine months ended September
30, 2001, the Partnership stopped recording rental revenue relating to these two
Properties. In October 2001, PRG filed for bankruptcy and rejected one of the
two leases it had with the Partnership. In December 2001, the Partnership sold
the vacant Property, and reinvested the net sales proceeds in an additional
Property. In addition, the increase in rental revenues was partially
attributable to the fact that since the bankruptcy date, the Partnership has
received rental payments relating to the one Property not rejected by the
tenant. In May 2002, the Partnership assigned the lease relating to the one
Property not rejected by PRG to a new tenant; all lease terms remained the same.
In July 2002, a tenant, Loco Lupe's of Hermitage, Inc., filed for
bankruptcy. As of September 30, 2002, the Partnership has continued receiving
rental payments relating to this lease. While the tenant has neither rejected
nor affirmed the one lease it has with the Partnership, there can be no
assurance that the lease will not be rejected in the future. The lost revenues
that would result if the tenant rejects this lease could have an adverse effect
on the results of operations of the Partnership if the Partnership is unable to
lease the Property in a timely manner.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $539,032 and $737,463, respectively, attributable to net
income earned by joint ventures, of which $198,605 and $222,171 was earned
during the quarters ended September 30, 2002 and 2001, respectively. The
decrease in net income earned by joint ventures during the quarter and nine
months ended September 30, 2002, as compared to the same periods of 2001, was
partially due to the fact that in June 2001, the Partnership and CNL Income Fund
IX, Ltd., as tenants-in-common, sold the Property in Dublin, California, in
which the Partnership owned a 75% interest. In connection with this sale, the
tenancy in common recognized a gain of approximately $158,000 during the nine
months ended September 30, 2001. In addition, the decrease in net income earned
by joint ventures during the quarter and nine months ended September 30, 2002,
was partially due to the fact that in October 2001, the Partnership and CNL
Income Fund XI, Ltd., as tenants-in-common, sold the Property in Round Rock,
Texas, in which the Partnership owned a 77% interest. Each tenancy in common
distributed to the Partnership its pro-rata share of the net sales proceeds from
the respective sales as a liquidating distribution. The decrease in net income
earned by joint ventures was partially offset by the fact that in July 2001, the
Partnership reinvested a portion of these liquidating distributions in an
additional Property, as tenants-in-common with CNL Income Fund IX, Ltd. and CNL
Income Fund XVII, Ltd. The decrease in net income earned by joint ventures was
also partially offset by the fact that in June 2002, the Partnership reinvested
a portion of the net sales proceeds from the 2001 sales of two Properties in two
additional Properties, each as tenants-in-common with CNL Income Fund XI, Ltd.,
as described above in "Capital Resources." Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the general partners.
The decrease in net income earned by joint ventures during the quarter
and nine months ended September 30, 2002, was also partially due to the fact
that in January 2002, Houlihan's Restaurant, Inc., which leased the Property
owned by Show Low Joint Venture, filed for bankruptcy and rejected the lease
relating to this Property. As a result, the joint venture, in which the
Partnership owns a 36% interest, stopped recording rental income relating to
this Property. The joint venture will not recognize any rental revenues from
this Property until the Property is re-leased or the Property is sold and the
proceeds are reinvested in an additional Property. The joint venture is
currently seeking a replacement tenant for this Property. The lost revenues
resulting from the vacant Property will have an adverse effect on the equity in
earnings of joint ventures, if the joint venture is not able to re-lease or sell
the Property in a timely manner.
During the nine months ended September 30, 2002 and 2001, the
Partnership also earned $12,547 and $79,560, respectively, in interest and other
income, of which $3,496 and $5,921 were earned during the quarters ended
September 30, 2002 and 2001, respectively. Interest and other income were higher
during the nine months ended September 30, 2001, as compared to the same period
of 2002, primarily due to higher average cash balances during the nine months
ended September 30, 2001, and due to the Partnership holding net sales proceeds
received from the 2000 sales of several Properties until such proceeds were
reinvested in additional Properties.
Operating expenses, including depreciation and amortization expense, and
provision for write-down of assets were $566,901 and $1,217,602 for the nine
months ended September 30, 2002 and 2001, respectively, of which $184,782 and
$441,385 were incurred during the quarters ended September 30, 2002 and 2001,
respectively. The decrease in operating expenses during the quarter and nine
months ended September 30, 2002, as compared to the same periods of 2001, was
partially attributable to a decrease in state tax expense and a decrease in the
costs incurred for administrative expenses for servicing the Partnership and its
Properties.
Operating expenses were higher during the quarter and nine months ended
September 30, 2001, as compared to the same periods of 2002, due to the fact
that during the quarter and nine months ended September 30, 2001, the
Partnership recorded provisions for write-down of assets of $301,718 and
$565,062, respectively, relating to the Properties leased by PRG. The provision
represented the difference between the Properties, carrying value and their fair
value. During 2001, the Partnership also recorded bad debt expense of
approximately $36,700 relating to these Properties. In December 2001, the
Partnership sold one of the Properties and in May 2002, the Partnership assigned
the lease relating to the other Property, as described above.
In addition, the decrease in operating expenses during the quarter and
nine months ended September 30, 2002, was partially due to the fact that during
2002 and 2001, the Partnership incurred certain Property related expenses, such
as legal fees, repairs and maintenance, insurance and real estate taxes relating
to vacant PRG Properties. In December 2001 the Partnership sold one of its two
PRG Properties and in May 2002 the Partnership assigned the lease relating to
the remaining PRG Property to a new tenant. The Partnership did not incur any
additional expenses relating to these Properties after the sale of the Property
and the assignment of the lease had occurred.
The decrease in operating expenses during the quarter and nine months
ended September 30, 2002, as compared to the same periods of 2001, was partially
offset by the fact that during the nine months ended September 30, 2002, the
Partnership elected to reimburse the tenant of the Properties in El Paso and
Amarillo, Texas for certain renovation costs.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
As a result of the sale of the Property in Chester, Pennsylvania, the
Partnership recognized a loss of $14,008 during the quarter and six months ended
June 30, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
Subsequent to the above evaluation, there were no significant changes in
internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
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
3.1 Certificate of Limited Partnership of CNL Income Fund
VI, Ltd. (Included as Exhibit 3.3 to Registration
Statement No. 33-23892 on Form S-11 and incorporated
herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund
VI, Ltd. (Included as Exhibit 4.2 to Registration
Statement No. 33-23892 on Form S-11 and incorporated
herein by reference.)
4.2 Agreement and Certificate of Limited Partnership of CNL
Income Fund VI, Ltd. (Included as Exhibit 4.2 to Form
10-K filed with the Securities and Exchange Commission
on April 1, 1996, and incorporated herein by
reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to Form
10-K filed with the Securities and Exchange Commission
on March 31, 1994, and incorporated herein by
reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
Exchange Commission on August 9, 2001, and incorporated
herein by reference).
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.3 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2002, and
incorporated herein by reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 2002.
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 4th day of November, 2002.
CNL INCOME FUND VI, 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)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund VI, Ltd. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 4, 2002
/s/ James M. Seneff, Jr.
- -------------------------
James M. Seneff, Jr.
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund VI, Ltd. (the "registrant")
certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 4, 2002
/s/ Robert A. Bourne
- ------------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
(c) Exhibits
3.1 Certificate of Limited Partnership of CNL Income Fund VI,
Ltd. (Included as Exhibit 3.3 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund VI,
Ltd. (Included as Exhibit 4.2 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by
reference.)
4.2 Agreement and Certificate of Limited Partnership of CNL
Income Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on April
1, 1996, and incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March
31, 1994, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund Advisors,
Inc. to CNL APF Partners, LP. (Included as Exhibit 10.4 to
Form 10-Q filed with the Securities Exchange Commission on
August 9, 2001, and incorporated herein by reference).
10.5 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.3
to Form 10-Q filed with the Securities and Exchange
Commission on August 13, 2002, and incorporated herein by
reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)
EXHIBIT 99.1
EXHIBIT 99.2