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, 2004
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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
- ------------------------------------------ -------------------------------
(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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X
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 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
10
Item 4. Controls and Procedures 10
Part II.
Other Information 11-12
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2004 2003
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 13,156,890 $ 13,399,674
Net investment in direct financing leases 1,728,733 1,777,315
Real estate held for sale -- 2,203,860
Investment in joint ventures 7,794,789 7,875,770
Cash and cash equivalents 4,620,258 1,569,729
Receivables, less allowance for doubtful accounts
of $102,059 and $27,488, respectively -- 144,162
Accrued rental income, less allowance for doubtful
accounts of $8,549 and $9,697, respectively 574,225 556,895
Other assets 38,326 31,310
------------------- -------------------
$ 27,913,221 $ 27,558,715
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 53,587 $ 6,728
Real estate taxes payable 1,154 14,220
Distributions payable 787,500 787,500
Due to related parties 21,387 12,517
Rents paid in advance 53,168 58,650
------------------- -------------------
Total liabilities 916,796 879,615
Minority interest 435,631 443,607
Partners' capital 26,560,794 26,235,493
------------------- -------------------
$ 27,913,221 $ 27,558,715
=================== ===================
See accompanying notes to condensed financial statements.
1
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------- -------------- ------------- -------------
Revenues:
Rental income from operating leases $ 445,839 $ 445,455 $ 1,337,714 $ 1,339,719
Earned income from direct financing leases 48,603 50,452 147,051 152,631
Contingent rental income 10,705 7,673 34,506 18,442
Interest and other income 435 658 1,006 1,146
------------- -------------- ------------- -------------
505,582 504,238 1,520,277 1,511,938
------------- -------------- ------------- -------------
Expenses:
General operating and administrative 88,067 54,722 248,273 188,193
Property related 4,209 6,428 11,432 11,451
State and other taxes -- 1,128 44,076 46,080
Depreciation and amortization 80,927 80,927 242,784 242,784
------------- -------------- ------------- -------------
173,203 143,205 546,565 488,508
------------- -------------- ------------- -------------
Income before minority interest and equity in earnings of
unconsolidated joint ventures 332,379 361,033 973,712 1,023,430
Minority interest (8,615) (8,772) (25,861) (26,038)
Equity in earnings of unconsolidated joint ventures 183,004 160,603 549,360 488,804
------------- -------------- ------------- -------------
Income from continuing operations 506,768 512,864 1,497,211 1,486,196
------------- -------------- ------------- -------------
Discontinued operations:
Income from discontinued operations 25,586 38,564 5,018 187,038
Gain on disposal of discontinued operations 46,530 -- 1,185,572 --
------------- -------------- ------------- -------------
72,116 38,564 1,190,590 187,038
------------- -------------- ------------- -------------
Net income $ 578,884 $ 551,428 $ 2,687,801 $ 1,673,234
============= ============== ============= =============
Income per limited partner unit:
Continuing operations $ 7.24 $ 7.33 $ 21.39 $ 21.23
Discontinued operations 1.03 0.55 17.01 2.67
------------- -------------- ------------- -------------
$ 8.27 $ 7.88 $ 38.40 $ 23.90
============= ============== ============= =============
Weighted average number of limited partner
units outstanding 70,000 70,000 70,000 70,000
============= ============== ============= =============
See accompanying notes to condensed financial statements.
2
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2004 2003
--------------------- ------------------
General partners:
Beginning balance $ 291,598 $ 291,598
Net income -- --
--------------------- ------------------
291,598 291,598
--------------------- ------------------
Limited partners:
Beginning balance 25,943,895 26,736,255
Net income 2,687,801 2,357,640
Distributions ($33.75 and $45.00 per
limited partner unit, respectively) (2,362,500) (3,150,000)
--------------------- ------------------
26,269,196 25,943,895
--------------------- ------------------
Total partners' capital $ 26,560,794 $ 26,235,493
===================== ==================
See accompanying notes to condensed financial statements.
3
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2004 2003
-------------- --------------
Net cash provided by operating activities $ 2,134,382 $ 2,148,895
-------------- --------------
Cash flows from investing activities:
Insurance proceeds for casualty loss on building -- 590,132
Proceeds from sale of assets 3,362,484 472,425
Payment of lease costs (50,000) --
-------------- --------------
Net cash provided by investing activities 3,312,484 1,062,557
-------------- --------------
Cash flows from financing activities:
Distributions to limited partners (2,362,500) (2,362,500)
Distributions to holder of minority interest (33,837) (33,825)
-------------- --------------
Net cash used in financing activities (2,396,337) (2,396,325)
-------------- --------------
Net increase in cash and cash equivalents 3,050,529 815,127
Cash and cash equivalents at beginning of period 1,569,729 1,169,848
-------------- --------------
Cash and cash equivalents at end of period $ 4,620,258 $ 1,984,975
============== ==============
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.
4
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
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 the general partners, necessary for a fair
statement of the results for the interim periods presented. Operating
results for the quarter and nine months ended September 30, 2004 may
not be indicative of the results that may be expected for the year
ending December 31, 2004. Amounts as of December 31, 2003, 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, 2003.
The Partnership accounts for its 64.29% interest in Warren Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partner's proportionate share of the equity
in the joint venture. All significant intercompany accounts and
transactions have been eliminated.
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January
2003) ("FIN 46R"), "Consolidation of Variable Interest Entities"
requiring existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries. The primary beneficiary of
a variable interest entity is the party that absorbs a majority of the
entity's expected losses, receives a majority of its expected residual
returns, or both, as a result of holding variable interests, which are
the ownership, contractual, or other pecuniary interests in an entity
that change with changes in the fair value of the entity's net assets
excluding variable interests. Prior to FIN 46R, a company generally
included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R
is required in financial statements of public entities that have
interests in variable interest entities for periods ending after March
15, 2004. The Partnership adopted FIN 46R during the quarter ended
March 31, 2004, which resulted in the consolidation of a previously
unconsolidated joint venture, which was accounted for under the equity
method. FIN 46R does not require, but does permit restatement of
previously issued financial statements. The Partnership has restated
prior year's financial statements to maintain comparability between the
periods presented. Such consolidation resulted in certain assets and
minority interest, and revenues and expenses, of the entity being
reported on a gross basis in the Partnership's financial statements;
however, these restatements had no effect on partners' capital or net
income.
2. Discontinued Operations
In October 2002, the building on the property in Marietta, Georgia was
destroyed by fire and the tenant terminated its lease relating to this
property. In March 2003, the Partnership received approximately
$590,100 of insurance proceeds, resulting in a gain on casualty loss of
approximately $12,400. The Partnership had recorded a provision for
write-down of assets in the previous year relating to this property. In
September 2003, the Partnership entered into a new lease, with a new
tenant for this property. In March 2004, the Partnership sold the
property and received net sales proceeds of approximately $1,588,900,
resulting in a gain on disposal of discontinued operations of
approximately $1,139,000.
During 2002, the tenant of the property in Hermitage, Tennessee filed
for bankruptcy and affirmed the one lease it had with the Partnership.
In March 2004, the tenant vacated the property and as a result, the
Partnership recorded a provision for write-down of assets of
approximately $6,800. In April 2004, the Partnership entered into an
agreement to sell this property. In addition, in June 2004, the
Partnership entered into an agreement to sell its property in Lawton,
Oklahoma, and based on the sales price, the Partnership recorded a
provision for write-down of assets of approximately $51,500. In August
2004, the Partnership sold these properties, each to a third party, and
received net sales proceeds of approximately $1,773,600, resulting in a
net gain on disposal of discontinued operations of approximately
$46,500.
5
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
2. Discontinued Operations - Continued
The following presents the operating results of the discontinued
operations for these properties, along with the property in Broken
Arrow, Oklahoma that was sold in June 2003.
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------- --------------- ------------ --------------
Rental revenues $ 31,224 $ 60,574 $ 114,579 $ 225,422
Expenses (5,638) (22,010) (51,270) (50,740)
Provision for write-down of assets -- -- (58,291) --
Gain on casualty loss of building -- -- -- 12,356
------------- --------------- ------------ --------------
Income from discontinued
operations $ 25,586 $ 38,564 $ 5,018 $ 187,038
============= =============== ============ ==============
3. Merger Transaction
On August 9, 2004, the Partnership entered into a definitive Agreement
and Plan of Merger pursuant to which the Partnership will be merged
with a subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The
merger is one of multiple concurrent transactions pursuant to which 17
other affiliated limited partnerships also will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. and in which CNL
Restaurant Properties, Inc., an affiliate, also will be merged with
U.S. Restaurant Properties, Inc. CNL Restaurant Properties, Inc.
currently provides property management and other services to the
Partnership. The merger of the Partnership (and each of the 17 other
affiliated mergers) is subject to certain conditions including approval
by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as
measured by the value of the merger consideration) of all limited
partnerships, consummation of the merger between U.S. Restaurant
Properties, Inc. and CNL Restaurant Properties, Inc., approval of the
shareholders of U.S. Restaurant Properties, Inc., and availability of
financing. The transaction is expected to be consummated in the first
quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, the limited partners will receive total consideration of
approximately $36.04 million, consisting of approximately $30.14
million in cash and approximately $5.90 million in U.S. Restaurant
Properties, Inc. Series A Convertible Preferred Stock that is listed on
the New York Stock Exchange. The general partners will receive total
consideration of approximately $234,000 consisting of approximately
$196,000 in cash and approximately $38,000 in preferred stock.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership," which may be referred to
as "we," "us," or "our") 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,
2003, we owned 23 Properties directly and 14 Properties indirectly through joint
venture or tenancy in common arrangements. As of September 30, 2004, we owned 20
Properties directly and 15 Properties indirectly through joint venture or
tenancy in common arrangements.
Merger Transaction
The general partners believe their primary objective is to maintain
current operations with restaurant operators as successfully as possible, while
evaluating strategic alternatives, including alternatives that may provide
liquidity to the limited partners. Real estate markets are strong throughout
much of the nation, and the performance of restaurants has generally improved
after several challenging years. As a result, the general partners believe that
this is an attractive period for a strategic event to monetize the interests of
the limited partners.
In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement and Plan of Merger pursuant to which we will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent transactions pursuant to which 17 other affiliated limited
partnerships also will be merged with a subsidiary of U.S. Restaurant
Properties, Inc. and in which CNL Restaurant Properties, Inc., an affiliate,
also will be merged with U.S. Restaurant Properties, Inc. Our merger (and each
of the 17 other affiliated mergers) is subject to certain conditions including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by the value of the merger consideration) of all limited partnerships,
consummation of the merger between U.S. Restaurant Properties, Inc. and CNL
Restaurant Properties, Inc., approval of the shareholders of U.S. Restaurant
Properties, Inc., and availability of financing. U.S. Restaurant Properties,
Inc. is a real estate investment trust (REIT) that focuses primarily on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, our limited partners will receive total consideration of approximately
$36.04 million, consisting of approximately $30.14 million in cash and
approximately $5.90 million in U.S. Restaurant Properties, Inc. Series A
Convertible Preferred Stock that is listed on the New York Stock Exchange. The
general partners will receive total consideration of approximately $234,000
consisting of approximately $196,000 in cash and approximately $38,000 in
preferred stock.
We received an opinion from Wachovia Capital Markets, LLC that as of
August 9, 2004 the merger consideration to be received by the holders of our
general and limited partnership interests is fair, from a financial point of
view, to such holders.
As reflected above, the contemplated transactions are complex, and
contingent upon certain conditions. The restaurant marketplace, the real estate
industry, and the equities markets, all individually or taken as a whole, could
impact the economics of this transaction. As a result, there is no assurance
that we will be successful in completing the contemplated transaction.
Capital Resources
Net cash provided by operating activities was $2,134,382 and $2,148,895
for the nine months ended September 30, 2004 and 2003, respectively. During
2004, we sold the Property in Marietta, Georgia to the tenant and the Properties
Lawton, Oklahoma and Hermitage, Tennessee, each to a third party, and received
total net sales proceeds of approximately $3,362,500, resulting in a net gain on
disposal of discontinued operations of approximately $1,185,600. We had recorded
provisions for write-down of assets relating to these Properties. We intend to
reinvest these proceeds in additional Properties or to pay liabilities as
needed.
7
At September 30, 2004, we had $4,620,258 in cash and cash equivalents,
as compared to $1,569,729 at December 31, 2003. At September 30, 2004, these
funds were held in demand deposit accounts at a commercial bank. The increase
was primarily a result of holding sales proceeds at September 30, 2004. The
funds remaining at September 30, 2004, after the payment of distributions and
other liabilities, may be used to either invest in additional Properties or to
meet our working capital needs.
Short-Term Liquidity
Our investment strategy of acquiring Properties for cash and leasing
them under triple-net leases to operators who generally meet specified financial
standards minimizes our operating expenses. The general partners believe that
the leases will generate net cash flow in excess of operating expenses.
Our short-term liquidity requirements consist primarily of our
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
our operations.
We generally distribute cash from operations remaining after the
payment of operating expenses 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 30, 2004, a
portion of prior year sales proceeds, we declared distributions to limited
partners of $2,362,500 for each of the nine months ended September 30, 2004 and
2003 ($787,500 for each of the quarters ended September 30, 2004 and 2003). This
represents distributions of $33.75 per unit for each of the nine months ended
September 30, 2004 and 2003 ($11.25 for each applicable quarter). No
distributions were made to the general partners for the quarters and nine months
ended September 30, 2004 and 2003. No amounts distributed to the limited
partners for the nine months ended September 30, 2004 and 2003 are required to
be or have been treated as a return of capital for purposes of calculating the
limited partners' return on their adjusted capital contributions. We intend to
continue to make distributions of cash to the limited partners on a quarterly
basis.
Total liabilities, including distributions payable, were $916,796 at
September 30, 2004, as compared to $879,615 at December 31, 2003. The increase
in liabilities at September 30, 2004, as compared to December 31, 2003, was due
primarily to an increase in accounts payable and accrued expenses. The general
partners believe that we have sufficient cash on hand to meet our current
working capital needs.
Long-Term Liquidity
We have no long-term debt or other long-term liquidity requirements.
Results of Operations
Rental revenues from continuing operations were $1,484,765 during the
nine months ended September 30, 2004, as compared to $1,492,350 during the same
period of 2003, $494,442 and $495,907 of which were earned during the third
quarters of 2004 and 2003, respectively. Rental revenues from continuing
operations remained relatively constant because all of the changes in the
Property portfolio related to the Properties accounted for as discontinued
operations.
In December 2003, Waving Leaves, Inc., the tenant of the Property in
Waynesburg, Ohio, filed for Chapter 11 bankruptcy protection. In June 2004, the
lease was assigned to and assumed by Hardee's Food Systems, Inc. As of November
5, 2004, we have received all rental payments relating to this lease.
8
We earned $34,506 in contingent rental income during the nine months
ended September 30, 2004, as compared to $18,442 during the same period of 2003,
$10,705 and $7,673 of which were earned during the third quarters of 2004 and
2003, respectively. The increase in contingent rental income during 2004 was due
to an increase in reported gross sales of certain restaurants with leases that
require the payment of contingent rents.
We also earned $549,360 attributable to net income earned by
unconsolidated joint ventures during the nine months ended September 30, 2004,
as compared to $488,804 during the same period of 2003, $183,004 and $160,603 of
which were earned during the third quarters of 2004 and 2003, respectively. Net
income earned by unconsolidated joint ventures was lower during 2003 because
Show Low Joint Venture, in which we owned a 36% interest, recorded a provision
for write-down of assets of approximately $55,500, relating to the Property that
Houlihan's Restaurant, Inc. leased from the joint venture. During 2002,
Houlihan's Restaurant, Inc. filed for Chapter 11 bankruptcy protection and
rejected its lease. The provision represented the difference between the
Property's net carrying value and its estimated fair value. In September 2003,
the joint venture sold this vacant Property to a third party and recorded an
additional loss on disposal of discontinued operations of approximately $29,500.
In the fourth quarter of 2003, the joint venture was liquidated. In November
2003 we acquired a Property in Dalton, Georgia, as tenants-in-common, with CNL
Income Fund XI, Ltd., CNL Income Fund XV, Ltd., and CNL Income Fund XVI, Ltd.,
each of which is a Florida limited partnership and an affiliate of the general
partners. The rental payments relating to this Property commenced at the time of
acquisition.
In October 2003, Chevy's, Inc., the tenant of the Property in
Vancouver, Washington, in which we own a 23.04% interest as tenants-in-common
with affiliates of the general partners, filed for Chapter 11 bankruptcy
protection. While the tenant has neither rejected nor affirmed the one lease it
has, there can be no assurance that the lease will not be rejected in the
future. From the bankruptcy date through November 5, 2004, the tenancy in common
has received all rental payments relating to this lease. The lost revenues that
would result if the tenant were to reject this lease will have an adverse effect
on the equity in earnings of unconsolidated joint ventures if the tenancy in
common is not able to re-lease the Property in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $546,565 during the nine months ended September 30, 2004, as compared to
$488,508 during the same period of 2003, $173,203 and $143,205 of which were
incurred during the third quarters of 2004 and 2003, respectively. Operating
expenses were higher during the quarter and nine months ended September 30,
2004, as compared to the same periods of 2003, because we incurred additional
general operating and administrative expenses, including, primarily, legal fees
incurred in connection with the merger transaction describe above.
We recognized income from discontinued operations (rental revenues and
other Property related income less property related expenses) of $38,564 and
$187,038 during the quarter and nine months ended September 30, 2003, relating
to the Properties in Broken Arrow, Oklahoma; Marietta, Georgia; Hermitage,
Tennessee; and Lawton, Oklahoma. We sold the Property in Broken Arrow, Oklahoma
in June 2003 and recorded no gain or loss on disposal of discontinued
operations. In October 2002, the building on the Property in Marietta, Georgia
was destroyed by fire and the tenant terminated its lease. In March 2003, we
received approximately $590,100 of insurance proceeds, resulting in a gain of
approximately $12,400. We had recorded a provision for write-down of assets in
2002 relating to this Property. In September 2003, we entered into a new lease,
with a new tenant. We recognized income from discontinued operations of $5,018
during the nine months ended September 30, 2004, relating to the Properties in
Marietta, Georgia; Hermitage, Tennessee; and Lawton, Oklahoma. In March 2004, we
sold the Property in Marietta, Georgia; and recorded a gain on disposal of
discontinued operations of approximately $1,139,000. We recognized income from
discontinued operations of $25,586 during the quarter ended September 30, 2004,
relating to the Properties in Hermitage, Tennessee; and Lawton, Oklahoma. In
2002, Loco Lupe's of Hermitage, Inc., the tenant of the Hermitage, Tennessee
Property, filed for Chapter 11 bankruptcy protection. Although the tenant
affirmed the one lease it had with us, the tenant stopped making rental payments
in September 2003 and vacated the Property in March 2004. During 2004, we
recorded a provision for doubtful accounts of approximately $8,600 relating to
past due amounts and a provision for write-down of assets of approximately
$6,800, relating to this Property. Based on anticipated sales proceeds, we
recorded a provision for write-down of assets of approximately $51,500 relating
to the Property in Lawton, Oklahoma. The provisions for write-down of assets
represented the difference between each Property's net carrying value and its
estimated fair value. In August 2004, we sold these two Properties, and recorded
a net gain on disposal of discontinued operations of approximately $46,500.
9
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"), "Consolidation of Variable Interest Entities" requiring existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries. The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entity's expected losses, receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, which are the ownership, contractual, or other pecuniary
interests in an entity that change with changes in the fair value of the
entity's net assets excluding variable interests. Prior to FIN 46R, a company
generally included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R is
required in financial statements of public entities that have interests in
variable interest entities for periods ending after March 15, 2004. We adopted
FIN 46R during the quarter ended March 31, 2004, which resulted in the
consolidation of a previously unconsolidated joint venture, Warren Joint
Venture, which was accounted for under the equity method. FIN 46R does not
require, but does permit restatement of previously issued financial statements.
We restated prior year's financial statements to maintain comparability between
the periods presented. Such consolidation resulted in certain assets and
minority interest, and revenues and expenses, of the entity being reported on a
gross basis in our financial statements; however, these restatements had no
effect on partners' capital or net income.
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 our
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 our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q and have determined that such disclosure controls and procedures are
effective.
There was no change in internal control over financial reporting that
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
-----------------------------------------------------------
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
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition VI, LLC, and CNL
Income Fund VI, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
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 between CNL Income Fund VI, Ltd.
and CNL Investment Company. (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 10.5 to Form 10-Q filed with the Securities and
Exchange Commission on August 13, 2002, and incorporated
herein by reference.)
11
31.1 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. (Filed herewith.)
31.2 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. (Filed herewith.)
32.1 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.)
32.2 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.)
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November 2004.
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)
EXHIBIT INDEX
Exhibit Number
Exhibits
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition VI, LLC, and CNL
Income Fund VI, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
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 between CNL Income Fund VI, Ltd.
and CNL Investment Company. (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 10.5 to Form 10-Q filed with the Securities and
Exchange Commission on August 13, 2002, and incorporated
herein by reference.)
31.1 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. (Filed herewith.)
31.2 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. (Filed herewith.)
32.1 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.)
32.2 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 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2