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
0-21558
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CNL Income Fund XII, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3078856
- ---------------------------------- -----------------------------
(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 _________
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
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 XII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------------- -------------------
ASSETS
Land and buildings on operating leases, net $ 23,000,483 $ 21,325,863
Net investment in direct financing leases 8,005,900 8,143,625
Real estate held for sale -- 1,376,319
Investment in joint ventures 4,453,437 4,577,565
Cash and cash equivalents 1,079,166 1,281,855
Certificates of deposit 542,526 545,107
Receivables, less allowance for doubtful accounts of $53,499
and $51,016, respectively 8,941 5,584
Due from related parties 10,510 25,037
Accrued rental income, less allowance for doubtful
accounts of $9,061 in 2002 and 2001 2,670,356 2,486,119
Other assets 66,793 69,537
------------------- -------------------
$ 39,838,112 $ 39,836,611
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 20,083 $ 22,119
Real estate taxes payable 23,252 7,037
Distributions payable 956,252 956,252
Due to related parties 33,853 25,885
Rents paid in advance and deposits 26,453 175,992
------------------- -------------------
Total liabilities 1,059,893 1,187,285
Partners' capital 38,778,219 38,649,326
------------------- -------------------
$ 39,838,112 $ 39,836,611
=================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XII, 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 $ 719,587 $ 622,771 $ 2,077,641 $ 1,971,701
Earned income from direct financing leases 228,319 235,898 688,731 730,716
Contingent rental income 7,127 7,877 21,789 12,485
Interest and other income 2,611 28,214 11,994 74,708
--------------- -------------- ----------------- ---------------
957,644 894,760 2,800,155 2,789,610
--------------- -------------- ----------------- ---------------
Expenses:
General operating and administrative 73,644 49,899 236,367 299,072
Property expenses 7,376 25,967 25,394 68,033
Management fees to related parties 9,785 9,542 31,684 30,520
State and other taxes -- -- 49,763 59,150
Depreciation and amortization 115,114 90,473 333,900 312,286
Provision for write-down of assets -- -- -- 362,265
--------------- -------------- ----------------- ---------------
205,919 175,881 677,108 1,131,326
--------------- -------------- ----------------- ---------------
Income Before Gain on Sale of Assets and Equity in
Earnings of Joint Ventures 751,725 718,879 2,123,047 1,658,284
Gain on Sale of Assets -- 345,279 -- 345,279
Equity in Earnings of Joint Ventures 101,659 101,078 307,874 260,226
--------------- --------------- ----------------- --------------
Income from Continuing Operations 853,384 1,165,236 2,430,921 2,263,789
Discontinued Operations (Note 4):
Income from discontinued operations, net 8,776 16,512 65,645 101,200
Gain on disposal of discontinued operations, net 167,083 -- 501,083 --
--------------- -------------- ----------------- ---------------
175,859 16,512 566,728 101,200
--------------- -------------- ----------------- ---------------
Net Income $ 1,029,243 $ 1,181,748 $ 2,997,649 $ 2,364,989
=============== ============== ================= ===============
Income Per Limited Partner Unit
Continuing operations $ 0.19 $ 0.25 $ 0.54 $ 0.50
Discontinued operations 0.04 0.01 0.13 0.03
--------------- -------------- ----------------- ---------------
$ 0.23 $ 0.26 $ 0.67 $ 0.53
=============== ============== ================= ===============
Weighted Average Number of Limited
Partner Units Outstanding 4,500,000 4,500,000 4,500,000 4,500,000
=============== ============== ================= ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XII, 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 $ 259,109 $ 259,109
Net income -- --
--------------------- ------------------
259,109 259,109
--------------------- ------------------
Limited partners:
Beginning balance 38,390,217 38,946,975
Net income 2,997,649 3,268,250
Distributions ($0.64 and $0.85 per
limited partner unit, respectively) (2,868,756 ) (3,825,008 )
--------------------- ------------------
38,519,110 38,390,217
--------------------- ------------------
Total partners' capital $ 38,778,219 $ 38,649,326
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XII, 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 $ 2,798,713 $ 2,883,068
---------------- ---------------
Cash Flows from Investing Activities:
Increase in restricted cash -- (1,383,034 )
Additions to land and building on operating leases (2,004,511 ) --
Proceeds from sale of assets 1,871,865 1,382,365
Investment in joint venture -- (1,689,609 )
Liquidating distribution from joint venture -- 1,663,260
Collections on mortgage note receivable -- 43,760
---------------- ---------------
Net cash provided by (used in) investing
activities (132,646 ) 16,742
---------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,868,756 ) (2,868,756 )
---------------- ---------------
Net cash used in financing activities (2,868,756 ) (2,868,756 )
---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (202,689 ) 31,054
Cash and Cash Equivalents at Beginning of Period 1,281,855 1,161,018
---------------- ---------------
Cash and Cash Equivalents at End of Period $ 1,079,166 $ 1,192,072
================ ===============
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at end of
period $ 956,252 $ 956,252
================ ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XII, 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 XII, Ltd. (the "Partnership") for the year ended December
31, 2001.
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 years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Land and Buildings on Operating Leases:
In June 2002, the Partnership reinvested the majority of the remaining
proceeds from the 2001 sale of the property in Winter Haven, Florida
and the net sales proceeds from the sale of the property in Arlington,
Texas (see Note 4) in a property in San Antonio, Texas at an
approximate cost of $1,287,700. The Partnership acquired this property
from CNL Funding 2001-A, LP, an affiliate of the general partners (see
Note 5).
In September 2002, the Partnership reinvested the proceeds from the
sale of the property in Valdosta, Georgia (see Note 4) in a property in
Clive, IA for an approximate cost of $716,800. The Partnership acquired
this property from CNL Net Lease Investors, L.P., an affiliate of the
general partners (see Note 5).
4. Discontinued Operations:
In April 2002, the Partnership sold its property in Arlington, Texas to
an unrelated third party for approximately $1,288,600 and received net
sales proceeds of approximately $1,248,200 resulting in a gain on
disposal of discontinued operations of $334,000.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Discontinued Operations - Continued:
In August 2002, the Partnership sold its property in Valdosta, Georgia
to an unrelated third party for approximately $627,000 and received net
sales proceeds of approximately $623,700 resulting in a gain on
disposal of discontinued operations of approximately $167,100. The
financial results for these properties are reflected as Discontinued
Operations in the accompanying financial statements.
The operating results of discontinued operations are as follows:
Quarter Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
--------------- -------------- ---------------- ---------------
Rental revenues $ 9,476 $ 42,344 $ 72,298 $ 127,032
Expenses (700 ) (25,832 ) (6,653 ) (25,832 )
Gain on disposal of assets 167,083 -- 501,083 --
--------------- -------------- ---------------- ---------------
Income from discontinued
operations $ 175,859 $ 16,512 $ 566,728 $ 101,200
=============== ============== ================ ===============
5. Related Party Transactions:
In June 2002, the Partnership acquired a property in San Antonio,
Texas, from CNL Funding 2001-A, LP, for a purchase price of
approximately $1,287,700 (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 property in order to facilitate the
acquisition of the property by the Partnership. The purchase price paid
by the Partnership represented the costs incurred by CNL Funding
2001-A, LP to acquire and carry the property.
In September 2002, the Partnership acquired a property in Clive, Iowa
from CNL Net Lease Investors, L.P. ("NLI") at an approximate cost of
$716,800. During 2002, and prior to the Partnership's acquisition of
this property, CNL Financial LP Holding, LP ("CFN") and CNL Net Lease
Investors GP Corp. ("GP Corp") purchased the limited partner's interest
and general partner's interest, respectively, of NLI. Prior to this
transaction, an affiliate of the Partnership's general partners owned a
0.1% interest in NLI and served as a general partner of NLI. The
original general partners of NLI waived their rights to benefit from
this transaction. The acquisition price paid by CFN for the limited
partner's interest was based on the portfolio acquisition price. The
Partnership acquired the property in Clive, Iowa at CFN's cost and did
not pay any additional compensation to CFN for the acquisition of the
property. Each CNL entity is an affiliate of the Partnership's general
partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XII, Ltd. (the "Partnership") is a Florida limited
Partnership that was organized on August 20, 1991, to acquire for cash, either
directly or through joint venture and tenancy in common arrangements, both newly
constructed and existing restaurants, as well as Properties upon which
restaurants were to be constructed (the "Properties"), which are leased
primarily to operators of national and regional fast-food and family-style
restaurant chains. The leases are generally triple-net leases, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of September 30, 2001, the Partnership owned 40 Properties
directly. As of September 30, 2002, the Partnership owned 41 Properties
directly. In addition, as of September 30, 2001 and 2002, the Partnership owned
seven 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 $2,798,713 and $2,883,068 for the
nine months ended September 30, 2002 and 2001, respectively. The decrease 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" below.
Other sources and uses of capital included the following during the
nine months ended September 30, 2002.
During the nine months ended September 30, 2002, the Partnership sold
its Property in Arlington, Texas to an unrelated third party for approximately
$1,288,600 and received net sales proceeds of approximately $1,248,200 resulting
in a gain on disposal of discontinued operations of $334,000. In June 2002, the
Partnership reinvested the majority of the remaining proceeds from the 2001 sale
of the Property in Winter Haven, Florida and the net sales proceeds from the
sale of its Property in Arlington, Texas, in a Property in San Antonio, Texas at
an approximate cost of $1,287,700. The Partnership acquired this Property 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 Property in order to facilitate the acquisition of the Property by
the Partnership. The purchase price paid by the Partnership represented the
costs incurred by CNL Funding 2001-A, LP to acquire and carry the Property.
During the quarter and nine months ended September 2002, the
Partnership sold its Property in Valdosta, Georgia to an unrelated third party
for approximately $627,000 and received net sales proceeds of approximately
$623,700 resulting in a gain on disposal of discontinued operations of
approximately $167,100. In September 2002, the Partnership used the proceeds
from the sale of this Property to acquire a Property in Clive, Iowa from CNL Net
Lease Investors, L.P. ("NLI"), a California Limited Partnership, at an
approximate cost of $716,800. The sale of the Property and the reinvestment of
the net sales proceeds was structured to qualify as a like-kind exchange
transaction for federal income tax purposes. However, 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 sale. During 2002, and
prior to the Partnership's acquisition of this Property, CNL Financial LP
Holding, LP ("CFN"), a Delaware Limited Partnership, and CNL Net Lease Investors
GP Corp. ("GP Corp"), a Delaware corporation, purchased the limited partner's
interest and general partner's interest, respectively, of NLI. Prior to this
transaction, an affiliate of the Partnership's general partners owned a 0.1%
interest in NLI and served as a general partner of NLI. The original general
partners of NLI waived their rights to benefit from this transaction. The
acquisition price paid by CFN for the limited partner's interest was based on
the portfolio acquisition price. The Partnership acquired the Property in Clive,
Iowa at CFN's cost and did not pay any additional compensation to CFN for the
acquisition of the Property. Each CNL entity is an affiliate of the
Partnership's general partners.
Currently, cash reserves and rental income from the Partnership's
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 $1,079,166 invested in such short-term investments, as compared to
$1,281,855 at December 31, 2001. The decrease in cash and cash equivalents at
September 30, 2002 was due to the fact that the Partnership reinvested a portion
of the remaining proceeds from the 2001 sale of the Property in Winter Haven,
Florida. The funds remaining at September 30, 2002, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital needs.
Short-Term Liquidity
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will 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 were $1,059,893 at September 30, 2002, from
$1,187,285 at December 31, 2001, primarily as a result of a decrease in rents
paid in advance at September 30, 2002, as compared to December 31, 2001. The
decrease was partially offset by an increase in real estate taxes payable. The
general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
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 the Partnership
declared distributions to the limited partners of $2,868,756 for each of the
nine months ended September 30, 2002 and 2001 ($956,252 for each applicable
quarter). This represents distributions for each of the nine months of $0.64 per
unit ($0.21 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 for distribution 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 $2,766,372 for the nine months ended
September 30, 2002, as compared to $2,702,417 in the comparable period of 2001,
of which $947,906 and $858,669 were earned during the second quarter of 2002 and
2001, respectively. The increase in rental revenues during the quarter and nine
months ended September 30, 2002 as compared to the same periods of 2001, was
primarily due to the Partnership reinvesting the majority of the net sales
proceeds from the 2001 sales of the Properties in Rialto, California and Winter
Haven, Florida in Properties in Pflugerville and Pasadena, Texas in December
2001. The increase in rental revenues was also partially attributable to the
Partnership reinvesting the proceeds from the sale of the Property in Arlington,
Texas in a Property in San Antonio, Texas.
In May 2002, Cypress Restaurants of Georgia, Inc., a lessee filed for
Chapter 7 bankruptcy protection. The general partners will continue to evaluate
the Property in the Partnership's portfolio that the tenant is continuing to
operate as of November 7, 2002. If the lease is rejected, the lost revenues
resulting from the rejected lease will have an adverse effect on the results of
operations of the Partnership, if the Partnership is not able to re-lease the
Property in a timely manner.
For the nine months ended September 30, 2002 and 2001, the Partnership
also earned $21,789 and $12,485, respectively, in contingent rental income,
$7,127 and $7,877 of which was earned during the quarters ended September 30,
2002 and 2001, respectively. The increase in contingent rental income during the
nine months ended September 30, 2002, as compared to the same period of 2001,
was primarily attributable to an increase in gross sales for certain restaurant
Properties the leases of which require the payment of contingent rental income.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $11,994 and $74,708, respectively, in interest and other
income, of which $2,611 and $28,214 were earned during the quarters ended
September 30, 2002 and 2001, respectively. The decrease in interest and other
income during the quarter and nine months ended September 30, 2002, as compared
to the same periods of 2001, was due to a decrease in the average cash balance
and a decline in interest rates.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $307,874 and $260,226, respectively, attributable to net
income earned by joint ventures, of which $101,659 and $101,078 were earned
during the quarters ended September 30, 2002 and 2001, respectively. The
increase in net income earned by joint ventures during the nine months ended
September 30, 2002, as compared to the same period of 2001, was primarily
attributable to the fact that in April 2001, the Partnership invested in a joint
venture arrangement, CNL VII, X, XII Kokomo Joint Venture, with CNL Income Fund
VII, Ltd., and CNL Income X, Ltd., each of which is a Florida limited
partnership and an affiliate of the general partners. The increase during the
nine months ended September 30, 2002 was partially offset by the fact that in
March 2001, Middleburg Joint Venture, in which the Partnership owned a 87.54%
interest, sold its Property to the tenant. The Partnership dissolved the joint
venture in accordance with the joint venture agreement.
Operating expenses, including depreciation and amortization expense,
and provision for write-down of assets were $677,108 and $1,131,326 for the nine
months ended September 30, 2002 and 2001, respectively, of which $205,919 and
$175,881 were incurred during the quarters ended September 30, 2002 and 2001,
respectively. Operating expenses were higher during the nine months ended
September 30, 2001, as compared to the same period of 2002, as a result of the
Partnership recording a provision for write-down of assets of $362,265
consisting of the accumulated accrued rental income balance relating to the
Properties in Winter Haven, Florida and Albany, Georgia. The tenant of the
Property in Winter Haven, Florida vacated the Property and ceased rental
payments to the Partnership. The tenant of the Property in Albany, Georgia
terminated its lease with the Partnership. The accrued rental income was the
accumulated amount of non-cash accounting adjustments previously recorded in
order to recognize future scheduled rent increases as income evenly over the
term of the lease. The Partnership sold the Property in Winter Haven, Florida in
December 2001 and re-leased the Property in Albany, Georgia in January 2001 to a
new tenant with lease terms substantially the same as the Partnership's other
leases. In addition, operating expenses were higher during 2001, due to the fact
that the Partnership incurred certain expenses, such as repairs and maintenance,
insurance and real estate taxes in connection with the Property in Winter Haven,
Florida. The decrease in operating expenses during the nine months ended
September 30, 2002, was also attributable to a decrease in the costs incurred
for administrative expenses for servicing the Partnership and its Properties.
The increase in operating expenses during the quarter ended September
30, 2002 was due to depreciation expense attributed to the acquisition of a
Property in Houston, Texas, as described in "Capital Resources" above. Although
this Property replaced a Property that was sold, the expenses related to
disposed Properties are reported as discontinued operations in the financial
statements as required by a newly adopted accounting pronouncement, as described
below. The increase in operating expenses was partially offset by the fact that
the Partnership will not continue to incur expenses related to the Property in
Winter Haven, Florida which was sold in December 2001.
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.
During the nine months ended September 30, 2002, the Partnership
identified and sold two Properties that met the criteria of this standard and
were classified as Discontinued Operations in the accompanying financial
statements. The proceeds from the sales were reinvested in income producing
Properties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
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. Default 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 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XII, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XII,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 15, 1993, 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 31, 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 Advisors,
Inc. to CNL APF Partners, LP. (Included as Exhibit
10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 13, 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.)
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 11th day of November, 2002.
CNL INCOME FUND XII, 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 XII, 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 11, 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 XII, 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 11, 2002
/s/ Robert A. Bourne
- ------------------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
(c) Exhibits
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XII, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XII, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, 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 31, 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 Advisors,
Inc. to CNL APF Partners, LP. (Included as Exhibit 10.4
to Form 10-Q filed with the Securities and Exchange
Commission on August 13, 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.)
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