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
0-23974
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CNL Income Fund XIV, Ltd.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3143096
- ----------------------------------- -----------------------------
(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 5-7
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 XIV, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------------- -------------------
ASSETS
Land and buildings on operating leases, net $ 22,855,895 $ 22,152,733
Net investment in direct financing leases 5,869,116 6,315,829
Real estate held for sale 323,175 1,671,833
Investment in joint ventures 4,566,435 4,639,435
Cash and cash equivalents 866,003 1,039,216
Restricted cash 1,303,859 --
Receivables, less allowance for doubtful accounts
of $77,256 in 2001 803 80,044
Due from related parties -- 7,045
Accrued rental income, less allowance for doubtful
accounts of $48,635 in 2002 and 2001 2,433,719 2,300,040
Other assets 58,717 47,734
------------------- -------------------
$ 38,277,722 $ 38,253,909
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,535 $ 21,657
Real estate taxes payable 17,593 28,596
Distributions payable 928,130 928,130
Due to related parties 34,439 14,154
Rents paid in advance and deposits 5,000 104,907
Deferred rental income 24,372 51,443
------------------- -------------------
Total liabilities 1,016,069 1,148,887
Commitment (Note 8)
Partners' capital 37,261,653 37,105,022
------------------- -------------------
$ 38,277,722 $ 38,253,909
=================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIV, 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 $ 753,291 $ 639,242 $2,093,656 $ 1,943,147
Earned income from direct financing leases 80,406 159,186 418,038 518,743
Contingent rental income 14,072 4,049 30,320 17,422
Interest and other income 745 24,422 7,751 46,193
--------------- -------------- ------------- ---------------
848,514 826,899 2,549,765 2,525,505
--------------- -------------- ------------- ---------------
Expenses:
General operating and administrative 71,320 42,550 235,192 286,219
Property expenses 11,458 35,528 50,989 83,119
Management fees to related party 10,108 9,424 29,315 28,762
State and other taxes -- -- 36,917 65,579
Depreciation and amortization 92,621 64,746 274,669 259,198
Provision for write-down of assets -- -- -- 526,947
--------------- -------------- ------------- ---------------
185,507 152,248 627,082 1,249,824
--------------- -------------- ------------- ---------------
Income Before Gain on Sale of Assets and Equity
in Earnings of Joint Ventures 663,007 674,651 1,922,683 1,275,681
Gain on Sale of Assets -- -- 497,689 --
Equity in Earnings of Joint Ventures 118,922 116,294 285,866 382,863
--------------- -------------- ------------- ---------------
Income from Continuing Operations 781,929 790,945 2,706,238 1,658,544
--------------- -------------- ------------- ---------------
Discontinued Operations (Note 4):
Income (loss) from discontinued operations, net 37,209 14,546 105,939 96,202
Gain (loss) on disposal of discontinued
operations, net 252,289 (39,096 ) 128,844 (39,096 )
--------------- -------------- ------------- ---------------
289,498 (24,550 ) 234,783 57,106
--------------- -------------- ------------- ---------------
Net Income $ 1,071,427 $ 766,395 $2,941,021 $ 1,715,650
=============== ============== ============= ===============
Net Income (Loss) Per Limited Partner Unit
Continuing operations $ 0.18 $ 0.18 $ 0.60 $ 0.37
Discontinued operations 0.06 (0.01 ) 0.05 0.01
--------------- -------------- ------------- ---------------
$ 0.24 $ 0.17 $ 0.65 $ 0.38
=============== ============== ============= ===============
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 XIV, 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 $ 209,255 $ 209,255
Net income -- --
--------------------- ------------------
209,255 209,255
--------------------- ------------------
Limited partners:
Beginning balance 36,895,767 38,104,189
Net income 2,941,021 2,504,098
Distributions ($0.62 and $0.83 per
limited partner unit, respectively) (2,784,390 ) (3,712,520 )
--------------------- ------------------
37,052,398 36,895,767
--------------------- ------------------
Total partners' capital $ 37,261,653 $ 37,105,022
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIV, 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 $ 2,594,015 $ 2,501,516
---------------- ----------------
Cash Flows from Investing Activities:
Increase in restricted cash (1,304,826 ) --
Additions to land and building on operating leases (1,283,608 ) --
Proceeds from sale of assets 2,605,596 --
Return of capital from joint venture -- 400,000
---------------- ----------------
Net cash provided by (used in)investing activities 17,162 400,000
---------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,784,390 ) (2,784,390 )
---------------- ----------------
Net cash used in financing activities (2,784,390 ) (2,784,390 )
---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (173,213 ) 117,126
Cash and Cash Equivalents at Beginning of Period 1,039,216 1,038,555
---------------- ----------------
Cash and Cash Equivalents at End of Period $ 866,003 $ 1,155,681
================ ================
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of period $ 928,130 $ 928,130
================ ================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIV, 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 XIV, 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 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. Land and Buildings on Operating Leases:
In February 2002, the Partnership sold its property in Las Vegas,
Nevada to an unrelated third party for $1,200,000 and received net
sales proceeds of approximately $1,143,800, resulting in a gain of
approximately $497,700. As of December 31, 2001, this property had been
identified for sale. In March 2002, the Partnership reinvested these
net sales proceeds in a property in San Antonio, Texas at an
approximate cost of $1,262,200. The Partnership acquired this property
from CNL Funding 2001-A, LP, an affiliate of the general partners (see
Note 6).
4. Discontinued Operations:
During 2002, the Partnership entered into two separate agreements, each
with an unrelated third party, to sell the Golden Corral property in
Greeley, Colorado and the Long John Silver's property in Laurens, South
Carolina. In August 2002, the Partnership sold the Laurens, South
Carolina property for $167,200 and received net sales proceeds of
approximately $155,200, resulting in a loss on disposal of discontinued
operations of $123,445, which the Partnership recorded during the
quarter and six months ended June 30, 2002. During the nine months
ended September 30, 2001, the Partnership recorded a provision for
write-down of assets of $39,096. In September 2002, the Partnership
sold the Greeley, Colorado property for
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Discontinued Operations - Continued
$1,330,000 and received net sales proceeds of approximately $1,306,600,
resulting in a gain on sale of discontinued operations of $278,650,
which the Partnership recorded during the quarter and nine months ended
September 30, 2002. The financial results for these properties are
reflected as Discontinued Operations in the accompanying financial
statements.
In addition, in September 2002, the Partnership entered into an
agreement with an unrelated third party to sell the Checker's property
in Merriam, Kansas (see notes 8 and 9). As a result, the Partnership
reclassified the assets from land and buildings on operating leases and
accrued rental income to real estate held for sale. The reclassified
assets were recorded at the lower of their carrying amount or fair
value, less cost to sell. In addition, the Partnership stopped
recording accrued rental income once the property was identified for
sale. In connection with the anticipated sale of this property, the
Partnership recorded a loss on disposal of discontinued operations of
$19,620 during the quarter and nine months ended September 30, 2002.
The operating results of the discontinued operations for the above
properties are as follows:
Quarter Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
--------------- -------------- ----------------- ---------------
Rental revenues $ 39,046 $ 50,769 $ 131,941 $ 135,780
Expenses (1,837 ) (36,223 ) (26,002 ) (39,578 )
Gain (loss) on disposal of assets 252,289 (39,096 ) 128,844 (39,096 )
--------------- -------------- ----------------- ---------------
Income (loss) from discontinued
operations $ 289,498 $ (24,550 ) $ 234,783 $ 57,106
=============== ============== ================= ===============
5. Restricted Cash:
As of September 30, 2002, the net sales proceeds of $1,304,826 from the
sale of the property in Greeley, Colorado, less miscellaneous escrow
fees of $967 were being held in an interest-bearing escrow account
pending the release of funds by the escrow agent to acquire an
additional property.
6. Related Party Transactions:
In March 2002, the Partnership acquired a property in San Antonio,
Texas from CNL Funding 2001-A, LP, for a purchase price of
approximately $1,262,200 (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 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 the property.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
7. Concentration of Credit Risk - Continued:
The following schedule presents total rental revenues from individual
lessees, each representing more than 10% of the Partnership's total
rental revenues (including the Partnership's share of rental revenues
from joint ventures and the properties held as tenants-in-common with
affiliates of the general partners) for each of the periods ended
September 30:
2002 2001
------------- -------------
Jack in the Box Inc. $ 407,071 $ 408,288
Checker's Drive-in Restaurants 405,352 405,546
Golden Corral Corporation 357,932 375,430
Flagstar Enterprise 316,315 317,487
Denny's, Inc. 314,063 N/A
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than 10% of the
Partnership's total rental revenues (including the Partnership's share
of rental revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the periods ended September 30:
2002 2001
------------ -----------
Golden Corral Family Steakhouse
Restaurant $ 537,800 $ 541,111
Denny's 450,278 461,185
Jack in the Box 407,071 408,288
Checker's 405,352 405,546
Hardee's 316,315 317,487
The information denoted by N/A indicates that for each period
presented, the chains did not represent more than 10% of the
Partnership's total rental and earned income.
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains will significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
8. Commitment:
During 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Checker's property in Merriam, Kansas
(see Notes 4 and 9).
9. Subsequent Event:
On November 7, 2002, the Partnership sold its property in Merriam,
Kansas for $325,000 and received net sales proceeds of approximately
$323,200, resulting in a loss on disposal of assets of $19,620, which
the Partnership recorded at September 30, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XIV, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 25, 1992, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurants, as well as land 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
generally are triple-net leases, with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of September 30, 2001,
the Partnership owned 43 Properties directly and 12 Properties indirectly
through joint venture or tenancy in common arrangements. As of September 30,
2002, the Partnership owned 41 Properties directly and 12 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 $2,594,015 and $2,501,516 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, as
compared to the same period of 2001, 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 February 2002, the Partnership sold its Property in Las Vegas,
Nevada to an unrelated third party for $1,200,000 and received net sales
proceeds of approximately $1,143,800, resulting in a gain of approximately
$497,700. In March 2002, the Partnership reinvested these net sales proceeds in
a Property in San Antonio, Texas at an approximate cost of $1,262,200. 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 the Property. The transaction, or a portion thereof,
relating to the sale of the Property in Las Vegas, Nevada, and the reinvestment
of the net sales proceeds, was structured to qualify as a like-kind exchange
transaction for federal income tax purposes. The Partnership anticipates 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 this transaction.
During 2002, the Partnership entered into two separate agreements, each
with an unrelated third party, to sell the Golden Corral Property in Greeley,
Colorado and the Long John Silver's Property in Laurens, South Carolina. In
August 2002, the Partnership sold the Laurens, South Carolina Property for
$167,200 and received net sales proceeds of approximately $155,200, resulting in
a loss on disposal of discontinued operations of $123,445, which the Partnership
recorded during the six months ended June 30, 2002. In September 2002, the
Partnership sold the Greeley, Colorado Property for $1,330,000 and received net
sales proceeds of approximately $1,306,600, resulting in a gain on sale of
discontinued operations of $278,650, which the Partnership recorded during the
quarter and nine months ended September 30, 2002. The Partnership anticipates it
will reinvest these proceeds in additional Properties. The Partnership
anticipates 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 these transactions.
Currently, rental income from the Partnership's Properties is 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
$866,003 invested in such short-term investments, as compared to $1,039,216 at
December 31, 2001. 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 $1,016,069 at September 30, 2002, as compared to $1,148,887 at December 31,
2001. The decrease in liabilities at September 30, 2002 was primarily due to a
decrease in rents paid in advance and deferred rental income 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, a portion of
the 2001 return of capital from Wood-Ridge Real Estate Joint Venture, the
Partnership declared distributions to the limited partners of $2,784,390 for
each of the nine months ended September 30, 2002 and 2001, ($928,130 for each of
the quarters ended September 30, 2002 and 2001.) This represents distributions
for each applicable nine months of $0.62 per unit ($0.21 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 contribution. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
During the nine months ended September 30, 2002, the Partnership
entered into an agreement with an unrelated third party to sell the Checker's
Property in Merriam, Georgia. As a result, the Partnership reclassified these
assets to real estate held for sale. On November 7, 2002, the Partnership sold
its Property in Merriam, Kansas for $325,000 and received net sales proceeds of
approximately $323,200, resulting in a loss on disposal of assets of $19,620,
which the Partnership recorded at September 30, 2002. The Partnership intends to
reinvest these proceeds in an additional Property.
Long Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $2,511,694 for the nine months ended
September 30, 2002, as compared to $2,461,890 for the same period of 2001, of
which $833,697 and $798,428 were earned during the third 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
partially due to the fact that in March 2002, the Partnership reinvested the
sales proceeds from the sale of the Property in Las Vegas, Nevada, in a Property
in San Antonio, Texas, as described above in "Capital Resources." The tenant of
the Las Vegas, Nevada Property ceased restaurant operations and vacated the
Property in 2001.
Revenues remained at reduced amounts during the quarters and nine
months ended September 30, 2002 and 2001, due to the fact that prior to 2001,
Elias Brothers Restaurants, Inc., which leased one Property with the
Partnership, filed for bankruptcy and rejected its lease. As a result, the
Partnership stopped recording rental revenue relating to this Property. In
October 2002, the Partnership entered into a new lease, with a new tenant for
this Property. The lease terms for this Property are substantially the same as
the Partnership's other leases. In connection with the new lease, the new tenant
has agreed to pay for all costs necessary to convert the Property into a
different restaurant concept. Conversion of the Property is expected to be
completed early in 2003, at which point rental payments are expected to
commence.
During the nine months ended September 30, 2002 and 2001, the
Partnership also earned $30,320 and $17,422, respectively, in contingent rental
income, of which $14,072 and $4,049 were earned during the quarters ended
September 30 2002 and 2001, respectively. The increase in contingent rental
income was primarily a result of an increase in gross sales of certain
restaurant Properties with leases requiring the payment of contingent rental
income.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $285,866 and $382,863, respectively, attributable to net
income earned by joint ventures, of which $118,922 and $116,294 was earned
during the quarters ended September 30, 2002 and 2001, respectively. The
decrease in net income earned by joint ventures during the nine months ended
September 30, 2002, as compared to the same period of 2001, was partially due to
the fact that the tenant of the Property owned by Duluth Joint Venture, in which
the Partnership owns a 44% interest, experienced financial difficulties and
ceased making rental payments. As a result, Duluth Joint Venture stopped
recording rental revenues during the quarter ended March 31, 2002. The joint
venture also recorded a provision for write-down of assets of approximately
$65,800. The provision represented the difference between the Property's
carrying value and its fair value. During the second quarter of 2002, the tenant
began making rental payments to the joint venture and the joint venture
recognized these amounts as rental revenues. In addition, the decrease in net
income earned by joint ventures during the nine months ended September 30, 2002
was partially due to the fact that in May 2001, Wood-Ridge Real Estate Joint
Venture, in which the Partnership owns a 50% interest, sold its Property in
Paris, Texas to the tenant, in accordance with the purchase option under the
lease agreement for $800,000. This resulted in a loss to the joint venture of
approximately $84,500. In addition, in connection with the sale of its Property
in Paris, Texas, Wood-Ridge Real Estate Joint Venture received $200,000 in
consideration for the joint venture releasing the tenant from its obligation
under the lease. During 2001, the joint venture distributed the net sales
proceeds received from the sale as a return of capital to the Partnership and
the other joint venture partner. The Partnership used this return of capital to
pay liabilities of the Partnership, and make quarterly distributions.
During the nine months ended September 30, 2002, five lessees, Golden
Corral Corporation, Jack in the Box Inc., Checker's Drive-in Restaurants,
Flagstar Enterprise, and Denny's, Inc. each contributed more than ten percent of
the Partnership's total rental revenues (including the Partnership's share of
rental revenues from Properties owned by joint ventures and tenants-in-common
with affiliates of the general partners.) It is anticipated that based on the
minimum rental payments required by the leases, these five lessees will continue
to contribute more than ten percent of the Partnership's total rental revenues.
In addition, during the nine months ended September 30, 2002, five restaurant
chains, Golden Corral Family Steakhouse Restaurants, Jack in the Box, Denny's,
Checker's, and Hardee's each accounted for more than ten percent of the
Partnership's total rental revenues (including the Partnership's share of rental
revenues from Properties owned by joint ventures and tenants-in-common with
affiliates of the general partners). It is anticipated that these five
restaurant chains will each continue to account for more than ten percent of the
total rental revenues to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or restaurant chains could materially
affect the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets were $627,082 and $1,249,824 for the nine
months ended September 30, 2002 and 2001, respectively, of which $185,507 and
$152,248 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 periods of 2002, due to the fact
that during the nine months ended September 30, 2001, the Partnership recorded
provisions for write-down of assets of $526,947 relating to the vacant
Properties in Akron, Ohio and Las Vegas, Nevada. In February 2002, the
Partnership sold the Property in Las Vegas, Nevada, as described above. The
decrease in operating expenses during the nine months ended September 30, 2002,
as compared to the same period of 2001, was also 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. In
addition, during the quarters and nine months ended September 30, 2002 and 2001,
the Partnership incurred certain Property related expenses, such as legal fees,
real estate taxes, insurance and maintenance relating to the Property in Akron,
Ohio, whose lease was rejected by its tenant, as described above. In October
2002, the Partnership re-leased this Property to a new tenant. The new tenant is
responsible for real estate taxes, insurance, and maintenance relating to the
Property in accordance with the terms of its leases; therefore, the general
partners do not anticipate the Partnership will incur these expenses for this
Property in the future.
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 three Properties that met the criteria of this standard and were
classified as Discontinued Operations in the accompanying financial statements.
Two of the Properties were sold during the nine months ended September 30, 2002,
one of which was vacant. The Partnership intends to reinvest these sales
proceeds in additional Properties.
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. 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 XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XIV, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 13, 1994, incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XIV,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 13, 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
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 10.3 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 8th day of November, 2002.
CNL INCOME FUND XIV, 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 XIV, 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 8, 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 XIV, 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 8, 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 XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XIV, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 13, 1994, incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XIV, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 13, 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 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 10.3 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