UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended March 31, 1997 Commission file number 0-14510 CEDAR INCOME FUND, LTD. (Exact name of registrant as specified in its charter) Iowa 42-1241468 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4333 Edgewood Road N.E., Cedar Rapids, IA 52499
(Zip Code) Registrant's telephone number, including area code: (319) 398-8975 N/A (Former name, address and fiscal year, if changed since last report) Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 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 The number of shares of common stock outstanding at May 13, 1997 was 2,245,411. PART I FINANCIAL INFORMATION Item 1. Financial Statements. CEDAR INCOME FUND, Ltd. Balance Sheets (unaudited) March 31, December 31, 1997 1996 1997 ASSETS Real estate Land 4,126,044 4,126,044 4,126,044 Buildings and improvements 14,494,516 14,200,539 14,336,858 18,620,560 18,326,583 18,462,902 Less accumulated depreciation (3,867,371) (3,427,922) (3,755,012) 14,753,189 14,898,661 14,707,890 Mortgage loan receivable 571,678 580,643 573,991 15,324,867 15,479,304 15,281,881 Cash and cash equivalents 529,293 845,020 670,306 Rent and other receivables 102,308 110,962 95,413 Interest receivable 3,930 3,992 3,946 Prepaid expenses 71,915 34,183 84,758 Deferred lease commissions 176,573 119,005 116,148 Taxes held in escrow 30,252 22,556 17,697 16,239,138 16,615,022 16,270,149 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loan payable 1,417,885 1,439,547 1,423,492 Accounts payable and accrued 184,006 157,305 103,337 expenses Due to affiliates 2,976 32,136 36,538 Security deposits 86,415 69,030 66,655 Advance rents 23,110 13,896 15,047 1,714,392 1,711,914 1,645,069 Shareholders' equity Common stock, $1 par value, 5,020,000 shares authorized 2,245,411 2,245,411 2,245,411 Additional paid-in capital 12,279,335 12,657,697 12,379,669 14,524,746 14,903,108 14,625,080 16,239,138 16,615,022 16,270,149
CEDAR INCOME FUND, LTD. Statements of Operations (unaudited) Three Months Ended March 31, 1997 1996 REVENUE Rents 539,619 559,047 Interest 21,296 23,245 560,915 582,292 EXPENSES Property expenses: Real estate taxes 64,423 62,723 Wages and salaries 5,148 5,356 Repairs and maintenance 75,535 56,457 Utilities 31,811 34,222 Management fee 26,981 27,953 Insurance 4,913 4,311 Other 25,103 23,804 Property expenses, excluding depreciation 233,914 214,826 Depreciation 112,359 109,649 Total property expenses 346,273 324,475 Interest 34,237 34,736 Administrative fees 25,353 24,975 Directors' fees and expenses 11,865 11,144 Other administrative 18,980 20,941 436,708 416,271 Net earnings 124,207 166,021 Net earnings per share .06 .07 Dividends to shareholders 224,541 224,541 Dividends to shareholders per share .10 .10 Average number of shares outstanding 2,245,411 2,245,411
CEDAR INCOME FUND, Ltd. Statements of Cash Flows (unaudited) Three Months Ended March 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Rents collected 540,787 533,684 Interest received 21,312 23,260 Payments for operating expenses (304,059) (224,887) Interest paid (33,320) (33,819) Net cash provided by operating activities 224,720 298,238 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (157,658) - Principal portion of scheduled mortgage loan collections 2,313 2,126 Security deposits collected, net 19,760 2,160 Net cash provided (used) by investing activities (135,585) 4,286 CASH FLOWS FROM FINANCING ACTIVITIES: Principal portion of scheduled mortgage loan payments (5,607) (5,107) Dividends paid to shareholders (224,541) (224,541) Net cash used by financing activities (230,148) (229,648) Net increase (decrease) in cash and cash equivalents. (141,013) 72,876 Cash and cash equivalents at beginning of period 670,306 772,144 Cash and cash equivalents at end of period 529,293 845,020 RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net earnings 124,207 166,021 Add (deduct) reconciling adjustments: Depreciation 112,359 109,649 Amortization 916 917 Increase in rent and other receivables (19,450) (49,725) Decrease in interest receivable 16 15 Decrease in prepaid expenses 11,927 9,175 Increase in deferred lease commissions (60,425) (4,198) Increase in operating accounts payable, accrued expenses and due to affiliates 47,107 61,007 Increase in advance rents 8,063 5,377 Net cash provided by operating activities 224,720 298,238
NOTES TO FINANCIAL STATEMENTS Note 1: The unaudited interim financial statements are prepared in accordance with generally accepted accounting principles and include all adjustments of a normal recurring nature necessary for a fair presentation of the financial position and quarterly results. Interim reports should be read in conjunction with the audited financial statements and related notes included in the 1996 Annual Report. Note 2: Shareholders' equity, December 31, 1996 14,625,080 Net earnings 124,207 Dividends to shareholders (224,541) Shareholders' equity, March 31, 1997 14,524,746 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. We are pleased to present the first quarter report for Cedar Income Fund, Ltd. Net earnings for the three months ended March 31, 1997 were $124,207 ($.06 per share) compared to $166,021 ($.07 per share) for the same period in 1996. Funds from operations (earnings from operations plus depreciation) were $236,566 for the first three months of 1997 compared to $275,670 for the same period a year ago. Net earnings and funds from operations were lower in the first quarter of 1997, compared to 1996, primarily due to a slight decrease in rental income and an increase in repairs and maintenance. The Company's real estate portfolio had an overall occupancy rate of 99% at March 31, 1997. Rental income for the first quarter was $539,619 compared to $559,047 for the first quarter in 1996. Rental income at Southpoint Parkway Center in Jacksonville, Florida decreased by $48,000 due to tenants who contributed rents in the first quarter of 1996 but vacated their space later in the year. During the first quarter of 1997, the Company was successful in leasing this space to an existing tenant who will be paying rent on the entire space beginning in May 1997. This decrease was offset by increased rental income at the remaining properties. Rents increased by $21,000 at Corporate Center East in Bloomington, Illinois as a result of the Company's success in leasing the 20,400 square feet of space vacated by Hewlett Packard at the end of 1995. Rental income at Broadbent Business Center in Salt Lake City, Utah and Germantown Square in Louisville, Kentucky increased slightly over the same period a year ago. Total property expenses, excluding depreciation, increased from 38% of rental income in 1996 to 43% in 1997. Repairs and maintenance were higher in 1997 primarily as a result of tenant remodeling expenses incurred at Broadbent Business Center. As mentioned above, the Company has been successful in locating replacement tenants for the vacant spaces that existed at Corporate Center East and Southpoint. As a result of releasing this space, the Company incurred capital expenditures of $158,000 and lease commissions of $39,000 through March 31, 1997. In order to complete the projects in progress, the Company expects to incur an additional $143,000 in capital expenditures and $21,000 in lease commissions during 1997. Capital resources of the Company consist of equity in real estate investments and a mortgage loan receivable. The Company maintains its real estate in good condition and provides adequate insurance coverage. The Company's liquidity at March 31, 1997 is represented by cash and cash equivalents, a mortgage loan participation, and cash flow from operating activities. This liquidity is considered sufficient to meet current obligations. The Board of Directors declared a dividend of $.10 per share, payable May 19, 1997 to shareholders of record May 9, 1997. The Board of Directors will continue to consider leasing prospects, operating results and the financial condition of the Company in determining future dividends. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. At the Company's annual meeting of shareholders on April 28, 1997, 45% of the Company's outstanding shares were represented (in person or by proxy). Four Directors were elected to the Board of Directors, with each receiving at least 98% of the vote for the shares represented. The vote tabulation for each Director was as follows: Director Votes For Votes Withheld Patrick E. Falconio 1,014,203 13,466 Edwin L. Ingraham 1,014,450 13,219 Alex A. Meyer 1,014,816 12,853 James L. Roberts 1,012,339 15,330 SIGNATURE Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CEDAR INCOME FUND, LTD. /s/ Alan F. Fletcher Alan F. Fletcher Vice President and Treasurer (principal financial officer) /s/ Roger L. Schulz Roger L. Schulz Controller (principal accounting officer) Dated: May 13, 1997