<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarter period ended September 30, 1997
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 0-18528
INCOME GROWTH PARTNERS, LTD. X
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0274177
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11300 Sorrento Valley Road, Suite 108, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
(619) 457-2750
(Registrant's telephone number, including area code)
(Former name, former address and former 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 filing requirements
for the past 90 days. Yes [X] No [ ]
The number of the registrant's Original Limited Partnership Units outstanding as
of July 31, 1997 was 18,826.5. The number of the registrant's Class A Units
outstanding as of July 31, 1997 was 8,100.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE> 2
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
----------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Rental properties:
Land $ 7,778,365 $ 7,778,365
Buildings and improvements 23,571,531 23,455,047
------------ ------------
31,349,896 31,233,412
Less accumulated depreciation and impairments (11,183,959) (10,545,531)
------------ ------------
20,165,937 20,687,881
Other assets:
Cash and cash equivalents 240,261 244,582
Prepaid expenses and other assets 792,198 544,455
------------ ------------
1,032,459 789,037
------------ ------------
$ 21,198,396 $ 21,476,918
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loans payable $ 19,640,605 $ 19,788,869
Other liabilities:
Accounts payable and accrued liabilities 299,499 81,473
Accrued interest payable 119,111 123,392
Security deposits 201,952 184,355
Loan payable to affiliate 43,000 55,300
------------ ------------
20,304,167 20,233,389
Commitments
Partners' capital 904,229 1,253,529
Note receivable from general partner (10,000) (10,000)
------------ ------------
$ 21,198,396 $ 21,476,918
============ ============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
1
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INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
----------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rents $ 922,233 $ 867,611 $ 2,711,423 $ 2,559,785
Other 32,774 38,025 109,512 113,438
----------- ----------- ----------- -----------
Total revenues 955,007 905,636 2,820,935 2,673,223
----------- ----------- ----------- -----------
Expenses:
Interest 367,983 330,307 1,134,252 1,120,354
Operating expenses (excluding
depreciation and amortization) 454,593 416,969 1,366,796 1,275,261
Depreciation and amortization 223,254 240,106 669,186 665,722
----------- ----------- ----------- -----------
Total expenses 1,045,830 987,382 3,170,234 3,061,337
----------- ----------- ----------- -----------
Net loss (90,823) $ (81,746) $ (349,299) $ (388,114)
=========== =========== =========== ===========
Net loss per limited partnership unit $ (3.37) $ (3.04) $ (12.97) $ (14.41)
=========== =========== =========== ===========
Weighted average limited partnership units
outstanding 26,926 26,926 26,926 26,926
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
2
<PAGE> 4
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
----------
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(349,299) $(388,114)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 669,186 665,722
Increase in prepaid expenses and other assets (278,501) (80,491)
Increase (decrease) in:
Accounts payable and accrued liabilities 218,025 16,784
Security deposits 17,597 19,516
Accrued interest payable (4,281) 67,874
--------- ---------
Net cash provided by operating activities 272,727 301,291
--------- ---------
Cash flows from investing activities:
Capital expenditures (116,484) (52,795)
--------- ---------
Net cash used in investing activities (116,484) (51,795)
--------- ---------
Cash flows from financing activities:
Principal payments under mortgage debt (148,264) (129,965)
Principal payments to affiliate (12,300) (46,700)
--------- ---------
Net cash used by financing activities (160,564) (176,665)
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,321) 71,831
Cash and cash equivalents at beginning of period 244,582 153,735
--------- ---------
Cash and cash equivalents at end of period $ 240,261 $ 225,566
========= =========
The accompanying notes are an integral part of the
financial statements.
</TABLE>
3
<PAGE> 5
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. BASIS OF FINANCIAL STATEMENT PRESENTATION:
The accompanying unaudited consolidated financial statements of Income
Growth Partners, Ltd. X, a California limited partnership, and
subsidiary (the "Partnership") have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Partnership believes that the disclosures made
are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Partnership's
latest audited financial statements for the year ended December 31, 1996
filed on Form 10K.
The accompanying consolidated financial statements have not been audited
by independent public accountants, but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion
of the general partners, necessary for a fair presentation of the
financial condition, results of operations and cash flows for period
presented. However, these results are not necessarily indicative of
results for a full year.
Certain prior period amounts have been reclassified to conform with the
current period presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No 128,
Earnings Per Share. SFAS No. 128 requires dual presentation of newly
defined basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures. The
accounting standard is effective for fiscal years ending after December
15, 1997, including interim periods. The effect of SFAS No. 128 is not
expected to have any impact on the Partnership's previously reported
earnings per partnership unit.
In February 1997, FASB issued SFAS No. 129, Disclosure of Information
About Capital Structure. This statement establishes standards for
disclosing information about an entity's capital structure. Management
intends to comply with the disclosure requirements for this statement
which are effective for periods ending after December 15, 1997.
Continued 4
<PAGE> 6
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED:
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Partnership for the
year ending December 31, 1998. Comprehensive income includes such items
as foreign currency translation adjustments and unrealized holding gains
and losses on available for sale securities that are currently being
presented by the Company as a component of stockholders' equity
(deficit). The Partnership does not expect this pronouncement to
materially impact the Partnership's results of operations.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. SFAS No. 131 establishes
standards for disclosure about operating segments in annual financial
statements and selected information in interim financial reports. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement
supersedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. The new standard becomes effective for the Partnership for
the year ending December 31, 1998, and requires that comparative
information from earlier years be restated to conform to the
requirements of this standard. The Partnership does not expect this
pronouncement to materially change the Partnership's current reporting
and disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with
the financial statements and notes thereto filed herewith.
a. Liquidity and Capital Resources:
Since inception, the Partnership's operating and debt service
obligations have been financed through the sale of Partnership Units,
cash provided by operating activities, and 1995 debt restructuring
activities. During the nine months ended September 30, 1997, all of
the Partnership's operating and debt service cash requirements have
been met through cash generated from operations.
Continued 5
<PAGE> 7
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED:
As of September 30, 1997, the Partnership's properties, Shadowridge
Meadows and Mission Park, remain highly leveraged. The Mission Park
mortgage was refinanced in December 1995 at a fixed interest rate of
7.76%. The Shadowridge Meadows mortgage was refinanced subsequent to
September 30, 1997 at a fixed interest rate of 7.49%.
Despite the refinancings, mortgage indebtedness on the properties
remains high, which may make it difficult for the properties to service
their debt through Partnership operations. In the event that one or more
of the properties is unable to support its debt service and the
Partnership is unable to cover operational shortfalls from cash
reserves, the Partnership may have to take one or more alternative
courses of action. The general partners would then determine, based on
their analysis of relevant economic conditions and the status of the
properties, a course of action intended to be consistent with the best
interests of the Partnership. Possible courses of action might include
the sacrifice, sale or refinancing of one or more of the properties, the
entry into one or more joint venture partnerships with other entities,
or the filing of another bankruptcy petition.
The Partnership changed its method of reporting cash flows from the
direct method to the indirect method in 1996. Prior period amounts have
been reclassified to conform with the current year presentation. Net
cash provided by operating activities for the nine month period ended
September 30, 1997 was $272,727 compared to net cash provided by
operating activities of $301,291 for the same period in 1996. The
principal reason for this difference is increased deferred expenses
related to the refinancing of Shadowridge Meadows.
b. Results of Operations:
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996.
Rental revenue for the three months ended September 30, 1997 was
approximately $922,000, an increase of 6% over rents of approximately
$868,000 in the comparable period in 1996. The increase is primarily
attributable to an increase in average occupancy from 96.5% at September
30, 1996 to 98% at September 30, 1997 and to increases in monthly tenant
rental rates.
Continued 6
<PAGE> 8
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED:
Interest expense for the three months ended September 30, 1997
was approximately $368,000, an increase of 11% over interest
expense of approximately $330,000 in the comparable period in
1996. The increase is primarily attributable to increases in the
variable interest rate on the Shadowridge Meadows property.
Operating expense for the three months ended September 30, 1997
were $455,000, an increase of 9% over operating expense of
$417,000 in the comparable period in 1996. The increase is
primarily attributable to an increase in refurbishment expenses.
Depreciation and amortization expenses for the three months
ended September 30, 1997 were $223,000, a decrease of 7% over
depreciation and amortization expenses of $240,000 in the
comparable period in 1996. The decrease is primarily
attributable to non-recurring loan refinancing fee amortization
recorded during the three months ended September 30, 1996.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1996.
Rental revenue for the nine months ended September 30, 1997 was
approximately $2,711,000, an increase of 6% over rents of
approximately $2,560,000 in the comparable period in 1996. The
increase is primarily attributable to an increase in occupancy
from 96.5% at September 30, 1996 to 98% at September 30, 1997
and to increases in monthly tenant rental rates.
Interest expense for the nine months ended September 30, 1997
was approximately $1,134,000, an increase of 1% over interest
expense of approximately $1,120,000 in the comparable period in
1996. The increase is primarily attributable to increases in the
variable interest rate on the Shadowridge Meadows property.
Operating expense for the nine months ended September 30, 1997
were $1,367,000, an increase of 7% over operating expense of
$1,275,000 in the comparable period in 1996. The increase is
primarily attributable to an increase in refurbishment expenses.
Depreciation and amortization expenses for the nine months ended
September 30, 1997 was approximately $669,000, an increase of 1%
over depreciation and amortization expenses of approximately
$666,000 in the comparable period in 1996. The increase is
primarily attributable to increased loan costs and loan fees
resulting from preparation of the refinancing for Shadowridge
Meadows.
Continued 7
<PAGE> 9
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
There are no pending legal proceedings which may have a material adverse
effect on the Partnership. However, the Partnership is involved in small
claims court proceedings against certain present or former tenants of
its apartment complexes with regard to landlord-tenant matters, all of
which are considered to be in the ordinary course of its business.
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
None
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 240,261
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,032,459
<PP&E> 31,349,896
<DEPRECIATION> (11,183,959)
<TOTAL-ASSETS> 21,198,396
<CURRENT-LIABILITIES> 663,562
<BONDS> 19,640,605
0
0
<COMMON> 0
<OTHER-SE> 894,229
<TOTAL-LIABILITY-AND-EQUITY> 21,198,396
<SALES> 0
<TOTAL-REVENUES> 2,820,935
<CGS> 0
<TOTAL-COSTS> 1,366,796
<OTHER-EXPENSES> 669,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,134,252
<INCOME-PRETAX> (349,299)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,299)
<EPS-PRIMARY> (12.97)
<EPS-DILUTED> 0
</TABLE>
