<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 33-0294177
(State or 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 registration (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 May 14, 1998 was 18,826.5. The number of the registrant's Class A Units
outstanding as of May 14, 1998 was 8,100.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A California Limited Partnership)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Rental properties:
Land $ 7,078,365 $ 7,078,365
Buildings and improvements 21,731,106 21,607,078
------------ ------------
28,809,471 28,685,443
Less accumulated depreciation (9,229,906) (8,582,492)
------------ ------------
19,579,565 20,102,951
Other assets:
Cash and cash equivalents 286,968 282,293
Deferred loan fees, net of accumulated amortization of
$107,147 and $80,873, respectively 670,036 689,294
Prepaid expenses and other assets 260,531 151,181
------------ ------------
1,217,535 1,122,768
------------ ------------
$ 20,797,100 $ 21,225,719
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loans payable $ 19,629,145 $ 19,765,202
Other liabilities:
Loan payable to affiliate 90,449 113,000
Accounts payable and accrued liabilities 172,374 148,501
Accrued interest payable 125,699 125,623
Security deposits 202,905 201,250
------------ ------------
20,220,572 20,353,576
Commitments
Partners' capital 586,528 882,143
Note receivable from general partner (10,000) (10,000)
------------ ------------
$ 20,797,100 $ 21,225,719
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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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
-------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rents $ 973,736 $ 922,233 $ 2,939,359 $ 2,711,423
Other 69,053 32,774 148,449 109,512
----------- ----------- ----------- -----------
Total revenues 1,042,789 955,007 3,087,808 2,820,935
----------- ----------- ----------- -----------
Expenses:
Operating expenses 415,188 454,593 1,359,974 1,366,796
Depreciation 227,310 223,254 673,687 669,186
Interest 378,863 367,983 1,114,762 1,134,252
----------- ----------- ----------- -----------
Total expenses 1,021,361 1,045,830 3,148,423 3,170,234
----------- ----------- ----------- -----------
Net income (loss) $ 21,428 $ (90,823) $ (60,615) $ (349,299)
=========== =========== =========== ===========
Basic and diluted per limited
partnership unit data
Net loss per limited partnership unit $ .80 $ (3.37) $ (2.25) $ (12.97)
=========== =========== =========== ===========
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.
3
<PAGE> 4
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A California Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (60,615) $(349,299)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 647,413 638,428
Amortization of loan fees 26,274 30,758
(Increase) in:
Prepaid expenses and other assets (109,350) (271,566)
Increase in:
Accounts payable, accrued liabilities and accrued
interest payable 23,949 213,744
Security deposits 1,655 17,597
--------- ---------
Net cash provided by operating activities 529,326 279,662
--------- ---------
Cash flows from investing activities:
Capital expenditures (124,028) (116,484)
--------- ---------
Net cash used in investing activities (124,028) (116,484)
Cash flows from financing activities:
Principal payments under mortgage debt (136,057) (148,264)
Loan fees and refinancing costs (7,016) (6,935)
Principal payments to affiliate (22,550) (12,300)
Distributions to Investors (235,000) --
--------- ---------
Net cash used by financing activities (400,623) (167,499)
Net increase (decrease) in cash and cash equivalents 4,675 (4,321)
--------- ---------
Cash and cash equivalents at beginning of period 282,293 244,582
--------- ---------
Cash and cash equivalents at end of period $ 286,968 $ 240,261
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<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, 1997 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 the periods 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 AUTHORITATIVE PRONOUNCEMENTS:
In September 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 periods be restated to conform to the
requirements of this standard. The Partnership believes it is involved in
only one segment and expects the new standard will have no impact on the
Partnership's financial presentation.
5
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INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
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, 1998, all of the Partnership's operating and debt service
cash requirements have been met through cash generated from
operations.
As of September 30, 1998, 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 in October 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.
Net cash provided by operating activities for the nine months
ended September 30, 1998 was approximately $529,000 compared to
approximately $280,000 for the same period in 1997. The
principal reason for this increase was an increase in rental
revenue.
There was no material change in net cash used in investing
activities for the nine months ended September 30, 1998 when
compared to the same period in 1997.
6
<PAGE> 7
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED:
Net cash used in financing activities for the nine months ended
September 30, 1998 was approximately $401,000 compared to
approximately $168,000 for the same period in 1997. The increase
is due to distributions to partners and/or investors of
$235,000. There were no such distributions in the same period of
1997.
b. Results of Operations:
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1997.
Rental revenue for the three months ended September 30, 1998 was
approximately $974,000, an increase of 6% over rents of
approximately $922,000 for the comparable period in 1997. The
increase is primarily attributable to an increase in monthly
tenant rental rates and steady average occupancy rates. On
September 30, 1998, the Shadowridge Meadows Apartments and
Mission Park Apartments reflected occupancy rates of 98% and
97%, respectively, compared to 96% and 97%, respectively, on
September 30, 1997.
Interest expense for the three months ended September 30, 1998
was approximately $379,000, an increase of 3% over interest
expense of approximately $368,000 for the comparable period in
1997. The increase is attributable to prior year fluctuations in
Shadowridge Meadows' variable interest rate loan, which was
refinanced to a fixed rate during the fourth quarter of 1997.
Operating expenses for the three months ended September 30, 1998
were approximately $415,000, a decrease of 9% over operating
expenses of approximately $455,000 for the comparable period in
1997. The decrease is due to lower repair and maintenance
expense in the current year.
Depreciation and amortization expenses for the three months
ended September 30, 1998 and 1997 were approximately $227,000.
Depreciation and amortization expenses have remained relatively
constant as there have been few material additions to buildings
and improvements in the period.
7
<PAGE> 8
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED:
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1997.
Rental revenue for the nine months ended September 30, 1998 was
approximately $2,939,000, an increase of 8% over rents of
approximately $2,711,000 for the comparable period in 1997. The
increase is primarily attributable to an increase in monthly
tenant rental rates and steady average occupancy rates. On
September 30, 1998, the Shadowridge Meadows Apartments and
Mission Park Apartments reflected occupancy rates of 98% and
97%, respectively, compared to 96% and 97%, respectively, on
September 30, 1997.
Interest expense for the nine months ended September 30, 1998
was approximately $1,115,000, a decrease of 2% over interest
expense of approximately $1,134,000 for the comparable period in
1997. The decrease is attributable to the refinancing of the
Shadowridge Meadows mortgage in October 1997.
Operating expenses for the nine months ended September 30, 1998
were approximately $1,360,000, an decrease of less than 1% over
operating expenses of approximately $1,367,000 for the
comparable period in 1997. The decrease is due to lower repair
and maintenance expense in the current year.
Depreciation and amortization expenses for the nine months ended
September 30, 1998 and 1997 were approximately $674,000.
Depreciation and amortization expenses have remained relatively
constant as there have been few material additions to buildings
and improvements in the period.
c. Year 2000
The Partnership currently uses prepackaged accounting software
on a Windows NT platform. To the extent the Partnership's
software applications contain source code that are unable to
appropriately interpret the upcoming Year 2000, some level of
modification, or even possibly replacement of such applications,
may be necessary. The Partnership has made an assessment of the
impact of the Year 2000 issue on its internal operations and has
developed a plan to bring its computer systems into compliance
before the end of 1999. The Plan addresses the modification or
replacement of applications and operating systems to achieve
timely Year 2000 compliance and also includes communication and
analysis with outside vendors with whom the Partnership
interfaces electronically. Although it is not possible to
quantify the aggregate cost of such modifications, the
8
<PAGE> 9
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
Partnership does not anticipate that the cost will have a
material adverse effect on its financial position or results of
operations. The foregoing discussion of Year 2000 issues
contains forward-looking statements and actual compliance may be
affected by a number of factors which include the timing and
compliance by the Partnership's outside vendors and suppliers.
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
9
<PAGE> 10
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A CALIFORNIA LIMITED PARTNERSHIP)
SIGNATURES
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.
November 2, 1998
INCOME GROWTH PARTNERS, LTD. X,
a California Limited Partnership
By: Income Growth Management, Inc.
General Partner
By: /s/ Timothy C. Maurer
-------------------------------
Timothy C. Maurer
Principal Financial Officer AND
Duly Authorized Officer of the
Registrant
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FILED WITH THE REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 286,968
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 260,531
<PP&E> 28,809,471
<DEPRECIATION> 9,229,906
<TOTAL-ASSETS> 20,797,100
<CURRENT-LIABILITIES> 298,073
<BONDS> 19,629,145
0
0
<COMMON> 0
<OTHER-SE> 576,528
<TOTAL-LIABILITY-AND-EQUITY> 20,797,100
<SALES> 2,939,359
<TOTAL-REVENUES> 3,087,808
<CGS> 1,359,974
<TOTAL-COSTS> 1,359,974
<OTHER-EXPENSES> 673,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,114,762
<INCOME-PRETAX> (60,615)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,615)
<EPS-PRIMARY> (2.25)
<EPS-DILUTED> (2.25)
</TABLE>
