<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 June 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
June 30, 1998 and December 31, 1997
(Unaudited)
----------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Rental properties:
Land $ 7,078,365 $ 7,078,365
Buildings and improvements 21,700,307 21,607,078
------------ ------------
28,778,672 28,685,443
Less accumulated depreciation (9,012,617) (8,582,492)
------------ ------------
19,766,055 20,102,951
Other assets:
Cash and cash equivalents 224,431 282,293
Deferred loan fees, net of accumulated
amortization of $97,121
and $80,873, respectively 680,056 689,294
Prepaid expenses and other assets 244,093 151,181
------------ ------------
1,148,580 1,122,768
------------ ------------
$ 20,914,635 $ 21,225,719
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loans payable $ 19,674,036 $ 19,765,202
Other liabilities:
Loan payable to affiliate 103,199 113,000
Accounts payable and accrued liabilities 178,177 148,501
Accrued interest payable 125,699 125,623
Security deposits 203,423 201,250
------------ ------------
20,284,534 20,353,576
Commitments
Partners' capital 640,101 882,143
Note receivable from general partner (10,000) (10,000)
------------ ------------
$ 20,914,635 $ 21,225,719
============ ============
</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
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
----------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Rents $ 1,965,623 $ 1,789,190
Other 79,396 76,736
----------- -----------
Total revenues 2,045,019 1,865,926
----------- -----------
Expenses:
Operating expenses 944,786 911,119
Depreciation and amortization 446,377 445,931
Interest 735,899 766,268
----------- -----------
Total expenses 2,127,062 2,123,318
----------- -----------
Net loss $ (82,043) $ (257,392)
=========== ===========
Basic and diluted per limited partnership unit data:
Net loss per limited partnership unit $ (3.05) $ (9.56)
=========== ===========
Weighted average limited partnership units
outstanding 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 Six Months Ended June 30, 1998 and 1997
(unaudited)
----------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (82,043) $(257,392)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 446,379 445,931
(Increase) in:
Deferred loan fees (7,016) --
Prepaid expenses and other assets (92,912) (164,222)
Increase in:
Accounts payable and accrued liabilities 29,752 169,414
Security deposits 2,173 9,535
--------- ---------
Net cash provided by operating activities 296,333 203,266
--------- ---------
Cash flows from investing activities:
Capital expenditures (93,229) (88,565)
--------- ---------
Net cash used in investing activities (93,229) (88,565)
--------- ---------
Cash flows from financing activities:
Principal payments under mortgage debt (91,166) (88,743)
Principal payments to affiliate (9,800) (12,300)
Distributions to Investors (160,000) --
--------- ---------
Net cash used by financing activities (260,966) (101,043)
--------- ---------
Net increase (decrease) in cash and
cash equivalents (57,862) 13,658
--------- ---------
Cash and cash equivalents at beginning of period 282,293 244,582
--------- ---------
Cash and cash equivalents at end of period $ 224,431 $ 258,240
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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, 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 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 from the beginning of the
fiscal 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 has adopted this standard for the interim financial
statements, however, the Partnership has no comprehensive income items at
June 30, 1998.
4
<PAGE> 6
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. RECENT AUTHORITATIVE PRONOUNCEMENTS, CONTINUED:
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 periods be restated to conform to the requirements of
this standard, however, the new standard has no effect on the Partnership's
financial statement presentation.
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 six months ended June 30, 1998, all of the
Partnership's operating and debt service cash requirements have been
met through cash generated from operations.
As of June 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%.
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:
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 six months ended
June 30, 1998 was approximately $296,000 compared to approximately
$203,000 for the same period in 1997. The principal reason for this
increase was an increase in rental revenue.
Net cash used in investing activities for the six months ended June
30, 1998 was approximately $93,000 compared to approximately $89,000
for the same period in 1997. The increase related to building
improvements was made possible by increased rental revenues.
Net cash used in financing activities for the six months ended June
30, 1998 was approximately $261,000 compared to approximately $101,000
for the same period in 1997. The increase is due to distributions to
partners and/or investors of $160,000. There were no such
distributions in the same period of 1997.
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:
b. Results of Operations:
Comparison of six months ended June 30, 1998 to the six months ended
June 30, 1997.
Rental revenue for the six months ended June 30, 1998 was
approximately $1,966,000, an increase of 9% over rents of
approximately $1,789,000 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 June 30, 1998, the
Shadowridge Meadows Apartments and Mission Park Apartments reflected
occupancy rates of 99% and 98%, respectively, compared to 95% and 97%,
respectively, on June 30, 1997.
Interest expense for the six months ended June 30, 1998 was
approximately $736,000, a decrease of 4% over interest expense of
approximately $766,000 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 six months ended June 30, 1998 were
approximately $945,000, an increase of 4% over operating expenses of
approximately $911,000 for the comparable period in 1997. The increase
is due to higher administrative costs in the current year.
Depreciation and amortization expenses for the six months ended June
30, 1998 and 1997 were approximately $446,000. 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 a prepackaged accounting software on a
Novell Netware platform. The software maker has announced that it will
not support the current software beginning in the Year 2000. As a
result, the Partnership intends to purchase a new accounting system
that is Year 2000 compliant. The Partnership believes that the
purchase and related training costs will not be material to the
Partnership's financial position or results of operations.
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.
7
<PAGE> 9
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
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
<PAGE> 10
INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARY
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.
Date: August 7, 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
9
<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
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 224,431
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 244,093
<PP&E> 28,778,672
<DEPRECIATION> 9,012,617
<TOTAL-ASSETS> 20,914,635
<CURRENT-LIABILITIES> 303,876
<BONDS> 19,674,036
0
0
<COMMON> 0
<OTHER-SE> 630,101
<TOTAL-LIABILITY-AND-EQUITY> 20,914,635
<SALES> 1,965,623
<TOTAL-REVENUES> 2,045,019
<CGS> 944,786
<TOTAL-COSTS> 944,786
<OTHER-EXPENSES> 446,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 735,899
<INCOME-PRETAX> (82,043)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,043)
<EPS-PRIMARY> (3.05)
<EPS-DILUTED> (3.05)
</TABLE>
