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 March 31, 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
0-20016
----------------------
CNL Income Fund X, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3004139
- ----------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
-------------------
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
<PAGE>
CONTENTS
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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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-8
Part II
Other Information 9
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
------ ----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $951,316 and
$898,779 $15,171,855 $15,224,392
Net investment in direct financing
leases 14,174,509 14,219,805
Investment in joint ventures 3,419,882 3,449,210
Cash and cash equivalents 1,722,915 1,769,483
Receivables, less allowance for
doubtful accounts of $27,546 and
$4,428 94,832 52,470
Prepaid expenses 7,753 5,503
Accrued rental income, less
allowance for doubtful accounts
of $99,298 and $88,781 1,742,045 1,683,593
Other assets 33,104 33,104
----------- -----------
$36,366,895 $36,437,560
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 3,507 $ 2,913
Escrowed real estate taxes payable 29,989 45,060
Distributions payable 900,000 940,000
Due to related parties 4,597 1,609
Rents paid in advance and
deposits 204,670 160,928
----------- -----------
Total liabilities 1,142,763 1,150,510
Commitments (Note 3)
Minority interest 64,441 64,385
Partners' capital 35,159,691 35,222,665
----------- -----------
$36,366,895 $36,437,560
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1997 1996
---------- ----------
Revenues:
Rental income from operating leases $ 457,899 $ 416,283
Earned income from direct financing
leases 402,589 453,119
Interest and other income 20,742 17,859
---------- ----------
881,230 887,261
---------- ----------
Expenses:
General operating and administrative 35,158 46,603
Professional services 6,858 11,793
State and other taxes 9,503 8,983
Depreciation and amortization 52,537 47,563
---------- ----------
104,056 114,942
---------- ----------
Income Before Minority Interest in
Income of Consolidated Joint Venture
and Equity in Earnings of Unconsoli-
dated Joint Ventures 777,174 772,319
Minority Interest in Income of
Consolidated Joint Venture (1,972) (1,866)
Equity in Earnings of Unconsolidated
Joint Ventures 61,824 61,798
---------- ----------
Net Income $ 837,026 $ 832,251
========== ==========
Allocation of Net Income:
General partners $ 8,370 $ 8,323
Limited partners 828,656 823,928
---------- ----------
$ 837,026 $ 832,251
========== ==========
Net Income Per Limited Partner Unit $ 0.21 $ 0.21
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,000,000 4,000,000
========== ==========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- ------------
General partners:
Beginning balance $ 174,718 $ 140,100
Net income 8,370 34,618
----------- -----------
183,088 174,718
----------- -----------
Limited partners:
Beginning balance 35,047,947 35,260,756
Net income 828,656 3,427,194
Distributions ($0.23 and
$0.91 per limited partner
unit,respectively) (900,000) (3,640,003)
----------- -----------
34,976,603 35,047,947
----------- -----------
Total partners' capital $35,159,691 $35,222,665
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1997 1996
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 895,348 $ 863,689
----------- -----------
Cash Flows from Investing
Activities:
Additions to land and buildings
on operating leases - (977)
Investment in direct financing
leases - (1,542)
Investment in joint ventures - (129,503)
----------- -----------
Net cash used in investing
activities - (132,022)
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (940,000) (940,000)
Distributions to holder of
minority interest (1,916) (1,874)
----------- -----------
Net cash used in financing
activities (941,916) (941,874)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (46,568) (210,207)
Cash and Cash Equivalents at Beginning
of Quarter 1,769,483 1,832,853
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 1,722,915 $ 1,622,646
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 900,000 $ 900,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership) NOTES
TO CONDENSED FINANCIAL STATEMENTS Quarters
Ended March 31, 1997 and 1996
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 ended March 31, 1997, may not be indicative of the results
that may be expected for the year ending December 31, 1997. Amounts as
of December 31, 1996, 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 X, Ltd. (the "Partnership") for the year ended December 31,
1996.
The Partnership accounts for its 88.26% interest in Allegan Real Estate
Joint Venture using the consolidation method. Minority interest
represents the minority joint venture partner's proportionate share of
the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been
eliminated.
2. Commitments:
In October 1995, the tenant of the Partnership's property located in
Austin, Texas, entered into a sublease agreement for a vacant parcel of
land under which the subtenant has the option to purchase such land.
The subtenant exercised the purchase option and in accordance with the
terms of the sublease agreement, the tenant assigned the purchase
contract, together with the purchase contract payment of $69,000, from
the subtenant, to the Partnership. As of March 31, 1997, the sale of
the vacant parcel of land had not closed and, as a result, the net
proceeds of $68,000 (representing the original $69,000 received by the
Partnership, less $1,000 in costs incurred in anticipation of the sale)
were recorded as a deposit at March 31, 1997. The contract price of
$69,000 exceeds the Partnership's cost attributable to the parcel of
land.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CNL Income Fund X, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on April 16, 1990, 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
selected national and regional fast-food and family-style restaurant chains. The
leases are triple-net leases, with the lessees generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of March
31, 1997, the Partnership owned 48 Properties, including nine Properties owned
by joint ventures in which the Partnership is a co-venturer and one property
owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1997 and 1996, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $895,348 and
$863,689 for the quarters ended March 31, 1997 and 1996, respectively. The
increase in cash from operations for the quarter ended March 31, 1997, is
primarily a result of changes in income and expenses as discussed below in
"Results of Operations" and changes in the Partnership's working capital.
In October 1995, the tenant of the Partnership's Property located in
Austin, Texas, entered into a sublease agreement for a vacant parcel of land
under which the subtenant has the option to purchase such land. The subtenant
exercised the purchase option and in accordance with the terms of the sublease
agreement, the tenant assigned the purchase contract, together with the purchase
contract payment of $69,000, from the subtenant, to the Partnership. As of March
31, 1997, the sale of the vacant parcel of land had not closed and, as a result,
the net proceeds of $68,000 (representing the original $69,000 received by the
Partnership, less $1,000 in costs incurred in anticipation of the sale) were
recorded as a deposit at March 31, 1997.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At March 31, 1997, the Partnership had $1,722,915
invested in such short-term investments as compared to $1,769,483 at December
31, 1996. The decrease in cash and cash equivalents during the quarter ended
March 31, 1997, is primarily the result of the payment of a special distribution
to the limited partners of $40,000 in January 1997 from cumulative excess
operating reserves. The funds remaining at March 31, 1997, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
6
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
decreased to $1,142,763 at March 31, 1997, from $1,150,510 at December 31, 1996.
The general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
Based primarily on cash from operations, the Partnership declared
distributions to limited partners of $900,000 for each of the quarters ended
March 31, 1997 and 1996. This represents distributions for each applicable
quarter of $0.23 per unit. No distributions were made to the general partners
for the quarters ended March 31, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the quarters ended March 31, 1997 and
1996, 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 contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
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 continue to generate cash flow
in excess of operating expenses.
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.
Results of Operations
During the quarters ended March 31, 1997 and 1996, the Partnership and
its consolidated joint venture, Allegan Real Estate Joint Venture, owned and
leased 39 wholly owned Properties to operators of fast-food and family-style
restaurant chains. In connection therewith, during the quarters ended March 31,
1997 and 1996, the Partnership and Allegan Real Estate Joint Venture earned
$860,488 and $869,402, respectively, in rental income from operating leases and
earned income from direct financing leases for these Properties.
For the quarters ended March 31, 1997 and 1996, the Partnership also
owned and leased eight Properties indirectly through other joint venture
arrangements and one Property as tenants-in-common with affiliates of the
general partners. In connection therewith, during the quarters ended March 31,
1997 and 1996, the Partnership earned $61,824 and $61,798, respectively,
attributable to the net income earned by these unconsolidated joint ventures.
7
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $104,056 and $114,942 for the quarters ended March 31, 1997 and 1996,
respectively. The decrease in operating expenses during the quarter ended March
31, 1997, as compared to the quarter ended March 31, 1996, is primarily the
result of a decrease in accounting and administrative expenses associated with
operating the Partnership and its Properties and a decrease in professional
services as a result of the Partnership incurring the cost of the 1996 appraisal
updates obtained to prepare an annual statement of unit valuation to qualified
plans in accordance with the partnership agreement during the quarter ended
December 31, 1996. The Partnership incurred the cost of the 1995 appraisal
updates during the quarter ended March 31, 1996. The decrease in operating
expenses during the quarter ended March 31, 1997, as compared to the quarter
ended March 31, 1996, was partially offset by an increase in depreciation
expense as a result of the reclassification of the building portion of the lease
relating to the Perkins Property in Ft. Pierce, Florida, from a direct financing
lease to an operating lease during the quarter ended March 31, 1996.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults 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 - None.
(b) No reports on Form 8-K were filed during the
quarter ended March 31, 1997.
9
<PAGE>
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 9th day of May, 1997.
CNL INCOME FUND X, 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the balance sheet of CNL Income Fund X, Ltd. at March 31, 1997, and
its statement of income for the three months then ended and is qualified
in its entirety by reference to the Form 10-Q of CNL Income Fund X, Ltd.
for the three months ended March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,722,915
<SECURITIES> 0
<RECEIVABLES> 122,378
<ALLOWANCES> 27,546
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 16,123,171
<DEPRECIATION> 951,316
<TOTAL-ASSETS> 36,366,895
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,159,691
<TOTAL-LIABILITY-AND-EQUITY> 36,366,895
<SALES> 0
<TOTAL-REVENUES> 881,230
<CGS> 0
<TOTAL-COSTS> 104,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 837,026
<INCOME-TAX> 0
<INCOME-CONTINUING> 837,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 837,026
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund X, Ltd. has
an unclassified balance sheet; therefore, no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
