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 June 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
0-20016
CNL Income Fund X, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3004139
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
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
--------
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
June 30, December 31,
ASSETS 1997 1996
------ ----------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $1,003,852 and
$898,779 $15,119,319 $15,224,392
Net investment in direct financing
leases 14,119,958 14,219,805
Investment in joint ventures 3,404,714 3,449,210
Cash and cash equivalents 1,705,037 1,769,483
Receivables, less allowance for
doubtful accounts of $74,013 and
$4,428 111,625 52,470
Prepaid expenses 11,951 5,503
Accrued rental income, less
allowance for doubtful accounts
of $105,396 and $88,781 1,790,999 1,683,593
Other assets 33,104 33,104
----------- -----------
$36,296,707 $36,437,560
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 2,914 $ 2,913
Escrowed real estate taxes payable 11,828 45,060
Distributions payable 900,001 940,000
Due to related parties 3,131 1,609
Rents paid in advance and
deposits 196,812 160,928
----------- -----------
Total liabilities 1,114,686 1,150,510
Commitment (Note 2)
Minority interest 64,524 64,385
Partners' capital 35,117,497 35,222,665
----------- -----------
$36,296,707 $36,437,560
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- --------
<S> <C>
Revenues:
Rental income from
operating leases $ 488,101 $ 438,110 $ 941,638 $ 854,393
Earned income from direct
financing leases 350,942 438,666 753,531 891,785
Contingent rental income 7,810 2,352 12,172 2,352
Interest and other income 39,696 27,375 60,438 45,234
---------- ---------- ---------- ----------
886,549 906,503 1,767,779 1,793,764
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 39,970 42,088 75,128 88,691
Professional services 4,974 6,455 11,832 18,248
State and other taxes - 331 9,503 9,314
Depreciation and
amortization 52,536 47,563 105,073 95,126
---------- ---------- ---------- ----------
97,480 96,437 201,536 211,379
---------- ---------- ---------- ----------
Income Before Minority
Interest in Income of
Consolidated Joint
Venture and Equity in
Earnings of Unconsoli-
dated Joint Ventures 789,069 810,066 1,566,243 1,582,385
Minority Interest in
Income of Consolidated
Joint Venture (2,082) (2,120) (4,054) (3,986)
Equity in Earnings of
Unconsolidated Joint
Ventures 70,820 72,335 132,644 134,133
---------- ---------- ---------- ----------
Net Income $ 857,807 $ 880,281 $1,694,833 $1,712,532
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 8,578 $ 8,803 $ 16,948 $ 17,125
Limited partners 849,229 871,478 1,677,885 1,695,407
---------- ---------- ---------- ----------
$ 857,807 $ 880,281 $1,694,833 $1,712,532
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.21 $ 0.22 $ 0.42 $ 0.42
========== ========== ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- ------------
General partners:
Beginning balance $ 174,718 $ 140,100
Net income 16,948 34,618
----------- -----------
191,666 174,718
----------- -----------
Limited partners:
Beginning balance 35,047,947 35,260,756
Net income 1,677,885 3,427,194
Distributions ($0.45 and
$0.91 per limited partner
unit,respectively) (1,800,001) (3,640,003)
----------- -----------
34,925,831 35,047,947
----------- -----------
Total partners' capital $35,117,497 $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
Six Months Ended
June 30,
1997 1996
----------- -------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,779,469 $ 1,822,546
----------- -----------
Cash Flows from Investing
Activities:
Additions to land and buildings
on operating leases - (978)
Investment in direct financing
leases - (1,542)
Investment in joint ventures - (129,503)
----------- -----------
Net cash used in investing
activities - (132,023)
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,840,000) (1,840,000)
Distributions to holder of
minority interest (3,915) (3,677)
----------- -----------
Net cash used in financing
activities (1,843,915) (1,843,677)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (64,446) (153,154)
Cash and Cash Equivalents at Beginning
of Period 1,769,483 1,832,853
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,705,037 $ 1,679,699
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 900,001 $ 900,001
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 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 and six months ended June 30, 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. Commitment:
----------
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 June 30, 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 June 30, 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 June 30,
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 six months ended
June 30, 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 $1,779,469 and
$1,822,546 for the six months ended June 30, 1997 and 1996, respectively. The
decrease in cash from operations for the six months ended June 30, 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 June
30, 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 June 30, 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 June 30, 1997, the Partnership had $1,705,037
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 six months ended
June 30, 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 June 30, 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 $1,114,686 at June 30, 1997, from $1,150,510 at December 31, 1996,
primarily as the result of the Partnership's accruing a special distribution
payable to the limited partners of $40,000 at December 31, 1996, as described
above, which was paid in January 1997. 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 $1,800,001 for each of the six months ended
June 30, 1997 and 1996 ($900,001 for each of the quarters ended June 30, 1997
and 1996). This represents distributions for each applicable six months of $0.45
per unit ($0.23 per unit for each applicable quarter ended June 30, 1997 and
1996). No distributions were made to the general partners for the quarters and
six months ended June 30, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the six months ended June 30, 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 six months ended June 30, 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 six months ended June 30,
1997 and 1996, the Partnership and Allegan Real Estate Joint Venture earned
$1,695,169 and $1,746,178, respectively, in rental income from operating leases
and earned income from direct financing leases for these Properties, $839,043
and $876,776 of which was earned during the quarters ended June 30, 1997 and
1996, respectively. The decrease in rental and earned income during the quarter
and six months ended June 30, 1997, as compared to the quarter and six months
ended June 30, 1996, is primarily attributable to the Partnership increasing its
allowance for doubtful accounts by approximately $39,000 and $61,500,
respectively, for rental amounts relating to the Perkins Properties located in
Lancaster and
7
<PAGE>
Results of Operations - Continued
- ---------------------------------
Amherst, New York, which are leased by the same tenant, due to financial
difficulties the tenant is experiencing. No such allowance was established
during the quarter and six months ended June 30, 1996. As of July 31, 1997, the
Partnership was negotiating an agreement with the tenant of these Properties for
the collection of past due amounts and will recognize such amounts as income if
collected.
For the six months ended June 30, 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 six months ended June 30,
1997 and 1996, the Partnership earned $132,644 and $134,133, respectively,
attributable to the net income earned by these unconsolidated joint ventures,
$70,820 and $72,335 of which was earned during the quarters ended June 30, 1997
and 1996, respectively.
Operating expenses, including depreciation and amortization expense,
were $201,536 and $211,379 for the six months ended June 30, 1997 and 1996,
respectively, of which $97,480 and $96,437 were incurred for the quarters ended
June 30, 1997 and 1996, respectively. The decrease in operating expenses during
the six months ended June 30, 1997, as compared to the six months ended June 30,
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 six months ended June 30, 1996. The
decrease in operating expenses during the six months ended June 30, 1997, as
compared to the six months ended June 30, 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 six
months ended June 30, 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 June 30, 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 6th day of August, 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 June 30, 1997, and its
statement of income for the six months then ended and is qualified in its
entirety by reference to the Form 10Q of CNL Income Fund X, Ltd. for the
six months ended June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,705,037
<SECURITIES> 0
<RECEIVABLES> 185,638
<ALLOWANCES> 74,013
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 16,123,171
<DEPRECIATION> 1,003,852
<TOTAL-ASSETS> 36,296,707
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,117,497
<TOTAL-LIABILITY-AND-EQUITY> 36,296,707
<SALES> 0
<TOTAL-REVENUES> 1,767,779
<CGS> 0
<TOTAL-COSTS> 201,536
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,694,833
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,694,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,694,833
<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>
