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, 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
0-20016
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
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 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-10
Part II
Other Information 11
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
------ ----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,171,445 and
$1,113,247 $15,142,585 $15,709,899
Net investment in direct financing
leases 12,883,527 13,460,125
Investment in joint ventures 3,473,663 3,505,326
Cash and cash equivalents 1,685,494 1,583,883
Restricted cash 1,330,726 92,236
Receivables, less allowance for
doubtful accounts of $117,461 and
$137,856 94,820 123,903
Prepaid expenses 8,986 5,877
Accrued rental income, less
allowance for doubtful accounts
of $123,692 and $117,593 1,711,030 1,775,374
Other assets 33,104 33,104
----------- -----------
$36,363,935 $36,289,727
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,221 $ 6,033
Escrowed real estate taxes payable 42,388 27,784
Distributions payable 980,001 900,001
Due to related parties 5,056 4,946
Rents paid in advance and
deposits 144,985 132,419
----------- -----------
Total liabilities 1,174,651 1,071,183
Minority interest 64,491 64,501
Partners' capital 35,124,793 35,154,043
----------- -----------
$36,363,935 $36,289,727
=========== ===========
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,
1998 1997
---------- ----------
Revenues:
Rental income from operating leases $ 447,273 $ 457,899
Earned income from direct financing
leases 358,837 402,589
Interest and other income 26,472 20,742
---------- ----------
832,582 881,230
---------- ----------
Expenses:
General operating and administrative 38,237 35,158
Bad debt expense 2,033 -
Professional services 5,199 6,858
State and other taxes 10,271 9,503
Depreciation and amortization 58,198 52,537
---------- ----------
113,938 104,056
---------- ----------
Income Before Minority Interest in
Income of Consolidated Joint Venture
and Equity in Earnings of Unconsoli-
dated Joint Ventures 718,644 777,174
Minority Interest in Income of
Consolidated Joint Venture (2,186) (1,972)
Equity in Earnings of Unconsolidated
Joint Ventures 63,134 61,824
Gain on Sale of Land and Building 171,159 -
---------- ---------
Net Income $ 950,751 $ 837,026
========== ==========
Allocation of Net Income:
General partners $ 7,796 $ 8,370
Limited partners 942,955 828,656
---------- ----------
$ 950,751 $ 837,026
========== ==========
Net Income Per Limited Partner Unit $ 0.24 $ 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,
1998 1997
------------- -------------
General partners:
Beginning balance $ 208,709 $ 174,718
Net income 7,796 33,991
----------- -----------
216,505 208,709
----------- -----------
Limited partners:
Beginning balance 34,945,334 35,047,947
Net income 942,955 3,497,390
Distributions ($0.25 and
$0.90 per limited partner
unit,respectively) (980,001) (3,600,003)
----------- -----------
34,908,288 34,945,334
----------- -----------
Total partners' capital $35,124,793 $35,154,043
=========== ===========
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,
1998 1997
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,003,374 $ 895,348
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building 1,231,106 -
Increase in restricted cash (1,230,672) -
----------- ----------
Net cash provided by
investing activities 434 -
----------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (900,001) (940,000)
Distributions to holder of
minority interest (2,196) (1,916)
----------- -----------
Net cash used in financing
activities (902,197) (941,916)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 101,611 (46,568)
Cash and Cash Equivalents at Beginning
of Quarter 1,583,883 1,769,483
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 1,685,494 $ 1,722,915
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 980,001 $ 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, 1998 and 1997
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, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, 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,
1997.
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. Land and Building on Operating Leases:
In January 1998, the Partnership sold its property in Sacramento,
California, to the tenant, for $1,250,000 and received net sales
proceeds of $1,230,672, resulting in a gain of $163,349 for financial
reporting purposes. This property was originally acquired by the
Partnership in December 1991 and had a cost of approximately $969,400,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $261,300
in excess of its original purchase price.
5
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
2. Land and Building on Operating Leases - Continued:
In addition, in March 1998, a vacant parcel of land relating to the
property in Austin, Texas, was sold to a third party who had previously
subleased the land from the Partnership's lessee. In connection
therewith, the Partnership received net sales proceeds of $68,434
($68,000 of which had been received as a deposit in 1995), resulting in
a gain of $7,810 for financial reporting purposes.
3. Net Investment in Direct Financing Leases:
In March 1998, the Partnership sold its property in Sacramento,
California, for which the building portion had been classified as a
direct financing lease. In connection therewith, the gross investment
(minimum lease payments receivable and the estimated residual value)
and unearned income relating to the building were removed from the
accounts and the gain from the sale of the property was reflected in
income (see Note 2).
4. Restricted Cash:
As of March 31, 1998, the net sales proceeds of $1,230,672 from the
sale of the property in Sacramento, California and the remaining net
sales proceeds from the 1997 sale of the property in Fremont,
California of $89,702, plus accrued interest of $10,352 were being held
in an interest-bearing escrow account pending the release of funds by
the escrow agent to acquire an additional property.
6
<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, 1998, the Partnership owned 48 Properties, including nine Properties owned
by joint ventures in which the Partnership is a co-venturer and two properties
owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1998 and 1997, 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 $1,003,374 and
$895,348 for the quarters ended March 31, 1998 and 1997, respectively. The
increase in cash from operations for the quarter ended March 31, 1998, is
primarily a result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1998.
In January 1998, the Partnership sold its Property in Sacramento,
California, to the tenant, for $1,250,000 and received net sales proceeds of
$1,230,672, resulting in a gain of $163,349 for financial reporting purposes.
This Property was originally acquired by the Partnership in December 1991 and
had a cost of approximately $969,400, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $264,800 in excess of its original purchase price. As of March
31, 1998, the net sales proceeds of $1,230,672 along with the remaining net
sales proceeds of $89,702 from the 1997 sale of the Property in Fremont,
California, plus accrued interest of $10,352 were being held in an
interest-bearing escrow account pending the release of funds by the escrow agent
to acquire an additional Property.
In addition, in March 1998, a vacant parcel of land relating to the
property in Austin, Texas, was sold to a third party who had previously
subleased the land from the Partnership's lessee. In connection therewith, the
Partnership received net sales proceeds of $68,434 ($68,000 of which had been
received as a deposit in 1995), resulting in a gain of $7,810 for financial
reporting purposes.
7
<PAGE>
Liquidity and Capital Resources - Continued
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, 1998, the Partnership had $1,685,494
invested in such short-term investments as compared to $1,583,883 at December
31, 1997. The funds remaining at March 31, 1998, after payment of distributions
and other liabilities, will be used to meet the Partnership's working capital
and other needs.
Total liabilities of the Partnership, including distributions payable,
increased to $1,174,651 at March 31, 1998, from $1,071,183 at December 31, 1997,
primarily as the result of the Partnership's accruing a special distribution of
accumulated, excess operating reserves payable to the limited partners of
$80,000 at March 31, 1998. The increase was also partially due to an increase in
rents paid in advance at March 31, 1998, as compared to December 31, 1997. The
general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
Based on cash from operations, and for the quarter ended March 31,
1998, accumulated excess operating reserves, the Partnership declared
distributions to limited partners of $980,001 and $900,001 for each of the
quarters ended March 31, 1998 and 1997, respectively. This represents
distributions for each applicable quarter of $0.25 and $0.23 per unit,
respectively. No distributions were made to the general partners for the
quarters ended March 31, 1998 and 1997. No amounts distributed to the limited
partners for the quarters ended March 31, 1998 and 1997, 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, 1998 and 1997, the Partnership and
its consolidated joint venture, Allegan Real Estate Joint Venture, owned and
leased 39 wholly owned Properties (including one Property in Fremont,
California, which was sold in September 1997 and one Property in Sacramento,
California, which
8
<PAGE>
Results of Operations - Continued
was sold in January 1998) to operators of fast-food and family-style restaurant
chains. In connection therewith, during the quarters ended March 31, 1998 and
1997, the Partnership and Allegan Real Estate Joint Venture earned $806,110 and
$860,488, respectively, in rental income from operating leases and earned income
from direct financing leases from these Properties. The decrease in rental and
earned income during the quarter ended March 31, 1998, as compared to the
quarter ended March 31, 1997, is partially due to a decrease of approximately
$39,000 during the quarter ended March 31, 1998, due to the fact that the lease
relating to the Perkins Property in Ft. Pierce, Florida, was amended to provide
for rent reductions from May 1997 through December 31, 1998. In addition, rental
and earned income decreased approximately $54,900 during the quarter ended March
31, 1998, as a result of the sale of the Properties in Fremont, California in
September 1997 and Sacramento, California in January 1998.
The decrease in rental and earned income for the quarter ended March
31, 1998 was partially offset by an increase in rental and earned income of
approximately $36,800 due to the reinvestment of a portion of the net sales
proceeds from the 1997 sale of the Property in Fremont, California, in a
Property in Homewood, Alabama in October 1997. In addition, rental and earned
income was lower during the quarter ended March 31, 1997 by approximately
$11,400 due to the Partnership establishing an allowance for doubtful accounts
for the Property in Amherst, New York during the quarter ended March 31, 1997
due to financial difficulties the tenant was experiencing. No such allowance was
recorded during the quarter ended March 31, 1998.
For the quarters ended March 31, 1998 and 1997, 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, and for the quarter ended March 31, 1998, the Partnership
owned and leased one additional Property as tenants-in-common with affiliates of
the general partners. In connection therewith, during the quarters ended March
31, 1998 and 1997, the Partnership earned $63,134 and $61,824, respectively,
attributable to the net income earned by these unconsolidated joint ventures.
The increase in net income earned by unconsolidated joint ventures during the
quarter ended March 31, 1998, as compared to the quarter ended March 31, 1997,
is primarily attributable to the Partnership investing in a Property in Miami,
Florida, in December 1997, with affiliates of the general partners as
tenants-in-common.
9
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $113,938 and $104,056 for the quarters ended March 31, 1998 and 1997,
respectively. The increase in operating expenses during the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is primarily the
result of an increase in depreciation expense due to the purchase of the
Property in Homewood, Alabama, in October 1997.
As a result of the sale of the Property in Sacramento, California, and
the sale of the parcel of land in Austin, Texas, as described above in
"Liquidity and Capital Resources," the Partnership recognized a gain of $171,159
for financial reporting purposes during the quarter ended March 31, 1998. No
Properties were sold during the quarter ended March 31, 1997.
10
<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, 1998.
11
<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 12th day of May, 1998.
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, 1998, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10Q of CNL Income Fund X, Ltd. for the three months ended March 31,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,016,220<F2>
<SECURITIES> 0
<RECEIVABLES> 212,281
<ALLOWANCES> 117,461
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 16,314,030
<DEPRECIATION> 1,171,445
<TOTAL-ASSETS> 36,363,935
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,124,793
<TOTAL-LIABILITY-AND-EQUITY> 36,363,935
<SALES> 0
<TOTAL-REVENUES> 832,582
<CGS> 0
<TOTAL-COSTS> 111,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,033
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 950,751
<INCOME-TAX> 0
<INCOME-CONTINUING> 950,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 950,751
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>Cash balance includes $1,240,838 in restricted cash.
<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>
