UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-25436
AAA NET REALTY FUND X, LTD.
NEBRASKA LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0381949
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
Indicate by check mark whether the registrant (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 such filing
requirements for the past 90 days. X Yes No
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H (1) (a) AND (b) OF FORM 10-Q AND IS, THEREFORE,
FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CASH & CASH EQUIVALENTS $ 193,632 $ 824,805
ACCOUNTS RECEIVABLE 300 14,780
PROPERTY:
Land 2,566,250 2,566,250
Building 5,370,984 5,370,984
7,937,234 7,937,234
Accumulated depreciation (364,299) (255,950)
TOTAL PROPERTY 7,572,935 7,681,284
NET INVESTMENT IN DIRECT FINANCING LEASE 613,113 615,410
INVESTMENT IN JOINT VENTURES 1,381,140 724,549
OTHER ASSETS:
Acquisition costs 0 23,231
Organization costs, net of accumulated
amortization of $197,245 and $152,245
respectively 102,755 147,755
Accrued rental income 61,137 37,230
TOTAL OTHER ASSETS 163,892 208,216
TOTAL ASSETS 9,925,012 10,069,044
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable 8,800 8,445
Security deposits 12,000 12,000
TOTAL LIABILITIES 20,800 20,445
PARTNERSHIP EQUITY:
General partners 10,088 7,333
Limited partners 9,894,124 10,041,266
TOTAL PARTNERSHIP EQUITY 9,904,212 10,048,599
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 9,925,012 $ 10,069,044
See Notes to Financial Statements.
2
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AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(Unaudited)
<CAPTION>
Quarter Year to Date
1996 1995 1996 1995
REVENUES
<S> <C> <C> <C> <C>
Rental income from operating
leases $ 216,662 $ 210,305 $ 647,670 $ 629,469
Earned income from direct
financing lease 14,701 19,700 44,161 49,308
Interest income 6,972 10,086 24,770 37,138
Equity income from investment
in joint venture 20,826 15,952 54,797 47,859
TOTAL REVENUES 259,161 256,043 771,398 763,774
EXPENSES
Accounting 450 2,006 9,786 11,186
Administrative expenses 16,179 22,951 48,537 47,370
Amortization 15,000 15,000 45,000 45,000
Depreciation 35,360 36,116 108,349 106,859
Legal & professional fees 2,339 4,597 12,448 15,293
Other 149 99 1,749 2,544
TOTAL EXPENSES 69,477 80,769 225,869 228,252
NET INCOME $ 189,684 $ 175,274 $ 545,529 $ 535,522
ALLOCATION OF NET INCOME
General partners $ 1,897 $ 1,753 $ 5,455 $ 5,355
Limited partners 187,787 173,521 540,074 530,167
$ 189,684 $ 175,274 $ 545,529 $ 535,522
NET INCOME PER UNIT $ 16.56 $ 15.30 $ 47.63 $ 46.75
UNITS OUTSTANDING 11,454 11,454 11,454 11,454
See Notes to Financial Statements.
3
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AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF PARTNERSHIP EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
PARTNERSHIP EQUITY AT DECEMBER 31, 1995 $ 7,333 $ 10,041,266 $ 10,048,599
NET INCOME 1,764 174,649 176,413
DISTRIBUTIONS (1,200) (229,072) (230,272)
PARTNERSHIP EQUITY AT MARCH 31, 1996 7,897 9,986,843 9,994,740
NET INCOME 1,794 177,638 179,432
DISTRIBUTIONS (600) (229,072) (229,672)
PARTNERSHIP EQUITY AT JUNE 30, 1996 9,091 9,935,409 9,944,500
NET INCOME 1,897 187,787 189,684
DISTRIBUTIONS (900) (229,072) (229,972)
PARTNERSHIP EQUITY AT SEPTEMBER 30, 1996 $ 10,088 $ 9,894,124 $ 9,904,212
See Notes to Financial Statements.
4
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AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(Unaudited)
<CAPTION>
Quarter Year to Date
1996 1995 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 189,684 $ 175,274 $ 545,529 $ 535,522
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 35,360 36,116 108,349 106,859
Amortization 15,000 15,000 45,000 45,000
Decrease in accounts receivable 2,615 214 14,480 1,760
Increase in accounts payable 3,153 7,158 355 4,174
Increase in security deposits 0 0 0 12,000
Decrease in escrow deposits 18,250 0 0 50,000
Cash received from direct financing lease
in excess of income recognized 785 948 2,297 2,312
Investment in joint venture:
Equity income (20,826) (15,952) (54,797) (47,859)
Distributions received 20,826 15,952 54,797 47,859
Increase in accrued rental income (7,969) (7,933) (23,907) (18,621)
NET CASH FLOWS FROM OPERATING
ACTIVITIES 256,878 226,777 692,103 739,006
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate:
Accounted for under the equity method 0 0 0 (1,477,390)
Investment in joint venture (662,252) 0 (662,252) (14,250)
(Increase) decrease in acquisition costs 23,974 (944) 23,231 59,920
Joint venture distributions in excess of income 1,130 3,299 5,661 9,897
NET CASH FLOWS FROM INVESTING
ACTIVITIES (637,148) 2,355 (633,360) (1,421,823)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (229,972) (225,045) (689,916) (653,493)
NET CASH FLOWS FROM FINANCING
ACTIVITIES (229,972) (225,045) (689,916) (653,493)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (610,242) 4,087 (631,173) (1,336,310)
CASH and CASH EQUIVALENTS at beginning
of period 803,874 820,167 824,805 2,160,564
CASH and CASH EQUIVALENTS at end of
period $ 193,632 $ 824,254 $ 193,632 $ 824,254
See Notes to Financial Statements.
5
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AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,1996 AND 1995
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund X, Ltd. ("the Partnership"), is a
limited partnership formed April 15, 1992, under the laws
of the State of Nebraska. American Asset Advisers
Management Corporation X (a Nebraska corporation) is the
managing general partner and H. Kerr Taylor is the
individual general partner. The offering period for
subscriptions terminated September 1, 1994 with a total
of 11,453.61 units having been subscribed at an offering
price of $1,000 per unit.
The Partnership was formed to acquire commercial
properties for cash. The Partnership will own, lease,
operate, manage and eventually sell the properties. The
selection, acquisition, and supervision of the operations
of the properties is managed by American Asset Advisers
Realty Corporation ("AAA"), a related party.
The financial records of the Partnership are maintained
on the accrual basis of accounting whereby revenues are
recognized when earned and expenses are reflected when
incurred. Rental income is recorded ratably over the
life of the lease.
For purposes of the statement of cash flows the
Partnership considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents. There has been no cash paid for income
taxes or interest during 1996 or 1995.
Real estate is leased to others on a net lease basis
whereby all operating expenses related to the properties
including property taxes, insurance and common area
maintenance are the responsibility of the tenant. The
leases are accounted for under the operating method or
the direct financing method.
Under the operating method, the properties are recorded
at cost. Rental income is recognized ratably over the
life of the lease and depreciation is charged as
incurred.
Under the direct financing method, the properties are
recorded at their net investment. Unearned income is
deferred and amortized to income over the life of the
lease so as to produce a constant periodic rate of
return.
The Partnership's interests in joint venture investments
are accounted for under the equity method whereby the
Partnership's investment is increased or decreased by its
share of earnings or losses in the joint venture and also
decreased by any distributions.
Organization costs are amortized on a straight line basis
over five years.
6
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All income and expense items flow through to the partners
for tax purposes. Consequently, no provision for federal
or state income taxes is provided in the accompanying
financial statements.
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q
and do not include all of the disclosures required by
generally accepted accounting principles. The financial
statements reflect all normal and recurring adjustments
which are, in the opinion of management, necessary to
present a fair statement of results for the three and
nine month periods ended September 30, 1996 and 1995.
The financial statements of AAA Net Realty Fund X, Ltd.
contained herein should be read in conjunction with the
financial statements included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995
financial statements to conform with 1996 presentation.
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers
Management Corporation X, and the individual general
partner, H. Kerr Taylor, have made capital contributions
in the amounts of $990 and $10, respectively. The
general partners shall not be obligated to make any other
contributions to the Partnership, except that, in the
event that the general partners have negative balances in
their capital accounts after dissolution and winding up
of, or withdrawal from, the Partnership, the general
partners will contribute to the Partnership an amount
equal to the lesser of the deficit balances in their
capital accounts or 1.01% of the total capital
contributions of the limited partners' over the amount
previously contributed by the general partners.
3. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the reimbursement
for administrative services necessary for the prudent
operation of the Partnership and its assets with the
exception that no reimbursement is permitted for rent,
utilities, capital equipment, salaries, fringe benefits
or travel expenses allocated to the individual general
partner or to any controlling persons of the managing
general partner. In connection therewith, $16,179 and
$48,537 were incurred and paid to AAA for the three and
nine months ended September 30, 1996, respectively, and
$22,951 and $47,370 were paid for the three and nine
months ended September 30, 1995, respectively.
On April 5, 1996, the Partnership entered into a joint
venture with American Asset Advisers Trust, Inc. and AAA
Net Realty Fund XI, Ltd., affiliates, for the purpose of
acquiring a property which is being operated as a Just
For Feet retail store in Tucson, Arizona. The
Partnership's interest in the joint venture is 18.25%.
The property was purchased on September 11, 1996 after
the construction was completed.
7
<PAGE>
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and nine months ended September 30,
1996 and September 30, 1995 under both operating and
direct financing leases:
Quarter Year to Date
1996 1995 1996 1995
Golden Corral Corporation $43,241 $43,241 $129,723 $129,723
TGI Friday's, Inc. 45,125 45,125 135,377 135,375
Goodyear Tire & Rubber Company 13,227 13,227 39,681 39,681
Tandy Corporation 64,155 64,155 192,465 192,465
America's Favorite Chicken Company 25,485 23,019 74,195 69,589
One Care Health Industries, Inc. 40,130 41,238 120,390 111,944
5. CONTINGENCY
The Partnership had determined that, beginning on
December 1, 1993, it inadvertently failed to update its
then outstanding prospectus with current information as
required by Section 10(a)(3) of the Securities Act of
1933 as amended (the "33 Act") and by the standard
undertakings made by the Partnership in its amended
registration statement filed pursuant to the 33 Act.
However, the Partnership did publicly disclose such
information in its Form 8-K and 10-Q filings with the
Securities and Exchange Commission.
As a result of the above information, the Partnership has
been advised that it has a contingent liability to
investors for recession rights or damages which, at a
maximum, would not exceed approximately $5.5 million.
Management anticipates that recessions, if any, will not
be material.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
AAA Net Realty Fund X, Ltd., a Nebraska limited partnership, was
formed April 15, 1992. The offering for 20,000 units was
effective September 17, 1992. The offering period for
subscriptions terminated September 1, 1994 with a total of
11,453.61 units having been subscribed at $1,000 per unit. In
addition, the general partners had previously made contributions
of $1,000.
LIQUIDITY AND CAPITAL RESOURCES
On April 5, 1996, the Partnership entered into a joint venture
with two affiliated entities for the purpose of acquiring a
property which is being operated as a Just For Feet retail store.
The property was purchased on September 11, 1996 after the
construction was completed. The Partnership's interest in the
joint venture is 18.25% and the Partnership s share of the
purchase price for the property was $638,838 plus $23,378 in
acquisition fees paid to affiliates. This was the final property
acquired by the Partnership from the funds raised through the
offering. The resulting use of Partnership funds will result in
an increase in the Partnership's rental income and a decrease in
interest income.
The Partnership had determined that, beginning on December 1,
1993, it inadvertently failed to update its then outstanding
prospectus with current information as required by Section 10(a)(3)
of the Securities Act of 1933 as amended (the "33 Act") and by the
standard undertakings made by the Partnership in its amended registration
statement filed pursuant to the 33 Act. However, the Partnership
did publicly disclose such information in its Form 8-K and 10-Q
filings with the Securities and Exchange Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
recession rights or damages which, at a maximum, would not exceed
approximately $5.5 million. Management anticipates that
recessions, if any, will not be material.
9
<PAGE>
RESULTS OF OPERATIONS
For the three months ended September 30, 1996, revenues totaled
$259,161 which included $252,189 from real estate operations and
$6,972 of interest income. Revenues for the third quarter
increased $3,118 from those of the third quarter of 1995 which
was attributable to a $6,232 increase in rental income offset by
a $3,114 decline in interest income. Expenses decreased in the
third quarter of 1996 to $69,477 compared to $80,769 for the
third quarter of 1995 primarily from decreased administrative
expenses, professional fees, and accounting fees. The
Partnership recorded $189,684 of net income for the third quarter
of 1996 compared to $175,274 for the third quarter of 1995.
For the nine months ended September 30, 1996, revenues totaled
$771,398 which included $746,628 from real estate operations and
$24,770 of interest income. Revenues for the first nine months
of 1996 increased $7,624 from those of the first nine months of
1995 which was attributable to a $19,992 increase in rental
income offset by a $12,368 decline in interest income. The
Partnership owned seven properties for the entire first nine
months of 1996 and the eighth property was acquired in September
of 1996 while six properties were owned for the entire first nine
months of 1995 and the seventh property was acquired during the
first quarter of 1995. Expenses decreased in the first nine
months of 1996 to $225,869 compared to $228,252 for the first
nine months of 1995 primarily from decreased professional
expenses resulting from legal fees that were incurred in 1995 on
a property which was not acquired by the Partnership. The
Partnership recorded $545,529 of net income for the first nine
months of 1996 compared to $535,522 for the first nine months of
1995.
For the three months ended September 30, 1995, revenues totaled
$256,043 which included $245,957 from real estate operations and
$10,086 of interest income. Revenues for the third quarter of
1995 increased $68,506 from those of the third quarter of 1994
primarily from an increase in real estate income. Real estate
income was earned from seven properties which were owned during
the third quarter of 1995 compared to the third quarter of 1994
when the Partnership owned five properties. The Partnership's
net income also increased from $137,584 to $175,274 for the same
reason.
For the nine months ended September 30, 1995, revenues totaled
$763,774 which included $726,636 from real estate operations and
$37,138 of interest income. Revenues for the first nine months
of 1995 increased $327,670 from those of the first nine months of
1994 primarily from an increase in real estate income. Real
estate income was earned from six properties which were owned at
the beginning of 1995 and a seventh property which was acquired
in January 1995 compared to the nine months of 1994 when the
Partnership owned five properties. The Partnership's net income
also increased from $304,683 to $535,522 for the same reason.
10
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
11
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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.
AAA Net Realty Fund X, Ltd
(Registrant)
November 14, 1996 H. Kerr Taylor
Date H. Kerr Taylor, President of
General Partner
November 14, 1996 H. Kerr Taylor
Date H. Kerr Taylor, Chief
Financial Officer
of General Partner
12
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 193,632
<SECURITIES> 0
<RECEIVABLES> 300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 193,932
<PP&E> 7,937,234
<DEPRECIATION> 364,299
<TOTAL-ASSETS> 9,925,012
<CURRENT-LIABILITIES> 8,800
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,904,212
<TOTAL-LIABILITY-AND-EQUITY> 9,925,012
<SALES> 746,628
<TOTAL-REVENUES> 771,398
<CGS> 0
<TOTAL-COSTS> 225,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 545,529
<INCOME-TAX> 0
<INCOME-CONTINUING> 545,529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,529
<EPS-PRIMARY> 47.63
<EPS-DILUTED> 0
</TABLE>
