UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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
(713) 850-1400
Indicate by check mark whether the issuer (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 issuer was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $ 236,929
Property:
Land 2,566,250
Buildings 5,370,984
----------
7,937,234
Accumulated depreciation (653,234)
----------
Total property 7,284,000
Net investment in direct financing leases 617,409
Investment in joint ventures 1,371,288
Accrued rental income 116,886
----------
TOTAL ASSETS $9,626,512
==========
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 1,014
Security deposit 12,000
----------
TOTAL LIABILITIES 13,014
Partnership equity:
General partners 16,063
Limited partners 9,597,435
----------
TOTAL PARTNERSHIP EQUITY 9,613,498
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $9,626,512
==========
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income from operating leases $214,210 $214,213 $644,540 $642,633
Earned income from direct financing leases 17,594 17,505 52,782 52,515
Interest income 1,846 496 3,958 2,554
Equity income from investment in joint ventures 35,554 35,517 106,633 106,531
-------- -------- -------- --------
Total revenues 269,204 267,731 807,913 804,233
Expenses:
Advisory fees to related party 17,283 17,283 51,849 51,649
Amortization - 15,000 27,755 45,000
Depreciation 36,116 36,117 108,350 108,350
Professional fees 6,509 3,338 22,798 16,137
-------- -------- -------- --------
Total expenses 59,908 71,738 210,752 221,136
Net income $209,296 $195,993 $597,161 $583,097
======== ======== ======== ========
Allocation of net income:
General partners $ 2,093 $ 1,960 $ 5,972 $ 5,831
Limited partners 207,203 194,033 591,189 577,266
-------- -------- -------- --------
$209,296 $195,993 $597,161 $583,097
======== ======== ======== ========
Net income per unit $ 18.27 $ 17.11 $ 52.14 $ 50.91
======== ======== ======== ========
Weighted average units outstanding 11,454 11,454 11,454 11,454
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $209,296 $195,993 $597,161 $583,097
Adjustments to reconcile net income to net cash
flows from operating activities:
Amortization - 15,000 27,755 45,000
Depreciation 36,116 36,117 108,350 108,350
Decrease (increase) in accounts receivable - 289 14,399 (7,420)
Increase (decrease) in accounts payable (5,193) 129 (17,953) 2,514
Cash received from direct financing leases
less than income recognized (817) (728) (2,451) (2,184)
Investment in joint ventures:
Equity income (35,554) (35,517) (106,633) (106,531)
Distributions received 35,554 35,517 106,633 106,531
Increase in accrued rental income (4,728) (7,968) (16,092) (23,904)
-------- -------- -------- --------
Net cash provided by operating activities 234,674 238,832 711,169 705,453
Cash flows from investing activities:
Joint venture distributions in excess of income 1,082 1,115 3,269 3,370
-------- -------- -------- --------
Net cash provided by investing activities 1,082 1,115 3,269 3,370
Cash flows from financing activities:
Distributions paid to partners (233,715) (232,046) (699,928) (695,175)
-------- -------- -------- --------
Net cash used in financing activities (233,715) (232,046) (699,928) (695,175)
Net increase in cash and cash equivalents 2,041 7,901 14,510 13,648
Cash and cash equivalents at beginning of period 234,888 199,213 222,419 193,466
-------- -------- -------- --------
Cash and cash equivalents at end of period $236,929 $207,114 $236,929 $207,114
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
4
<PAGE>
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(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 Partnership was formed to acquire commercial properties
for cash, own, lease, operate, manage and eventually sell the
properties. Prior to June 5, 1998, the selection,
acquisition, and supervision of the operations of the
properties was managed by American Asset Advisers Realty
Corporation ("AAA"), a related party. Beginning June 5, 1998,
the supervision of the operations of the properties is managed
by AmREIT Operating Corporation, ("AmREIT"), 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.
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 1998
or 1997.
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. The Partnership owns a
minority interest and does not exercise control over the
management of the joint ventures.
Organization costs are amortized on a straight line basis over
five years.
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.
5
<PAGE>
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB
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, 1998 and September 30, 1997.
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-KSB for the year ended December 31, 1997.
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, a total of $17,283 and $51,849 were
incurred and paid to AAA or AmREIT for the three and nine
months ended September 30, 1998, respectively and $17,283 and
$51,649 were incurred and paid to AAA for the three and nine
months ended September 30, 1997, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and nine months ended September 30, 1998
and September 30, 1997 under both operating and direct
financing leases:
Quarter Year to Date
1998 1997 1998 1997
Golden Corral Corporation (Texas) $ 43,241 $ 43,241 $129,723 $129,723
TGI Friday's, Inc. (Texas) 45,126 45,126 135,378 135,378
Goodyear Tire & Rubber Company
(Texas) 13,227 13,227 39,681 39,681
Tandy Corporation (Minnesota) 64,155 64,155 192,465 192,465
America's Favorite Chicken Company
(Georgia) 25,925 25,839 77,777 77,511
One Care Health Industries, Inc.
(Texas) 40,130 40,130 122,298 120,390
-------- -------- -------- --------
Total $231,804 $231,718 $697,322 $695,148
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Partnership was organized on April 15, 1992, to acquire, on a
debt-free basis, existing and newly constructed commercial
properties located in the continental United States and
particularly in the Southwest, to lease these properties to
tenants under generally "triple net" leases, to hold the
properties with the expectation of equity appreciation and
eventually to resell the properties.
The Partnership's overall investment objectives are to acquire
properties that offer investors the potential for (i)
preservation and protection of the Partnership's capital; (ii)
partially tax-deferred cash distributions from operations; and
(iii) long-term capital gains through appreciation in value of
the Partnership's properties realized upon sale.
AmREIT is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the
Year 2000 Issue. The Year 2000 Issue is the result of computer
programs being written using two digits rather than four to
define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather
than the year 2000. The Partnership believes that the cost of
remediation associated with its computer systems will be minimal
and the remediation is anticipated to be completed in the third
quarter of 1999. The other essential component of the Year 2000
issue is to ensure that the Partnership's significant tenants are
assessed for Year 2000 compliance. The Partnership has initiated
discussions with its significant tenants in order to assess their
readiness for the Year 2000 issue. Due to the nature of the
tenants' businesses, the Partnership does not believe the Year
2000 issue will materially impact the tenants' ability to pay
rent. However, the failure of one or more tenants as a result of
the Year 2000 issue could have a material adverse effect on the
Partnership's results of operation or financial position. Upon
completion of its assessment program, the Partnership will
consider the necessity of implementing a contingency plan to
mitigate any adverse effects associated with the Year 2000 issue.
Though the Partnership does not expect the Year 2000 issue to
have a material adverse effect on its results of operation or
financial position there can be no assurances of that position.
LIQUIDITY AND CAPITAL RESOURCES
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.
7
<PAGE>
RESULTS OF OPERATIONS
For the three months ended September 30, 1998, revenues totaled
$269,204 which included $267,358 from real estate operations and
$1,846 of interest income. Revenues for the third quarter of
1998 increased slightly from those of the third quarter of 1997
due to an increase in interest income. Expenses decreased from
$71,738 in the third quarter of 1997 to $59,908 in the third
quarter of 1998 primarily from a decrease in amortization expense
partially offset by an increase in professional fees. The
Partnership recorded $209,296 of net income for the third quarter
of 1998 compared to $195,993 for the third quarter of 1997.
For the nine months ended September 30, 1998, revenues totaled
$807,913 which included $803,955 from real estate operations and
$3,958 of interest income. Revenues for the first nine months of
1998 increased $3,680 from those of the first nine months of 1997
which was attributable to a $2,276 increase in rental income and
an increase of $1,404 in interest income. Rental income
increased based upon a specified rental adjustment during the
first nine months of 1998. Expenses decreased from $221,136 in
the first nine months of 1997 to $210,752 in the first nine
months of 1998 primarily from a decrease in amortization
partially offset by an increase in professional fees. The
Partnership recorded $597,161 of net income for the first nine
months of 1998 compared to $583,097 for the first nine months of
1997.
8
<PAGE>
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
9
<PAGE>
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.
(Issuer)
November 13, 1998 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
November 13, 1998 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting Officer)
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 236,929
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 236,929
<PP&E> 7,937,234
<DEPRECIATION> 653,234
<TOTAL-ASSETS> 9,626,512
<CURRENT-LIABILITIES> 13,014
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,613,498
<TOTAL-LIABILITY-AND-EQUITY> 9,626,512
<SALES> 803,955
<TOTAL-REVENUES> 807,913
<CGS> 0
<TOTAL-COSTS> 210,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 597,161
<INCOME-TAX> 0
<INCOME-CONTINUING> 597,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 597,161
<EPS-PRIMARY> 52.14
<EPS-DILUTED> 0
</TABLE>
