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 June 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
JUNE 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $ 234,888
Property:
Land 2,566,250
Buildings 5,370,984
7,937,234
Accumulated depreciation (617,117)
Total property 7,320,117
Net investment in direct financing leases 616,592
Investment in joint ventures 1,372,369
Accrued rental income 112,158
TOTAL ASSETS $9,656,124
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 6,207
Security deposit 12,000
TOTAL LIABILITIES 18,207
Partnership equity:
General partners 15,520
Limited partners 9,622,397
TOTAL PARTNERSHIP EQUITY 9,637,917
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $9,656,124
See Notes to Financial Statements.
2
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income from operating leases $214,211 $214,210 $430,330 $428,420
Earned income from direct financing leases 17,594 17,505 35,188 35,010
Interest income 1,086 1,226 2,112 2,058
Equity income from investment in joint ventures 35,544 35,511 71,079 71,014
Total revenues 268,435 268,452 538,709 536,502
Expenses:
Advisory fees to related party 17,283 17,233 34,566 34,366
Amortization 12,755 15,000 27,755 30,000
Depreciation 36,118 36,117 72,234 72,233
Professional fees 5,526 3,918 16,289 12,799
Total expenses 71,682 72,268 150,844 149,398
Net income $196,753 $196,184 $387,865 $387,104
Allocation of net income:
General partners $ 1,968 $ 1,962 $ 3,879 $ 3,871
Limited partners 194,785 194,222 383,986 383,233
$196,753 $196,184 $387,865 $387,104
Net income per unit $ 17.18 $ 17.13 $ 33.86 $ 33.80
Weighted average units outstanding 11,454 11,454 11,454 11,454
See Notes to Financial Statements.
</TABLE>
3
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(Unaudited)
<CAPTION>
Quarter Year To Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $196,753 $196,184 $387,865 $387,104
Adjustments to reconcile net income to
net cash flows from operating activities:
Amortization 12,755 15,000 27,755 30,000
Depreciation 36,118 36,117 72,234 72,233
Decrease (increase) in accounts receivables - 13,197 14,399 (7,709)
Increase (decrease) in accounts payable (1,528) (5,289) (12,760) 2,385
Cash received from direct financing leases
less than income recognized (817) (728) (1,634) (1,456)
Investment in joint ventures:
Equity income (35,544) (35,511) (71,079) (71,014)
Distributions received 35,544 35,511 71,079 71,014
Increase in accrued rental income (4,728) (7,968) (11,364) (15,936)
Net cash provided by operating activities 238,553 246,513 476,495 466,621
Cash flows from investing activities:
Joint venture distributions in excess of income 1,088 1,121 2,187 2,255
Net cash provided by investing activities 1,088 1,121 2,187 2,255
Cash flows from financing activities:
Distributions paid to partners (232,871) (232,010) (466,213) (463,129)
Net cash used in financing activities (232,871) (232,010) (466,213) (463,129)
Net increase in cash and cash equivalents 6,770 15,624 12,469 5,747
Cash and cash equivalents at beginning of period 228,118 183,589 222,419 193,466
Cash and cash equivalents at end of period $234,888 $199,213 $234,888 $199,213
See Notes to Financial Statements.
</TABLE>
4
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 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
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 six
month periods ended June 30, 1998 and June 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 $34,566 were
incurred and paid to AAA or AmREIT for the three and six
months ended June 30, 1998, respectively and $17,233 and
$34,366 were incurred and paid to AAA for the three and six
months ended June 30, 1997, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and six months ended June 30, 1998 and
June 30, 1997 under both operating and direct financing
leases:
<TABLE>
<CAPTION>
Quarter Year to Date
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Golden Corral Corporation (Texas) $ 43,241 $ 43,241 $ 86,482 $ 86,482
TGI Friday's, Inc. (Texas) 45,126 45,126 90,252 90,252
Goodyear Tire & Rubber Company (Texas) 13,227 13,227 26,454 26,454
Tandy Corporation (Minnesota) 64,155 64,155 128,310 128,310
America's Favorite Chicken Company (Georgia) 25,926 25,836 51,852 51,672
One Care Health Industries, Inc. (Texas) 40,130 40,130 82,168 80,260
Total $ 231,805 $ 231,715 $ 465,518 $ 463,430
</TABLE>
6
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 has conducted 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. AmREIT's hardware and software are believed
to be Year 2000 compliant. Accordingly, the Partnership does not
expect to incur any material costs in connection with the
compliance of the Year 2000 Issue.
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.
RESULTS OF OPERATIONS
For the three months ended June 30, 1998, revenues totaled
$268,435 which included $267,349 from real estate operations and
$1,086 of interest income. Revenues for the second quarter of
1998 remained unchanged from those of the second quarter of 1997.
Expenses decreased slightly from $72,268 in the second quarter of
1997 to $71,682 in the second quarter of 1998 primarily from an
decrease in amortization expense partially offset by an increase
in professional fees. The Partnership recorded $196,753 of net
income for the second quarter of 1998 compared to $196,184 for
the second quarter of 1997.
For the six months ended June 30, 1998, revenues totaled $538,709
which included $536,597 from real estate operations and $2,112 of
interest income. Revenues for the first six months of 1998
increased $2,207 from those of the first six months of 1997 which
was attributable to a $2,153 increase in rental income and a
slight increase of $54 in interest income. Rental income
increased based upon a specified rental adjustment during the
first six months of 1998. Expenses increased from $149,398 in
the first six months of 1997 to $150,844 in the first six months
of 1998 primarily from an increase in professional fees partially
offset by a decrease in amortization. The Partnership recorded
$387,865 of net income for the first six months of 1998 compared
to $387,104 for the first six months of 1997.
7
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
8
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)
August 14, 1998 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
August 14, 1998 /s/ L. Larry Mangum
Date L. Larry Mangum
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 234,888
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 234,888
<PP&E> 7,937,234
<DEPRECIATION> 617,117
<TOTAL-ASSETS> 9,656,124
<CURRENT-LIABILITIES> 18,207
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,637,917
<TOTAL-LIABILITY-AND-EQUITY> 9,656,124
<SALES> 536,597
<TOTAL-REVENUES> 538,709
<CGS> 0
<TOTAL-COSTS> 150,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 387,865
<INCOME-TAX> 0
<INCOME-CONTINUING> 387,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 387,865
<EPS-PRIMARY> 33.86
<EPS-DILUTED> 0
</TABLE>
