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, 2000
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, 2000
(Unaudited)
ASSETS
Cash and cash equivalents $ 409,317
Accounts receivable 14,496
Property:
Land 2,566,250
Buildings 5,370,983
------------
7,937,233
Accumulated depreciation (942,167)
------------
Total property, net 6,995,066
------------
Net investment in direct financing leases 616,035
Investment in joint ventures 1,352,066
Other assets:
Accrued rental income 172,032
Deferred lease costs, net of accumulated
amortization of $5,488 26,277
------------
Total other assets 198,309
------------
TOTAL ASSETS $ 9,585,289
============
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 31,767
Security deposit 12,000
------------
TOTAL LIABILITIES 43,767
------------
Partnership equity:
General partners 23,409
Limited partners 9,518,113
------------
TOTAL PARTNERSHIP EQUITY 9,541,522
------------
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $ 9,585,289
============
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, 2000 AND 1999
(Unaudited)
<CAPTION>
Quarter Year To Date
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Rental income from operating leases $ 217,733 $ 217,362 $ 655,222 $ 651,926
Earned income from direct financing
leases 17,597 17,668 52,791 53,004
Interest income and other income 4,225 436 9,911 1,986
Equity income from investment in
joint ventures 35,640 35,594 106,884 106,750
---------- ---------- ---------- ----------
Total revenues 275,195 271,060 824,808 813,666
---------- ---------- ---------- ----------
Expenses:
Advisory fees to related party 28,635 19,716 85,905 59,148
Amortization 784 784 2,352 2,352
Depreciation 36,116 36,117 108,350 108,350
Professional fees 4,465 857 21,849 11,777
---------- ---------- ---------- ----------
Total expenses 70,000 57,474 218,456 181,627
---------- ---------- ---------- ----------
Net income $ 205,195 $ 213,586 $ 606,352 $ 632,039
=========== ========== ========== ==========
Allocation of net income:
General partners $ 2,053 $ 2,135 $ 6,064 $ 6,320
Limited partners 203,142 211,451 600,288 625,719
---------- ---------- ---------- ----------
$ 205,195 $ 213,586 $ 606,352 $ 632,039
========== ========== ========== ==========
Net income per unit $ 17.91 $ 18.65 $ 52.94 $ 55.18
========== ========== ========== ==========
Weighted average units outstanding 11,454 11,454 11,454 11,454
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
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, 2000 AND 1999
(Unaudited)
<CAPTION>
Quarter Year To Date
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 205,195 $ 213,586 $ 606,352 $ 632,039
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization 784 784 2,352 2,352
Depreciation 36,116 36,117 108,350 108,350
Decrease (increase) in accounts 40,705 (13,632) 54,732 (13,242)
receivable
Increase (decrease) in accounts payable 3 33,747 (30,689) 64,799
Decrease in property costs payable (17,223) - - -
Cash received from direct financing leases
greater (less) than income recognized 876 1,456 2,629 (326)
Investment in joint ventures:
Equity income (35,640) (35,594) (106,884) (106,750)
Distributions received 35,640 35,594 106,884 106,750
Increase in accrued rental income (7,119) (7,512) (21,351) (22,823)
Increase in deferred lease costs - - - (31,765)
---------- ---------- ---------- ----------
Net cash provided by operating
activities 259,337 264,546 722,375 739,384
---------- ---------- ---------- ----------
Cash flows from investing activities:
Joint venture distributions in excess
of income 2,929 2,974 8,814 6,372
---------- ---------- ---------- ----------
Net cash provided by investing activities 2,929 2,974 8,814 6,372
---------- ---------- ---------- ----------
Cash flows from financing activities:
Distributions paid to partners (186,454) (234,360) (553,740) (702,963)
---------- ---------- ---------- ----------
Net cash used in financing activities (186,454) (234,360) (553,740) (702,963)
---------- ---------- ---------- ----------
Net increase in cash and cash equivalents 75,812 33,160 177,449 42,793
Cash and cash equivalents at beginning
of period 333,505 251,269 231,868 241,636
---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ 409,317 $ 284,429 $ 409,317 $ 284,429
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(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 Realty Investment Corporation, ("ARIC"), 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 2000 or 1999.
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.
Properties are leased on a triple-net basis. Revenue is recognized on a
straight-line basis over the terms of the individual leases. Percentage rents
are recognized when received.
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.
5
<PAGE>
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-QSB and 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, 2000 and 1999.
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, 1999.
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 payment for 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, $28,635 and $85,905 were incurred and expensed for the three and nine
months ended September 30, 2000, respectively and $19,716 and $59,148 for the
three and nine months ended September 30, 1999, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee for the three
and nine months ended September 30, 2000 and 1999, respectively under both
operating and direct financing leases:
<TABLE>
<CAPTION>
Quarter Year to Date
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Golden Corral Corporation (Texas) $ 43,243 $ 43,241 $ 131,980 $ 129,723
TGI Friday's, Inc. (Texas) 45,126 45,126 135,376 135,378
Goodyear Tire & Rubber Company (Texas) 13,227 13,227 39,681 39,681
Tandy Corporation (Minnesota) 64,150 64,155 192,460 192,465
America's Favorite Chicken Company (Georgia) 25,931 25,745 77,791 77,075
One Care/Memorial Hermann Hospital (Texas) 43,653 43,536 130,725 130,608
--------- --------- --------- ---------
Total $ 235,330 $ 235,030 $ 708,013 $ 704,930
========= ========= ========= =========
</TABLE>
6
<PAGE>
4. INVESTMENT IN JOINT VENTURES
On April 5, 1996, the Partnership formed a joint venture, AAA Joint Venture
96-1, with AAA Net Realty Fund XI, Ltd. and AmREIT, Inc., entities with common
management, for the purpose of acquiring a property, which is being operated as
a Just For Feet retail store in Tucson, Arizona. The property was purchased on
September 11, 1996 after construction was completed. The Partnership's interest
in the joint venture is 18.25%. On November 4, 1999, Just For Feet, Inc. filed a
petition of relief under Chapter 11 of the Federal bankruptcy code. On January
27, 2000 Just For Feet, Inc. announced that its previous efforts of
reorganization were unsuccessful. As such, the bankruptcy court in Delaware
approved a liquidation auction of all of Just For Feet, Inc.'s retail stores and
inventory. On February 16, 2000 Just For Feet, Inc. entered into an agreement
whereby Footstar, Inc. purchased the inventory of Just For Feet, Inc., and
assumed certain retail operating leases. Included in the leases assumed by
Footstar, Inc. is the Just For Feet located in Tucson, Arizona, which is owned
by AAA Joint Venture 96-1. Effective February 16, 2000, Footstar began operating
this store under the Just For Feet name. The bankruptcy court in Delaware has
ordered Just For Feet, Inc. to cure any deficiencies under the lease prior to
the assumption of the lease by Footstar, Inc. These deficiencies represent a
receivable for rent, property taxes and insurance at September 30, 2000 of
approximately $8,968. Footstar is the second largest retailer of athletic
footwear and apparel. Footstar, Inc. is a publicly owned company, whose common
stock is traded on the New York Stock Exchange.
On October 27, 1994, the Partnership formed a joint venture, AAA Joint Venture
94-1, with AmREIT, Inc., for the purpose of acquiring a property on lease to
BlockBuster Music Retail Inc. in Missouri. The Company's interest in the joint
venture is 45.16%.
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.
7
<PAGE>
RESULTS OF OPERATIONS
For the three months ended September 30, 2000, revenues totaled $275,195, which
included $270,970 from real estate operations and $4,225 of interest and other
income. Revenues for the third quarter of 2000 increased slightly from those of
the third quarter of 1999, primarily due to better cash management and overnight
investing opportunities. Expenses increased from $57,474 in the third quarter of
1999 to $70,000 in the third quarter of 2000, primarily from an increase in
advisory fees to related party and in professional fees which includes legal,
audit and transfer agent fees. The Partnership recorded $205,195 of net income
for the third quarter of 2000 compared to $213,586 for the third quarter of
1999.
For the nine months ended September 30, 2000, revenues total $824,808, which
included $814,897 from real estate operations and $9,911 of interest income and
other income. Revenues for the first nine months of 2000 increased $11,142 from
those of the first nine months in 1999, which was primarily attributable to a
$7,925 increase in interest income and other income and a $3,083 increase in
rental income, which represents a percentage rent payment from Golden Corral.
Expenses increased from $181,627 in the first nine months of 1999 to $218,456 in
the first nine months of 2000, primarily from an increase in advisory fees to
related party and professional fees which includes legal, audit and transfer
agent fees. The Partnership recorded $606,352 of net income for the first nine
months of 2000, compared to $632,039 for the first nine months of 1999.
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 14, 2000 /s/ H. Kerr Taylor
--------------- ------------------
Date H. Kerr Taylor, President of General Partner
November 14, 2000 /s/ Chad C. Braun
--------------- -------------------
Date Chad C. Braun (Principal Accounting Officer)
10
