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, 2001
------------------
- --------- 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
SEPTEMBER 30, 2001
(Unaudited)
ASSETS
Cash and cash equivalents $ 493,036
Property:
Land 2,566,250
Buildings 5,370,983
----------
7,937,233
Accumulated depreciation (1,086,634)
----------
Total property, net 6,850,599
----------
Net investment in direct financing leases 612,211
Investment in joint ventures 1,340,466
Other assets:
Accrued rental income 190,545
Deferred lease costs, net of accumulated
amortization of $8,624 23,141
----------
Total other assets 213,686
----------
TOTAL ASSETS $9,509,998
==========
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 986
Security deposit 12,000
----------
TOTAL LIABILITIES 12,986
----------
Partnership equity:
General partners 25,114
Limited partners 9,471,898
----------
TOTAL PARTNERSHIP EQUITY 9,497,012
----------
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $9,509,998
==========
See Notes to Financial Statements.
2
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
(Unaudited)
Quarter Year to Date
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Rental income from operating leases $ 218,001 $ 217,733 $ 655,826 $ 655,222
Earned income from direct financing leases 17,490 17,597 52,472 52,791
Interest income and other income 2,332 4,225 12,065 9,911
Equity income from investment in joint ventures 35,689 35,640 107,028 106,884
--------- --------- --------- ---------
Total revenues 273,512 275,195 827,391 824,808
--------- --------- --------- ---------
Expenses:
Advisory fees to related party 28,635 28,635 85,905 85,905
Amortization 784 784 2,352 2,352
Depreciation 36,116 36,116 108,350 108,350
Professional fees 4,665 4,465 21,368 21,849
Other 1,323 - 4,401 -
--------- --------- --------- ---------
Total expenses 71,523 70,000 222,376 218,456
------- --------- --------- ---------
Net income $ 201,989 $ 205,195 $ 605,015 $ 606,352
========= ========= ========= =========
Allocation of net income:
General partners $ 2,020 $ 2,053 $ 6,050 $ 6,064
Limited partners 199,969 203,142 598,965 600,288
--------- --------- --------- ---------
$ 201,989 $ 205,195 $ 605,015 $ 606,352
========= ========= ========= =========
Net income per unit $ 17.66 $ 17.91 $ 52.86 $ 52.94
========= ========= ========= =========
Weighted average units outstanding 11,436 11,454 11,446 11,454
========= ========= ========= =========
See Notes to Financial Statements.
3
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
(Unaudited)
Quarter Year to Date
2001 2000 2001 2000
--------- --------- --------- ---------
Cash flows from operating activities:
Net income $ 201,989 $ 205,195 $ 605,015 $ 606,352
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 784 784 2,352 2,352
Depreciation 36,116 36,116 108,350 108,350
Decrease in accounts receivable 1,043 40,705 21,961 54,732
Increase (decrease) in accounts payable 751 3 (45,080) (30,689)
Decrease in property costs payable - (17,223) - -
Cash received from direct financing leases
greater than income recognized 983 876 2,947 2,629
Investment in joint ventures:
Equity income (35,689) (35,640) (107,028) (106,884)
Distributions received 35,689 35,640 107,028 106,884
Increase in accrued rental income (3,579) (7,119) (11,388) (21,351)
--------- -------- --------- ---------
Net cash provided by operating activities 238,087 259,337 684,157 722,375
--------- -------- --------- ---------
Cash flows provided by investing activities:
Joint venture distributions in excess of income 2,880 2,929 8,677 8,814
--------- -------- --------- ---------
Net cash provided by investing activities 2,880 2,929 8,677 8,814
--------- -------- --------- ---------
Cash flows used in financing activities:
Distributions paid to partners (205,265) (186,454) (643,366) (553,740)
Repurchase of Limited Partners Units (15,183) - (15,183) -
--------- -------- --------- ---------
Net cash used in financing activities (220,448) (186,454) (658,549) (553,740)
--------- -------- --------- ---------
Net increase in cash and cash equivalents 20,519 75,812 34,285 177,449
Cash and cash equivalents, beginning of period 472,517 333,505 458,751 231,868
--------- --------- --------- --------
Cash and cash equivalents, end of period $ 493,036 $ 409,317 $ 493,036 $ 409,317
========= ========= ========= =========
See Notes to Financial Statements.
4
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(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 were 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 maturity of three months or
less to be cash equivalents. There has been no cash paid for income taxes
or interest during 2001 or 2000.
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 is 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.
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 preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
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 accounting principals generally accepted in the
United States. 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, 2001 and 2000.
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,
2000.
5
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, 2001,
respectively and $28,635 and $85,905 for the three and nine months ended
September 30, 2000, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee for the
three and nine months ended September 30, respectively, under both
operating and direct financing leases:
Quarter Year to Date
2001 2000 2001 2000
-------- -------- -------- --------
Tandy Corporation (Minnesota) $ 64,153 $ 64,150 $192,464 $192,460
Memorial Hermann Hospital System (Texas) 43,922 43,653 131,743 130,725
Golden Corral Corporation (Texas) 43,241 43,243 131,549 131,980
TGI Friday's, Inc. (Texas) 45,125 45,126 135,375 135,376
America's Favorite Chicken Company (Georgia) 25,823 25,931 77,473 77,791
Goodyear Tire & Rubber Company (Texas) 13,227 13,227 39,694 39,681
-------- -------- -------- --------
Total $235,491 $235,330 $708,298 $708,013
======== ======== ======== ========
6
5. 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 October 27, 1994, the Partnership formed a joint venture, AAA Joint
Venture 94-1, with AmREIT, Inc., for the purpose of acquiring a property,
which is being operated as a Wherehouse Entertainment retail store in
Independence, Missouri. The Company's interest in the joint venture is
45.16%.
7
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.
RESULTS OF OPERATIONS
For the three months ended September 30, 2001, revenues totaled $273,512, which
included $271,180 from real estate operations and $2,332 of interest and other
income. Revenues for the third quarter of 2001 decreased slightly from those of
the third quarter of 2000, primarily due to an increase in rental income from
Memorial Hermann Hospital System offset by a decrease in interest income due to
lower interest rates. Expenses increased from $70,000 in the third quarter of
2000 to $71,523 in the third quarter of 2001, primarily from an increase in
other fees, which includes accounting fees and bank charges. The Partnership
recorded $201,989 of net income for the third quarter of 2001 compared to
$205,195 for the third quarter of 2000.
For the nine months ended September 30, 2001, revenues totals $827,391, which
included $815,326 from real estate operations and $12,065 of interest income and
other income. Revenues for the first nine months of 2001 increased from those of
the first nine months in 2000, which was primarily due to an increase in
interest income and other income due to better cash management and an increase
in rental income from the collection of late fees on Memorial Hermann Hospital
System. Expenses increased from $218,456 in the first nine months of 2000 to
$222,376 in the first nine months of 2001, primarily from an increase in other
fees, which includes accounting fees and bank charges. The Partnership recorded
$605,015 of net income for the first nine months of 2001 compared to $606,352
for the first nine months of 2000.
8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
9
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, 2001 /s/ H. Kerr Taylor
- ----------------- ---------------------------------------------
Date H. Kerr Taylor, President of General Partner
November 14, 2001 /s/ Chad Braun
- ----------------- ---------------------------------------------
Date Chad Braun (Principal Accounting Officer)
10