FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 30, 2002
-------------------------------------
OR
( ) 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
0-20016
---------------------------------------
CNL Income Fund X, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3004139
- ---------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ---------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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. Yes X No _________
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
Part II.
Other Information 13
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2002 2001
------------------ ------------------
ASSETS
Land and buildings on operating leases, net $ 14,623,559 $ 13,494,448
Net investment in direct financing leases 8,761,930 8,911,232
Real estate held for sale -- 993,453
Investment in joint ventures 4,201,395 3,664,241
Cash and cash equivalents 927,017 1,565,888
Receivables, less allowance for doubtful accounts
of $24,814 in 2002 and 2001 1,464 30,290
Accrued rental income, less allowance for doubtful accounts of
$4,841 in 2002 and 2001 1,346,345 1,340,884
Other assets 94,495 87,209
------------------ ------------------
$ 29,956,205 $ 30,087,645
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,978 $ 11,105
Real estate taxes payable 18,275 8,256
Distributions payable 900,001 900,001
Due to related parties 36,615 5,539
Rents paid in advance and deposits 47,050 77,760
------------------ ------------------
Total liabilities 1,006,919 1,002,661
Minority interest 63,906 64,256
Partners' capital 28,885,380 29,020,728
------------------ ------------------
$ 29,956,205 $ 30,087,645
================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------- ------------- ------------- --------------
Revenues:
Rental income from operating leases $ 449,678 $ 446,401 $ 907,082 $ 895,308
Earned income from direct financing leases 235,697 239,611 473,449 483,129
Contingent rental income -- 6,845 23,096 9,612
Interest and other income 2,606 8,042 3,637 26,604
-------------- ------------- ------------- --------------
687,981 700,899 1,407,264 1,414,653
-------------- ------------- ------------- --------------
Expenses:
General operating and administrative 75,846 82,725 162,044 219,140
Property expenses 11,412 11,166 23,544 20,210
State and other taxes 3,410 -- 31,076 37,967
Depreciation and amortization 85,572 77,042 154,883 152,545
-------------- ------------- ------------- --------------
176,240 170,933 371,547 429,862
-------------- ------------- ------------- --------------
Income Before Minority Interest in Income of Consolidated
Joint Venture and Equity in Earnings of Unconsolidated
Joint Ventures 511,741 529,966 1,035,717 984,791
Minority Interest in Income of Consolidated
Joint Venture (2,028 ) (2,143 ) (4,065 ) (4,379 )
Equity in Earnings of Unconsolidated Joint Ventures 329,671 96,846 412,104 206,387
-------------- ------------- ------------- --------------
Income from Continuing Operations 839,384 624,669 1,443,756 1,186,799
-------------- ------------- ------------- --------------
Discontinued Operations (Note 6):
Income from discontinued operations, net 28,892 25,959 51,486 51,914
Gain on disposal of discontinued operations, net 169,412 -- 169,412 --
-------------- ------------- ------------- --------------
198,304 25,959 220,898 51,914
Net Income $ 1,037,688 $ 650,628 $1,664,654 $ 1,238,713
============== ============= ============= ==============
Income Per Limited Partner Unit
Continuing operations $ 0.21 $ 0.15 $ 0.36 $ 0.30
Discontinued operations 0.05 0.01 0.06 0.01
-------------- ------------- ------------- --------------
$ 0.26 $ 0.16 $ 0.42 $ 0.31
============== ============= ============= ==============
Weighted Average Number of Limited Partner
Units Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
============== ============= ============= ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
2002 2001
-------------------- ------------------
General partners:
Beginning balance $ 261,935 $ 261,935
Net income -- --
-------------------- ------------------
261,935 261,935
-------------------- ------------------
Limited partners:
Beginning balance 28,758,793 30,626,143
Net income 1,664,654 1,732,654
Distributions ($0.45 and $0.90 per limited partner
unit, respectively) (1,800,002 ) (3,600,004 )
-------------------- ------------------
28,623,445 28,758,793
-------------------- ------------------
Total partners' capital $ 28,885,380 $ 29,020,728
==================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2002 2001
--------------- --------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 1,629,384 $ 1,607,815
--------------- --------------
Cash Flows from Investing Activities:
Additions to land and building on operating leases (1,281,467 ) --
Proceeds from sale of land and buildings 1,161,056 --
Investment in joint venture (915,171 ) (211,201 )
Return of capital from joint venture 571,744 --
Payment of lease costs -- (3,324 )
--------------- --------------
Net cash used in investing activities (463,838 ) (214,525 )
--------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,800,002 ) (1,800,002 )
Distributions to holder of minority interest (4,415 ) (4,024 )
--------------- --------------
Net cash used in financing activities (1,804,417 ) (1,804,026 )
--------------- --------------
Net Decrease in Cash and Cash Equivalents (638,871 ) (410,736 )
Cash and Cash Equivalents at Beginning of Period 1,565,888 1,361,652
--------------- --------------
Cash and Cash Equivalents at End of Period $ 927,017 $ 950,916
=============== ==============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
period $ 900,001 $ 900,001
=============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 2002, may not be indicative
of the results that may be expected for the year ending December 31,
2002. Amounts as of December 31, 2001, included in the financial
statements, have been derived from audited financial statements as of
that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund X, Ltd. (the "Partnership") for the year ended December 31,
2001.
The Partnership accounts for its 88.26% interest in Allegan Real Estate
Joint Venture using the consolidation method. Minority interest
represents the minority joint venture partner's proportionate share of
the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been
eliminated.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
2. Reclassification:
Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Land and Buildings on Operating Leases:
In June 2002, the Partnership reinvested the majority of the proceeds
from the sale of the property in San Marcos, Texas (see Note 6) and a
portion of the return of capital received from CNL Restaurant
Investments III Joint Venture from the sale of its property in
Greensboro, North Carolina (see Note 4) in a property in Houston, Texas
at an approximate cost of $1,281,500. The Partnership acquired this
property from CNL Funding 2001-A, LP, an affiliate of the general
partners (see Note 5).
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
4. Investment in Joint Ventures:
In January 2002, the Partnership reinvested a portion of the
liquidation proceeds from the 2001 liquidation of Peoria Joint Venture
in a property in Austin, Texas, as tenants-in-common, with CNL Income
Fund XVIII, Ltd., an affiliate of the general partners. The Partnership
acquired this property from CNL Funding 2001-A, LP, an affiliate of the
general partners (see Note 5). The Partnership and CNL Income Fund
XVIII, Ltd. entered into an agreement whereby each co-venturer will
share in the profits and losses of the property in proportion to its
applicable percentage interest. As of June 30, 2002, the Partnership
had contributed $915,171 for an 81.65% interest in this property.
In May 2002, CNL Restaurant Investments III Joint Venture, in which the
Partnership owns a 50% interest, sold its property in Greensboro, North
Carolina to the tenant for a sales price of approximately $1,145,500
and received net sales proceeds of $1,143,500 resulting in a gain to
the joint venture of approximately $371,500. The Partnership received
approximately $571,700 as a return of capital from the joint venture.
In addition, in June 2002, Ashland Joint Venture, in which the
Partnership owns a 10.51% interest, sold its property in Ashland, New
Hampshire to the tenant for a sales price of approximately $1,477,500
and received net sales proceeds of $1,472,900 resulting in a gain of
approximately $500,900. Ashland Joint Venture used the majority of the
proceeds to invest in a property in San Antonio, Texas at an
approximate cost of $1,343,000. The Partnership acquired these
properties from CNL Funding 2001-A, LP, an affiliate of the general
partners (see Note 5). The financial results relating to the properties
in Greensboro, North Carolina and Ashland, New Hampshire are reflected
as Discontinued Operations in the condensed financial information
below.
CNL Restaurant Investments III Joint Venture owns and leases five
properties to operators of national and regional fast-food and
family-style restaurant chains. Ashland Joint Venture, Williston Real
Estate Joint Venture, Ocean Shores Joint Venture and CNL VIII, X, XII
Kokomo Joint Venture each own and lease one property to operators of
national and regional fast-food and family-style restaurant chains. The
Partnership and affiliates, as tenants-in-common, own and lease three
properties to operators of national and regional fast-food and
family-style restaurant chains.
The Partnership owns a 69.06% interest in the profits and losses of
Ocean Shores Joint Venture. The remaining interest in this joint
venture is held by an affiliate of the Partnership which has the same
general partners. As of December 31, 2001, Ocean Shores Joint Venture
met the significant subsidiary test at the 20% level and separate
financial statements were included in Form 10-K of CNL Income Fund X,
Ltd. The following presents summarized income statement information for
Ocean Shores Joint Venture for the quarters and six months ended June
30:
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenues $ -- $ -- $ -- $ 31,533
Expenses (5,576 ) (7,530 ) (17,353 ) (6,703 )
------------- -------------- ------------- --------------
Net (Loss) Income $ (5,576 ) $ (7,530 ) $ (17,353 ) $ 24,830
============= ============== ============= ==============
Allocation of Net (Loss) Income
CNL Income Fund X, Ltd. $ (3,851 ) $ (5,200 ) $ (11,984 ) $ 17,148
CNL Income Fund XVII, Ltd. (1,725 ) (2,330 ) (5,369 ) 7,682
------------- -------------- ------------- --------------
$ (5,576 ) $ (7,530 ) $ (17,353 ) $ 24,830
============= ============== ============= ==============
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
4. Investment in Joint Ventures - Continued:
The following presents the combined, condensed financial information
for the unconsolidated joint ventures (including Ocean Shores Joint
Venture) and the properties held as tenants-in-common with affiliates
at:
June 30, December 31
2002 2001
----------------- ------------------
Land and buildings on operating leases, net $ 11,611,863 $ 9,345,940
Net investment in direct financing leases 636,965 640,381
Real estate held for sale -- 1,760,504
Cash 36,041 31,907
Restricted cash 120,308 --
Receivables, less allowance for doubtful accounts 22,012 74,611
Accrued rental income 89,198 79,333
Other assets 12,610 24,639
Liabilities 6,522 7,593
Partners' capital 12,522,475 11,949,722
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------- -------------- ------------- --------------
Revenues $ 305,510 $ 332,791 $ 620,614 $ 636,260
Expenses (69,299 ) (67,362 ) (169,862 ) (129,756 )
------------- -------------- ------------- --------------
Income from continuing operations 236,211 265,429 450,752 506,504
------------- -------------- ------------- --------------
Discontinued operations:
Revenues 36,966 54,100 86,712 108,200
Expenses (15,451 ) (19,875 ) (29,597 ) (35,543 )
Gain on disposal of assets 872,385 -- 872,385 --
------------- -------------- ------------- --------------
893,900 34,225 929,500 72,657
------------- -------------- ------------- --------------
Net income $1,130,111 $ 299,654 $1,380,252 $ 579,161
============= ============== ============= ==============
The Partnership recognized income totaling $412,104 and $206,387 during
the six months ended June 30, 2002 and 2001, respectively, from these
joint ventures and the properties held as tenants-in-common with
affiliates, of which $329,671 and $96,846 were earned during the
quarters ended June 30, 2002 and 2001, respectively.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
5. Related Party Transactions:
In January 2002, the Partnership and CNL Income Fund XVIII, Ltd., as
tenants-in-common, acquired a property, in Austin, Texas, for a
purchase price of approximately $1,120,800 (see Note 4). In addition,
in June 2002, the Partnership acquired a property in Houston, Texas for
a purchase price of approximately $1,281,500 (see Note 3) and in a
separate transaction, Ashland Joint Venture acquired a property in San
Antonio, Texas for an approximate cost of $1,343,000 (see Note 4). The
Partnership acquired these Properties from CNL Funding 2001-A, LP, an
affiliate of the general partners. CNL Funding 2001-A, LP had purchased
and temporarily held title to the properties in order to facilitate the
acquisition of the properties by the Partnership and the joint
ventures. The respective purchase prices paid by the Partnership and
the joint ventures represented the costs incurred by CNL Funding
2001-A, LP to acquire and carry the properties, including closing
costs.
6. Discontinued Operations:
In April 2002, the Partnership sold its property in San Marcos, Texas
to a unrelated third party for a sales price of approximately
$1,202,700 and received net sales proceeds of approximately $1,161,000
resulting in a gain of approximately $169,400. The financial results of
this property are reflected as Discontinued Operations in the
accompanying financial statements.
The operating results of discontinued operations are as follows:
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------- ------------- ------------- ---------------
Rental revenues $ 32,436 $ 25,959 $ 56,677 $ 51,914
Expenses (3,544 ) -- (5,191 ) --
Gain on disposal of assets 169,412 -- 169,412 --
------------- -------------- ------------- ---------------
Income from discontinued operations $ 198,304 $ 25,959 $ 220,898 $ 51,914
============= ============== ============= ===============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund X, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on April 16, 1990, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as land upon which restaurants were to be
constructed, which are leased primarily to operators of national and regional
fast-food and family-style restaurant chains (collectively, the "Properties").
The leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. In June 2001,
the Partnership owned 35 Properties directly and owned 14 Properties indirectly
through joint venture and tenancy in common arrangements. As of June 30, 2002,
the Partnership owned 36 Properties directly and 12 Properties indirectly
through joint venture or tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 2002 and 2001 was cash from operating activities (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operating activities
was $1,629,384 and $1,607,815 for the six months ended June 30, 2002 and 2001,
respectively. The increase in cash from operating activities for the six months
ended June 30, 2002 was primarily a result of changes in the Partnership's
working capital and changes in income and expenses, as described in "Results of
Operations" below.
Other sources and uses of capital included the following during the six
months ended June 30, 2002.
In January 2002, the Partnership reinvested the proceeds from the 2001
liquidation of Peoria Joint Venture in a Property in Austin, Texas, as
tenants-in-common with CNL Income Fund XVIII, Ltd., a Florida limited
partnership and an affiliate of the general partners. The Partnership acquired
the Property from CNL Funding 2001-A, LP, a Delaware limited partnership and an
affiliate of the general partners. CNL Funding 2001-A, LP had purchased and
temporarily held title to the Property in order to facilitate the acquisition of
the Property by the tenancy in common. The purchase price paid by the tenancy in
common represented the costs incurred by CNL Funding 2001-A, LP to acquire and
carry the Property including closing costs.
In April 2002, the Partnership sold its Property in San Marcos, Texas
to an unrelated third party for a sales price of approximately $1,202,700 and
received net sales proceeds of approximately $1,161,100 resulting in a gain on
disposal of discontinued operations of approximately $169,400. In May 2002, CNL
Restaurant Investments III Joint Venture, in which the Partnership owns a 50%
interest, sold its Property in Greensboro, North Carolina to the tenant for a
sales price of approximately $1,145,500 and received net sales proceeds of
approximately $1,143,500 resulting in a gain to the joint venture of
approximately $371,500. The Partnership received approximately $571,700 as a
return of capital from the joint venture. In addition, in June 2002, Ashland
Joint Venture, in which the Partnership owns a 10.51% interest, sold its
Property in Ashland, New Hampshire to the tenant for a sales price of
approximately $1,477,500 and received net sales proceeds of $1,472,900 resulting
in a gain to the joint venture of approximately $500,900. The Partnership
reinvested the majority of the net sales proceeds from the sale of the Property
in San Marcos, Texas and a portion of the return of capital received from CNL
Restaurant Investments III Joint Venture in a Property in Houston, Texas at an
approximate cost of $1,281,500. Ashland Joint Venture used the majority of the
proceeds to invest in a Property in San Antonio, Texas at an approximate cost of
$1,343,000. The Partnership and joint venture acquired these Properties from CNL
Funding 2001-A, LP, a Delaware limited partnership and an affiliate of the
general partners. CNL Funding 2001-A, LP had purchased and temporarily held
title to the Properties in order to facilitate the acquisition of the Properties
by the Partnership and joint venture. The purchase price paid by the Partnership
and joint venture represented the costs incurred by CNL Funding 2001-A, LP to
acquire the Properties, including closing costs.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments such as
demand deposit accounts at commercial banks, money market accounts and
certificates of deposit with less than a 90-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At June 30, 2002, the Partnership had $927,017
invested in such short-term investments, as compared to $1,565,888 at December
31, 2001. The decrease in cash and cash equivalents at June 30, 2002 was
primarily a result of the fact that the Partnership used the majority of the
liquidation proceeds received from Peoria Joint Venture to invest in a Property
in Austin, Texas with CNL Income Fund XVIII, Ltd. as tenants-in-common. The
funds remaining at June 30, 2002, after payment of distributions and other
liabilities, will be used to meet the Partnership's working capital needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, the Partnership
declared distributions to limited partners of $1,800,002 for each of the six
months ended June 30, 2002 and 2001 ($900,001 for each applicable quarter.) This
represents distributions for each of the six months ended of $0.45 per unit
($0.23 for each applicable quarter.) No distributions were made to the general
partners for the quarters and six months ended June 30, 2002 and 2001. No
amounts distributed to the limited partners for the six months ended June 30,
2002 and 2001 are required to be or have been treated by the Partnership as a
return of capital for purposes of calculating the limited partners' return on
their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the limited partners on
a quarterly basis.
Total liabilities of the Partnership, including distributions payable,
were $1,006,919 at June 30, 2002, as compared to $1,002,661 at December 31,
2001, primarily due to an increase in real estate taxes payable and amounts due
to related parties. The increase was partially offset by a decrease in rents
paid in advance and deposits at June 30, 2002, as compared to December 31, 2001.
Total liabilities at June 30, 2002, to the extent they exceed cash and cash
equivalents at June 30, 2002, will be paid from future cash from operations and
in the event the general partners elect to make additional contributions, from
general partners' contributions.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues for the Partnership and Allegan Real Estate Joint
Venture were $1,380,531 for the six months ended June 30, 2002, as compared to
$1,378,437 in the comparable period of 2001, of which $685,375 and $686,012 were
earned during the second quarter of 2002 and 2001, respectively. Rental revenues
during the quarters and six months ended June 30, 2002 and 2001 continued to
remain at reduced amounts due to the fact that the Partnership is not receiving
any rental income relating to the Property in Ft. Pierce, Florida, which has
been vacant since 1999. Rental revenues are expected to remain at reduced
amounts until such time as the Partnership executes a new lease. The Partnership
is currently seeking a new tenant for this Property.
During the six months ended June 30, 2002 and 2001, the Partnership
also earned $23,096 and $9,612, respectively, in contingent rental income. The
increase in contingent rental income earned during the six months ended June 30,
2002, was partially attributable to an increase in gross sales of certain
restaurant Properties, the leases of which require the payment of contingent
rent.
During the quarters and six months ended June 30, 2002 and 2001, the
Partnership earned $3,637 and $26,604, respectively, in interest and other
income, of which $2,606 and $8,042 were earned during the quarters ended June
30, 2002 and 2001. The decrease in interest and other income during the quarter
and six months ended June 30, 2002, as compared to the same periods of 2001, was
primarily due to a decrease in the average cash balance and due to a decline in
interest rates.
During the six months ended June 30, 2002 and 2001, the Partnership
earned $412,104 and $206,387, respectively, attributable to the net income
earned by unconsolidated joint ventures of which $329,671 and $96,846 were
earned during the quarters ended June 30, 2002 and 2001, respectively. The
increase in net income earned by joint ventures during the quarter and six
months ended June 30, 2002, as compared to the same periods of 2001, was
primarily attributable to the fact that in May 2002 CNL Restaurant Investments
III Joint Venture, in which the Partnership owns a 50% interest, sold its
Property in Greensboro, North Carolina to the tenant, as described below. In
addition, in June 2002, Ashland Joint Venture, in which the Partnership owns a
10.51% interest, sold its Property in Ashland, New Hampshire to the tenant, as
described below. These sales resulted in a net gain of $872,385 to these joint
ventures, as described below.
The increase in net income earned from joint ventures during the
quarter and six months ended June 30, 2002 was also due to the fact that in
April 2001, the Partnership used a portion of the net sales proceeds received
from the 2000 sale of its Property in Lancaster, New York to invest in a joint
venture arrangement, CNL VIII, X, XII Kokomo Joint Venture, with CNL Income Fund
VIII, Ltd. and CNL Income Fund XII, Ltd., each of which is an affiliate of the
general partners, to purchase and hold one restaurant Property. The increase in
net income earned from the joint ventures was also partially a result of the
fact that in January 2002, the Partnership used the majority of the liquidation
proceeds received from the 2001 dissolution of Peoria Joint venture to invest in
a Property in Austin, Texas with CNL Income Fund XVIII, Ltd., an affiliate of
the general partners, as tenants-in-common. The increase in net income earned by
joint ventures during the six months ended June 30, 2002, as compared to the six
months ended June 30, 2001, was partially offset by the fact that during 2001,
the tenant of the Property owned by Ocean Shores Joint Venture, in which the
Partnership owns a 69.06% interest, experienced financial difficulties, ceased
operations and vacated the Property. As a result, during 2001 the joint venture
stopped recording rental revenue. The joint venture will not record rental
revenue relating to this Property until it locates a new tenant for this
Property. The joint venture is seeking a new tenant for this Property.
Operating expenses, including depreciation and amortization expense,
were $371,547 and $429,862 for the six months ended June 30, 2002 and 2001,
respectively, of which $176,240 and $170,933 were incurred for the quarters
ended June 30, 2002 and 2001, respectively. The decrease in operating expenses
during the six months ended June 30, 2002, as compared to the same period of
2001, was primarily the result of a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
In April 2002, the Partnership sold its Property in San Marcos, Texas
to an unrelated third party and recognized a gain on discontinued operations of
approximately $169,400, as described above in "Capital Resources." The
Partnership used the majority of the proceeds to invest in a Property in
Houston, Texas. During the six months ended June 30, 2002 and 2001, the
Partnership recognized in connection with the Property in San Marcos, Texas, net
rental income from discontinued operations (rental revenues less Property
related expenses) amounting to $51,486 and $51,914, respectively, of which
$28,892 and $25,959 was earned during the quarters ended June 30, 2002 and 2001,
respectively. These amounts are reported in Discontinued Operations in the
accompanying financial statements.
In May 2002, CNL Restaurant Investments III Joint Venture, in which the
Partnership owns a 50% interest, sold its Property in Greensboro, North
Carolina, to the tenant for approximately $1,145,500 and received net sales
proceeds of approximately $1,143,500 resulting in a gain to the joint venture of
approximately $371,500. The Partnership received approximately $571,700 as a
return of capital from the joint venture. In addition, in June 2002, Ashland
Joint Venture, in which the Partnership owns a 10.51% interest, sold its
Property in Ashland, New Hampshire to the tenant for approximately $1,477,500
and received net sales proceeds of approximately $1,472,900 resulting in a gain
to the joint venture of approximately $500,900.
Total net rental income (rental revenues less Property related
expenses) for the Properties in Greensboro, North Carolina and Ashland, New
Hampshire were $57,115 and $72,657 during the six months ended June 30, 2002 and
2001, respectively, of which $21,515 and $34,225 was earned during the quarters
ended June 30, 2002 and 2001, respectively. In addition, as a result of the
above sales, CNL Restaurant Investments III Joint Venture and Ashland Joint
Venture recognized a total gain on disposal of assets of $872,385 during the
quarter and six months ended June 30, 2002. The Partnership's pro rata share of
these amounts in included in equity in earnings of joint ventures in the
accompanying financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund X, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-35049 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund X, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-35049 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited
Partnership of CNL Income Fund X, Ltd. (Included as
Exhibit 3.3 to Post-Effective Amendment No. 4 to
Registration Statement No. 33-35049 on Form S-11 and
incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund X, Ltd.
and CNL Investment Company (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on March 17, 1998, and incorporated
herein by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with
the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with
the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Filed
herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 13th day of August, 2002.
CNL INCOME FUND X, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund X, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 13, 2002 /s/ James M. Seneff, Jr.
Name: James M. Seneff, Jr.
Title: Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Robert A. Bourne, the President and Treasurer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund X, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 13, 2002 /s/ Robert A. Bourne
Name: Robert A. Bourne
Title: President and Treasurer
EXHIBIT 10.5
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund X, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-35049 on Form S-11 and incorporated herein
by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund X, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-35049 on Form S-11 and incorporated herein
by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund X, Ltd. (Included as Exhibit 3.3 to
Post-Effective Amendment No. 4 to Registration Statement No.
33-35049 on Form S-11 and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund X, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March
17, 1998, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated herein
by reference.)
10.4 Assignment of Management Agreement from CNL Fund Advisors,
Inc. to CNL APF Partners, LP (Included as Exhibit 10.4 to
Form 10-Q filed with the Securities and Exchange Commission
on August 13, 2001, and incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF Partners, LP
to CNL Restaurants XVIII, Inc. (Filed herewith.)