SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Exact name of Registrant as specified in its charter)
Iowa 42-1401715 ---- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Second Street S.E., Cedar Rapids, Iowa 52401 ----------------------------------------------------------- (Address of principal executive offices) (Zip Code) |
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
As of October 31, 1997, 89,889 Units were issued and outstanding. Based on the original sales price of $250 per Unit, the aggregate market value at October 31, 1997 was $22,472,250.
TELECOMMUNICATIONS INCOME FUND X, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited). Balance sheets - September 30, 1997 and December 31, 1996. Statements of income - three months ended September 30, 1997 and three months ended September 30, 1996. Nine months ended September 30, 1997 and nine months ended September 30, 1996. Statement of changes in partners' equity - nine months ended September 30, 1997. Statements of cash flows - nine months ended September 30, 1997 and nine months ended September 30, 1996. Item 2. Management's discussion and analysis of financial condition and results of operations. Signatures |
TELECOMMUNICATIONS INCOME FUND X, L.P.
BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1997 DECEMBER 31, 1996 -------------------- -------------------- ASSETS Cash and cash equivalents $ 29,112 $ 516,612 Available-for-sale security 113,910 129,945 Notes receivable 529,934 -0- Net investment in direct financing leases (Note B) 17,714,508 20,323,138 Allowance for possible losses (427,599) (323,398) ------------ ------------ Notes receivable and direct financing leases, net 17,816,843 19,999,740 Equipment leased under operating leases, less accumulated depreciation of $233,335 and $79,305 in 1997 and 1996, respectively (Note C) 2,566,665 103,722 Equipment held for sale 291,711 317,693 Intangibles 9,225 15,872 Other assets 517,802 177,512 ------------ ------------ TOTAL ASSETS $ 21,345,268 $ 21,261,096 ============ ============ LIABILITIES AND PARTNERS' EQUITY LIABILITIES Line of credit agreement (Note D) $ 4,022,792 $ 2,607,911 Payable to affiliates 44,340 89,870 Distributions payable to partners 202,250 204,800 Accrued expenses and other liabilities 178,519 87,430 Lease security deposits 499,990 551,376 Note payable (Note D) 790,865 1,386,361 ------------ ------------ TOTAL LIABILITIES 5,738,756 4,927,748 ------------ ------------ PARTNERS' EQUITY, 100,000 units authorized: General partner, 40 units issued and outstanding 9,928 10,194 Limited partners, 89,849 units in 1997 and 90,370 units in 1996 issued and outstanding 15,638,215 16,366,470 Gain on redemption of units 17,720 -0- Unrealized loss on available-for-sale security (59,351) (43,316) ------------ ------------ TOTAL PARTNERS' EQUITY 15,606,512 16,333,348 ------------ ------------ TOTAL LIABILITIES AND PARTNERS' EQUITY $ 21,345,268 $ 21,261,096 ============ ============ |
See accompanying notes.
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ------------------------------------------ INCOME: Lease income $ 826,356 $ 840,862 Interest income 14,590 -0- Gain (loss) on lease terminations 24,003 (32,312) Other 49,792 10,830 --------- --------- Total income 914,741 819,380 EXPENSES: Management fees 99,028 95,469 Administrative services 21,000 21,466 Interest 118,779 174,732 Professional fees 1,292 36,616 Provision for possible losses (Note B) 17,025 154,432 Depreciation 164,368 119,625 Other 61,021 16,558 --------- --------- Total expenses 482,513 618,898 --------- --------- Net income $ 432,228 $ 200,482 ========= ========= Net income per partnership unit $ 4.81 $ 2.22 ========= ========= Weighted average partnership units outstanding 89,892 90,307 |
See accompanying notes.
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ------------------------------------------ INCOME: Lease income $2,245,457 $2,540,383 Interest Income 14,590 -0- Gain on lease terminations 61,073 198,437 Other 59,229 44,424 ---------- ---------- Total income 2,380,349 2,783,244 EXPENSES: Management fees 267,359 273,111 Administrative services 66,822 58,397 Interest 267,646 515,880 Professional fees 66,814 131,292 Provision for possible losses (Note B) 67,005 828,182 Depreciation 310,348 301,706 Other 108,487 70,192 ---------- ---------- Total expenses 1,154,481 2,178,760 ---------- ---------- Net income $1,225,868 $ 604,484 ========== =========== Net income per partnership unit $ 13.61 $ 6.68 ========== =========== Weighted average partnership units outstanding 90,084 90,492 |
See accompanying notes.
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
UNREALIZED GAIN (LOSS) GENERAL GAIN ON ON AVAILABLE PARTNER LIMITED PARTNERS REDEEMED FOR-SALE PARTNERS' (40 UNITS) UNITS AMOUNT UNITS SECURITY EQUITY ------------------------------------------------------------------------------------------------------ Balance at December 31, 1996 $10,194 90,370 $16,366,470 $ --- $ (43,316) $16,333,348 Withdrawal of limited partners --- (215) (53,750) --- --- (53,750) Change in unrealized loss on available-for-sale security --- --- --- --- 5,098 5,098 Distributions (270) --- (609,469) --- --- (609,739) Net income 246 --- 554,391 --- --- 554,637 --------------------------------------------------------------------- Balance at March 31, 1997 10,170 90,155 16,257,642 --- (38,218) 16,229,594 --------------------------------------------------------------------- Withdrawal of limited partners --- (250) (62,500) --- --- (62,500) Distributions (270) --- (607,253) --- --- (607,523) Net Income 106 --- 238,897 --- --- 239,003 Change in unrealized loss on available-for-sale security --- --- --- --- 8,843 8,843 Gain on redeemed units --- --- --- 11,737 --- 11,737 --------------------------------------------------------------------- Balance at June 30, 1997 10,006 89,905 15,826,786 11,737 (29,375) 15,819,154 --------------------------------------------------------------------- Withdrawal of limited partners --- (56) (14,000) --- --- (14,000) Distributions (270) --- (606,607) --- --- (606,877) Net Income 192 --- 432,036 --- --- 432,228 Change in unrealized loss on available-for-sale security --- --- --- --- (29,976) (29,976) Gain on redeemed units --- --- --- 5,983 --- 5,983 --------------------------------------------------------------------- Balance at September 30, 1997 $ 9,928 89,849 $15,638,215 $17,720 $ (59,351) $15,606,512 ===================================================================== |
See accompanying notes.
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 ------------------ ------------------ OPERATING ACTIVITIES Net Income $ 1,225,868 $ 604,484 Adjustments to reconcile net income to net cash provided by operating activities: Amortization 6,647 17,696 Provision for possible losses 67,005 828,182 Gain on lease terminations (61,073) (231,084) Depreciation 310,348 301,706 Changes in operating assets and liabilities: Other assets (340,290) (254,339) Outstanding checks in excess of cash balances -0- 6,400 Trade accounts payable, excluding equipment purchase costs accrued -0- (12,213) Due to affiliates (45,530) (216,782) Accrued expenses and other liabilities 91,089 (1,678) ------------ ------------ Net cash provided by operating activities 1,254,064 1,042,372 INVESTING ACTIVITIES Acquisitions of, and purchases of equipment for, direct financing leases (1,160,272) (4,365,674) Issuance of notes receivable (535,000) -0- Repayments of direct financing leases 2,933,812 2,902,398 Repayments of notes receivable 5,066 -0- Purchase of equipment for an operating lease (2,800,000) (44,076) Proceeds from sale or termination of direct financing leases 880,728 2,553,602 Net lease security deposits repaid (51,386) (21,439) ------------ ------------ Net cash provided by (used in) investing activities (624,280) 1,024,811 FINANCING ACTIVITIES Net proceeds from line-of-credit 1,414,881 44,754 Repayments of long term debt (595,496) (543,691) Distributions paid to partners (1,824,139) (1,831,209) Redemption of partnership units (112,530) -0- ------------ ------------ Net cash used in financing activities (1,117,284) (2,330,146) Net decrease in cash and cash equivalents (487,500) (262,963) Cash and cash equivalents at beginning of period 516,612 262,963 ------------ ------------ Cash and cash equivalents at end of period $ 29,112 $ -0- ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 266,831 $ 517,558 Reclassification of operating lease to direct financing lease -0- 1,210,110 Forfeiture of security deposit upon lease write-off -0- 101,287 Reclassification of direct financing lease to equipment -0- 686,037 Publicly traded common stock received in lease restructuring -0- 203,837 Deferred gain recorded on lease restructuring -0- 770 |
See accompanying notes
TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996.
NOTE B -- NET INVESTMENT IN DIRECT FINANCING LEASES
Components of the net investment in direct financing leases are as follows:
September 30, 1997 December 31, 1996 ------------------ ----------------- Lease payments receivable $19,280,410 $23,482,180 Unamortized initial direct costs 108,871 194,303 Estimated residual values of leased equipment 2,209,163 2,459,691 Unearned lease income (3,883,936) (5,813,036) Allowance for possible losses (427,599) (323,398) -------------- -------------- Net investment in direct financing leases $17,286,909 $19,999,740 ============== ============== |
At December 31, 1996, the Partnership had established a loss reserve of $464,000 for the expected loss on assets leased to United Tele-Systems of Virginia. The assets were subsequently sold to another customer and a related lawsuit was dismissed with no additional loss to the Partnership.
NOTE C -- EQUIPMENT
At December 31, 1996, the Partnership had recorded a $621,000 charge to reduce the carrying value of equipment previously leased to a customer to its estimated fair market value of approximately $318,000. As of September 30, 1997, the Partnership has depreciated this equipment down to a value of $291,711. This remaining amount is expected to be recovered by the Partnership through the sale of the equipment. Management's best current estimate of the fair market value of this equipment is its carrying value at September 30, 1997.
At December 31, 1996, the Partnership had $103,722 of equipment (net of depreciation) classified equipment leased under operating leases. This equipment was subsequently sold for a gain of $28,006.
During the second quarter of 1997, the Partnership entered into an agreement to finance $2,800,000 of equipment. Since the terms of the agreement allowed the customer to cancel, the transaction was classified as an operating lease. The equipment is being depreciated over its estimated useful life of 60 months.
Note D -- CREDIT ARRANGEMENTS
The Partnership has a line-of-credit agreement with a bank that carries interest (9.5% at September 30, 1997) at 1% over prime, with a minimum interest charge of $7,500 per month. The line-of-credit agreement allows the Partnership to borrow to the lesser of $7.25 million, or 40% of the Partnership's Qualified Accounts, as defined in the agreement. The agreement originally expired November 30, 1997 and is secured by substantially all assets of the Partnership. An agreement has been reached extending the agreement through April 30, 1998. The only modification was to reduce the borrowing amount to the lessor of $6 million, or 40% of the Partnership's Qualified Accounts, as defined in the agreement. This line-of-credit is guaranteed by the General Partner and certain affiliates of the General Partner.
The Partnership also has an installment loan agreement which bears interest at 8.91% and is due in monthly installments through November, 1998. The agreement is collateralized by certain direct financing leases and a second interest in all other Partnership assets. The agreement is also guaranteed by the General Partner. Covenants under the agreement require the Partnership, among other things, to be profitable, not exceed 40% debt to original equity raised ratio, and not sell a material portion of its assets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 RESULTS OF OPERATIONS: 1997 1996 1997 1996 ---------------------------------------------------------------------------------- Description ----------- Lease income $826,356 $840,862 $2,245,457 $2,540,383 Gain (loss) on lease terminations 24,003 (32,312) 61,073 198,437 Management fee expense 99,028 95,469 267,359 273,111 Interest expense 118,779 174,732 267,646 515,880 Professional fees 1,292 36,616 66,814 131,292 Depreciation 164,368 119,625 310,348 301,706 Provision for possible losses 17,025 154,432 67,005 828,182 Other expense 61,021 16,558 108,487 70,192 |
Lease income declined during the nine month and three month periods ended September 30, 1997 as compared to the same periods in 1996 due to the decrease in net investment in direct financing leases. The decrease in net investment in direct financing leases is attributable to the early termination of certain leases in 1996 at the request of the lessee which enabled the Partnership to recognize total gains on those terminations of $198,437.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Management fees are paid to the General Partner and represent 5% of the gross rental payments received. Rental payments decreased from $5,462,220 in the nine months ended September 30, 1996 to $5,347,180 for the nine months ended September 30, 1997. These decreases are primarily attributable to the early termination of certain leases as described above.
The decrease in interest expense is a result of the Partnership using the proceeds of various lease terminations to reduce the balance of its line of credit.
The decrease in professional fees is a result of legal fees incurred in 1996 with respect to VAC and United Tele-Systems of Virginia, Inc.
The Partnership had $1,721,005 of equipment being depreciated at September 30, 1996. The depreciation expense associated with this equipment amounted to $301,706 for the nine months ended September 30, 1996. As of September 1997, most of this equipment has been sold or re-leased. During the first nine months of 1997, $627,087 of this equipment remained on the Partnerships books generating depreciation expense of $73,102 for the nine months ended September 30, 1997. The Partnership also entered into an operating lease in the second quarter of 1997. The equipment cost of $2,800,000 has generated $233,335 depreciation expense as of September 30, 1997.
Currently the Partnership provides for possible lease losses at a rate of 1.5% of the equipment purchased. This amounts to $67,005 for the nine months ended September 30, 1997. As discussed in previous 10-Q Reports, the Partnership realized losses of $646,307 on leases associated with Value Added Communications as of September 30, 1996. This specific loss plus the accrual for other possible losses amounted to $828,128 through September 30, 1996.
The allowance for possible lease losses is based upon a continuing review of past lease loss experience, current economic conditions and the underlying lease asset value of the portfolio. At the end of each quarter a review of the allowance account is conducted. At a minimum, it is the Partnership's desire to maintain a loss reserve equal to 1.5 percent of the Partnership's investment in leases and notes, exclusive of any specific reserves. The Partnership currently has a loss reserve (exclusive of specific reserves) of $369,403. Based on 1.5 percent of the lease and note portfolio, the Partnership should have a minimum of $316,542 in the loss reserve. Management has determined the loss reserve account is adequate at September 30, 1997.
The Partnership has been unable to collect all of the property taxes it has paid on behalf of customers leasing equipment from the Partnership. As a result, a charge of $46,000 has been made to reflect what management believes to be uncollectible. There remains approximately $89,258 of property tax receivable on the Partnership's books as of September 30, 1997. The Partnership continues to pursue the collection of these tax receivables. Any amounts collected will serve as a recovery against amounts previoiusly written off.
Administrative fees of $66,000 were paid to the General Partner for the nine months ending September 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES NINE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 =============================================================================== MAJOR CASH SOURCES: ------------------- Principal portion of lease payments received $2,933,812 $2,902,398 Proceeds received on sale of leases 880,728 2,553,602 Net proceeds from debt 1,414,881 44,754 MAJOR CASH USES: ---------------- Purchase of equipment and leases 1,160,272 4,365,674 Net Payments on debt 595,496 543,691 Distributions to partners 1,824,139 1,831,209 ------------------------------------------------------------------------------- |
The Partnership's line of credit agreement is cancelable by the lender after giving a 90 day notice. The agreement originally matured in November 1997. The Partnership has extended the agreement through April 30, 1998. The only modification was to reduce the borrowing amount to the lessor of $6 million, or 40% of the Partnership's Qualified Accounts, as defined by the agreement. Management believes amounts available under the line of credit are adequate for the forseeable future.
The Partnership is required to establish working capital reserves of no less than 1% of the proceeds to satisfy general liquidity requirements, operating costs of equipment, and the maintenance and refurbishment of equipment. These funds are available under the Partnership's line-of-credit.
At September 30, 1997, adequate cash is being generated to make projected distributions.
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.
TELECOMMUNICATIONS INCOME FUND X, L.P.
(Registrant)
Date November 11, 1997 /s/ Ronald O. Brendengen ------------------- --------------------------------------- Ronald O. Brendengen, Chief Financial Officer, Treasurer Date November 11, 1997 /s/ Daniel P. Wegmann ------------------- --------------------------------------- Daniel P. Wegmann, Controller |
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED BALANCE SHEETS OF TELECOMMUNICATIONS INCOME FUND X, L.P. AS OF SEPTEMBER 30, 1997, AND THE UNAUDITED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1977, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
PERIOD TYPE | 9 MOS |
FISCAL YEAR END | DEC 31 1997 |
PERIOD START | JAN 01 1997 |
PERIOD END | SEP 30 1997 |
CASH | 29,112 |
SECURITIES | 113,910 |
RECEIVABLES | 18,244,442 |
ALLOWANCES | (427,599) |
INVENTORY | 0 |
CURRENT ASSETS | 17,959,865 |
PP&E | 3,091,711 |
DEPRECIATION | (233,335) |
TOTAL ASSETS | 21,345,268 |
CURRENT LIABILITIES | 4,447,901 |
BONDS | 0 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 0 |
OTHER SE | 15,606,512 |
TOTAL LIABILITY AND EQUITY | 21,345,268 |
SALES | 0 |
TOTAL REVENUES | 2,380,349 |
CGS | 0 |
TOTAL COSTS | 0 |
OTHER EXPENSES | 819,830 |
LOSS PROVISION | 67,005 |
INTEREST EXPENSE | 267,646 |
INCOME PRETAX | 1,225,868 |
INCOME TAX | 0 |
INCOME CONTINUING | 1,225,868 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 1,225,868 |
EPS PRIMARY | 13.61 |
EPS DILUTED | 13.61 |