UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD COMMISSION FILE
ENDED SEPT 30, 1996 NUMBER 033-26427
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
(Name of small business issuer in its charter)
Virginia 54-1482898
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2201 Wilson Boulevard, Arlington, VA 22201
(Address of principal executive offices) (Zip Code)
(703) 247-2900
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Limited Partnership Interest None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months and
(2) has been subject to such filing requirements for the past ninety days.
Yes x No
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Nine Month Period Ended Sept. 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Signatures 14
Part I - Financial Information
Item 1. Financial Statements
Telecommunications Growth & Income Fund L.P.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
CONSOLIDATED BALANCE SHEETS
Sept. 30, 1996 (Unaudited) and December 31, 1995 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Sept. 30, 1996 and 1995 (Unaudited) 6
Nine months ended Sept. 30, 1996 and 1995 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1995 (Audited) and
for the nine months ended Sept. 30, 1996 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended Sept. 30, 1996 and 1995 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-12
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
Sept. 30, 1996 Dec. 31, 1995
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $149,757 $175,561
RECEIVABLES:
Customer accounts receivable 88 88
Rent 8,596 17,505
Affiliates 1,844 1,844
Other 22,667 22,667
33,195 42,104
Total current assets 182,952 217,665
LAND 74,624 74,624
BUILDINGS, net of accumulated
depreciation of $94,468 and $84,465 172,277 182,280
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $434,259 and $386,025 831,132 845,426
INTANGIBLE ASSETS, net of accumulated
amortization of $855,834 and $848,334 121,666 136,666
1,207,199 1,238,996
OTHER ASSETS:
Note receivable 1,700,000 1,700,000
Additional consideration receivable 420,671 396,251
Other assets 16,958 37,747
2,137,629 2,133,998
Total Assets $3,527,780 $3,590,659
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Sept. 30, 1996 Dec. 31, 1995
(Unaudited) (Audited)
CURRENT LIABILITIES:
Notes payable, current portion $ - $24,456
Accrued liabilities 37,565 24,047
Accounts payable-affiliates 6,585 6,238
Deferred income 15,448 19,571
Security deposits 8,625 9,625
Total current liabilities 68,223 83,937
NOTES PAYABLE, less current portion - 52,068
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 11,160 10,078
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 9,864 8,742
PARTNERS' CAPITAL (DEFICIT):
General Partner (27,125) (28,218)
Investor Limited Partners 3,465,658 3,464,052
3,438,533 3,435,834
Total Liabilities and Partners'
Capital (Deficit) $3,527,780 $3,590,659
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPT. 30, 1996 AND 1995 (UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1996 1995 1996 1995
REVENUES:
Rental income $153,588 $154,728 $470,263 $451,528
COSTS AND EXPENSES:
Operating, general and administrative 24,728 42,991 98,473 127,488
Management fees
- affiliates 9,252 9,068 27,769 26,842
- others 16,526 15,744 50,999 55,228
Depreciation and amortization 22,045 19,102 92,679 98,274
72,551 86,905 269,920 307,832
OPERATING INCOME 81,037 67,823 200,343 143,696
OTHER INCOME (EXPENSES):
Interest income 43,368 43,263 129,740 129,382
Interest expense - (1,818) (1,274) (5,684)
43,368 41,445 128,466 123,698
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 124,405 109,268 328,809 267,394
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP'S NET INCOME (1,049) (972) (2,791) (2,560)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (390) (323) (1,123) (744)
NET INCOME $122,966 $107,973 $324,895 $264,090
ALLOCATION OF NET INCOME:
General Partner $1,230 $1,080 $3,249 $2,641
Investor Limited Partners $121,736 $106,893 $321,646 $261,449
Net income per Investor
Limited Partner Unit $22.82 $20.04 $60.30 $49.02
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995 (AUDITED) AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1995 $(28,593) $3,446,591 $3,417,998
Distributions (3,573) (373,380) (376,953)
Net Income 3,948 390,841 394,789
BALANCE, December 31,
1995 (28,218) 3,464,052 3,435,834
Distributions (2,156) (320,040) (322,196)
Net Income 3,249 321,646 324,895
BALANCE, September 30,
1996 $(27,125) $3,465,658 $3,438,533
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Nine Months Ended Sept. 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $324,895 $264,090
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 92,679 98,274
Imputed interest on additional consideration
receivable (24,420) (22,548)
Changes in assets and liabilities:
Decrease (increase) in receivables 8,909 (8,357)
Increase (decrease) in accrued liabilities 13,519 (29,818)
Decrease in deferred revenue (4,123) (3,262)
Increase (decrease) in security deposits (1,000) 2,000
Increase in minority interests 2,203 3,304
Increase (decrease) in
accounts payable-affiliates 346 (37,137)
Decrease in other assets (6,153) (6,866)
Net cash provided by operating activities 406,855 259,680
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital improvements (33,940) 0
Net cash used in investing activities (33,940) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (322,196) (266,700)
Repayment of borrowings (76,523) (13,017)
Net cash used in financing activities (398,719) (279,717)
DECREASE IN CASH AND CASH EQUIVALENTS (25,804) (20,037)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 175,561 173,793
CASH AND CASH EQUIVALENTS, END OF PERIOD $149,757 $153,756
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Nine Months Ended Sept. 30,
1996 1995
Supplementary information:
Cash paid during the period for interest $878 $11,834
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $24,419 $22,548
The accompanying notes are an integral part of these
consolidated financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis of accounting and include the accounts of the Partnership
and its 99% owned subsidiary, Tower Ventures Limited Partnership, a
Pennsylvania limited partnership ("Tower Ventures"), on a consolidated
basis. The remaining 1% limited partnership interest in Tower Ventures
is held by DCOA and Malarkey-Taylor in trust for the Partnership until the
property is sold.
On November 9, 1990, the Partnership purchased a 29.5% limited
partnership interest in United Mobile Networks L.P. ("UMN L.P."), a
Delaware limited partnership. On June 29, 1992, the Partnership's limited
partnership interest increased to a 99% limited partnership interest,
pursuant to the Third Amendment to the Limited Partnership Agreement
of UMN L.P. As a result of the provisions of UMN L.P.'s partnership
agreement, the Partnership was deemed to control UMN L.P. as of
November 9, 1990 (date of purchase). Accordingly, the accompanying
consolidated financial statements include the accounts of UMN L.P.
since November 9, 1990 on a consolidated basis.
All intercompany transactions have been eliminated in consolidation.
Cash Equivalents
For purposes of the statement of cash flows, the Partnership
considers all highly liquid instruments purchased with a maturity of three
months or less to be cash equivalents. Cash equivalents include an
investment in a mutual fund investing in short-term U.S. Treasury
obligations of $89,666 and $121,345 at Sept. 30, 1996 and December 31,
1995, respectively.
Income Taxes
No provision has been made for Federal and state income taxes since
the Partnership's profits and losses are reported by the individual
partners on their respective income tax returns.
Deferred Income
Deferred income represents prepayments of rent by certain tenants of
the communications tower owned by Tower Ventures that are recognized
as revenue in subsequent months.
Minority Interest in Tower Ventures Limited Partnership
Minority interest in Tower Ventures Limited Partnership, as shown on
the balance sheet, reflects the remaining capital account balances
attributable to the 1% interest in Tower Ventures owned by DCOA and
Malarkey-Taylor Associates, Inc.
For the nine months ended Sept. 30, 1996 and 1995, Tower Ventures
reported net income of $279,085 and $255,989, respectively. The minority
interest's 1% share in this net income is $2,791 and $2,560, respectively,
and is reflected on the balance sheet as Minority Interest in Tower
Ventures.
Minority Interest in United Mobile Networks L.P.
Minority interest is reflected in consolidation and represents the 1%
of UMN L.P. not owned by the Partnership.
For the nine months ended Sept. 30, 1996 and 1995, UMN L.P. reported
net income of $112,265 and $74,365, respectively. The minority interest's
1% share in this net income is $1,123 and $744, respectively, and is
reflected on the balance sheet as Minority Interest in UMN L.P.
Depreciation and Amortization
Buildings and the communications towers are stated at cost and
depreciated over estimated useful lives of 20 years using the straight-line
method. Costs assigned to intangible assets are being amortized using
the straight-line method over the remaining estimated useful lives of
from 4 months to 20 years. Loan fees are amortized on a straight-line basis
over the term of the loan and were fully amortized as
of March 31, 1996.
Income per Investor Limited Partner Unit
Income per Investor Limited Partner Unit is calculated by dividing the
allocation of income (loss) to Investor Limited Partners by the weighted
average number of units outstanding during the nine months ended Sept.
30, 1996 and 1995 of 5,334 units.
2. RELATED PARTY TRANSACTIONS
The General Partner is entitled to a management fee of 5% of the
gross revenues, not including proceeds from the sale, exchange or other
disposition of the businesses. Management fees for the nine months
ended Sept. 30, 1996 and 1995 were $27,769 and $26,842, respectively.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the nine months ended Sept. 30, 1996, Partnership operations
consisted of operating the communications tower owned by Tower
Ventures and managing the remaining business of UMN L.P., consisting
of collecting the interest and principal on the note receivable
and additional consideration receivable from, and monitoring the
operations of, East Texas Communications L.P. ("ETCLP"), the purchaser of
the specialized mobile radio businesses (the "SMR business") owned by
UMN L.P. The SMR business was sold to ETCLP effective July 14, 1994.
Rental revenues from the communications tower (Tower Ventures)
increased $18,735 and costs and expenses increased $127 for the nine
months ended Sept. 30, 1995 and 1996, respectively. For the nine months
ended Sept. 30, 1996, rental revenue of $470,263 was earned from 26
tenant leases. The increase was attributable to the addition of two new
tenants, consumer price index rent adjustments and increases in charges
to various tenants during this nine month period. Tenants are charged for
utilities and for their equipment additions to the tower or building.
Operating, general and administrative expense consisted of operating
costs of Tower Ventures and UMN L.P. in the amount of $55,226 and
$5,153, respectively, for the nine months ended Sept. 30, 1996. The
remaining $38,094 represents legal and accounting fees of $33,021 and
other administrative costs of $5,073. Management fees during this nine
month period consisted of fees incurred by Tower Ventures and UMN
L.P. of $41,999 and $9,000, respectively, and management fees of $27,769
to Telecommunications Growth & Income Fund Management Limited
Partnership, the general partner.
Operating income increased by $56,647 from $143,696 to $200,343 for
the nine months ended Sept. 30, 1995 and 1996, respectively. Depreciation
and amortization decreased $5,595, and operating, general and
administrative expense decreased $29,015. Management fees decreased
$3,302.
Interest expense decreased $4,410, from $5,684 to $1,274 for the nine
months ended Sept. 30, 1995 and 1996, respectively, as a result of the
repayment of the Tower Ventures debt on March 18, 1996. Interest
income represents income of $102,000 on the note receivable and $24,419
imputed interest income on the additional consideration receivable from
the sale of the SMR business and $3,321 from cash investments.
For the nine months ended Sept. 30, 1996, the Partnership had positive
cash flow from operations of $406,855. During the nine months ended
Sept. 30, 1996, the Partnership made distributions to investor limited
partners in the amount of 6% of contributed capital. These distributions
were funded from operating cash flow without considering amortization
and depreciation. Future distributions will be determined by
management based on operating performance and available positive
cash flow.
Financial Condition
On November 9, 1993, Tower Ventures entered into a $1,000,000 line
of credit/term agreement (the "Loan") with a commercial bank to finance
repayment of advances from the Partnership, to pay certain fees and
costs of obtaining the Loan in the amount of $33,500, and to provide
financing for future capital expenditures. The loan was a line of credit
which converted to a term loan at the end of the first year and was
scheduled to mature on October 8, 1998. On March 18, 1996, Tower
Ventures repaid the balance of the Loan from working capital.
At the time of acquisition, the Communications Tower had twelve
tenants with leases generating $34,208 per month. As of Sept. 30, 1996,
there were 26 tenant leases in effect with a current rent roll of $51,517
per month. Each lease has a cost of living adjustment resulting in
annual increases ranging from 3% to 10%. Management continues to
seek to acquire additional tenants for the Communications Tower and
operating expenses are generally fixed and relatively low. Operating
cash flow margins were 87% and 89% for the nine month ended Sept. 30,
1996 and 1995, respectively, and are expected to range from 85% to 90%
in the future. Operating cash flow is determined by subtracting
operating expenses, excluding management fees, depreciation and
amortization, from rental revenues.
The Partnership had current assets in excess of current liabilities of
approximately $114,729 and $133,728 at September 30, 1996 and December 31,
1995, respectively. The Partnership expects to generate positive cash
flows for 1996. The sale of UMN L.P. assets is expected to generate
additional cash over the next five years of a minimum of $1,700,000. As
a result, future cash flows are expected to be more than sufficient to
cover the Partnership's cash flow needs.
Part II - Other Information
None.
Pursuant to the requirements of Section 13 or 15(d) 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 GROWTH &
INCOME FUND L.P.
BY: TELECOMMUNICATIONS GROWTH
& INCOME FUND MANAGEMENT
LIMITED PARTNERSHIP
General Partner
BY: TELECOMMUNICATIONS GROWTH
& INCOME FUND, INC.
General Partner
DATE: November 8, 1996 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacity and on the dates indicated.
DATE: November 8, 1996 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: November 8, 1996 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director and
Chief Financial and Accounting
Officer