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 THREE MONTH PERIOD COMMISSION FILE
ENDED MARCH 31, 1997 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)
1525 Wilson Boulevard, Arlington, VA 22209
(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:
Title of each class Name of each exchange
Limited Partnership Interest on which registered
None
Check mark 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
Page 1 of 14
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Three Month Period Ended March 31, 1997
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or
Plan of Operation 12
PART II - OTHER INFORMATION 13
Signatures 14
Part I - Financial Information
Item 1. Financial Statements
Telecommunications Growth & Income Fund L.P.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
CONSOLIDATED BALANCE SHEETS
March 31, 1997 (Unaudited) and December 31, 1996 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1997 and 1996 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1996 (Audited) and
for the three months ended March 31, 1997 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-11
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
March 31,1997 Dec 31, 1996
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $ 118,892 $ 135,527
RECEIVABLES:
Rent 13,471 10,336
Affiliates 1,844 1,844
Other 20,088 22,755
35,403 34,935
Total current assets 154,295 170,462
LAND 74,624 74,624
BUILDINGS, net of accumulated
depreciation of $101,137 and $97,802 165,608 168,943
COMMUNICATIONS TOWER, net of accumulated
depreciation of $470,637 and $452,284 879,277 897,630
INTANGIBLE ASSETS, net of accumulated
amortization of $860,834 and $858,334 124,166 126,666
1,243,675 1,267,863
OTHER ASSETS:
Note receivable 1,500,000 1,700,000
Additional consideration receivable 437,780 429,140
Other assets 7,072 11,809
1,944,852 2,140,949
Total Assets $3,342,822 $3,579,274
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
March 31, 1997 Dec 31, 1996
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $ 8,273 $ 73,552
Accounts payable-affiliates 7,021 7,154
Deferred income 9,181 14,362
Security deposits 8,625 8,625
Total current liabilities 33,100 103,693
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 11,279 10,969
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 10,618 10,257
PARTNERS' CAPITAL (DEFICIT):
General Partner (26,833) (28,034)
Investor Limited Partners 3,314,658 3,482,389
3,287,825 3,454,355
Total Liabilities and Partners'
Capital (Deficit) $3,342,822 $3,579,274
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 MONTHS ENDED
MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended March 31,
1997 1996
REVENUES:
Rental income $ 169,952 $ 159,024
COSTS AND EXPENSES:
Operating, general and administrative 40,073 36,643
Management fees
-affiliates 9,628 9,304
-others 17,151 16,952
Depreciation and amortization 24,188 48,788
91,040 111,687
OPERATING INCOME 78,912 47,337
OTHER INCOME (EXPENSES):
Interest income 42,612 42,968
Interest expense - (1,274)
42,612 41,694
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 121,524 89,031
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP (1,110) (731)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (361) (376)
NET INCOME $120,053 $ 87,924
ALLOCATION OF NET INCOME:
General Partner $1,201 $ 879
Investor Limited Partners $118,852 $87,045
Net income per investor
Limited Partner Unit $22.28 $16.32
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, 1996 (AUDITED) AND FOR THE
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1996 $ (28,218) $ 3,464,052 $ 3,435,834
Distributions (4,312) (426,720) (431,032)
Net Income 4,496 445,057 449,553
BALANCE, December 31,
1996 (28,034) 3,482,389 3,454,355
Distributions - (286,583) (286,583)
Net Income 1,201 118,852 120,053
BALANCE, March 31,
1997 $(26,833) $3,314,658 $3,287,825
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 THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 120,053 $ 87,924
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 24,188 48,788
Imputed interest on additional consideration
receivable (8,640) (7,978)
Changes in assets and liabilities:
Increase in receivables (468) (1,261)
Decrease in accrued liabilities (65,279) (16,662)
Decrease in deferred revenue (5,181) (5,969)
Increase in minority interests 671 686
Increase (decrease) in
accounts payable-affiliates (133) 106
Decrease in deposits and
prepaid expenses 4,737 4,304
Net cash provided by operating activities 69,948 109,938
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of Note Receivable 200,000 -
Distributions (286,583) (107,758)
Repayment of borrowings - (76,523)
Net cash used in financing activities (86,583) (184,281)
DECREASE IN CASH AND CASH EQUIVALENTS (16,635) (74,343)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 135,527 175,561
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 118,892 $ 101,218
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 THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended March 31,
1997 1996
Supplementary information:
Cash paid during the period for interest $ - $ 878
The following non-cash activities
resulted from the sale
of UMN L.P. assets:
Imputed interest receivable $8,640 $7.978
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
$78, 379 and $90,740 at March 31, 1997 and December 31, 1996,
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 and is 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 three months ended March 31, 1997 and 1996, Tower Ventures
reported net income of $111,034 and $72,346, respectively. The minority
interest's 1% share in this net income is $1,110 and $723, respectively,
and is reflected on the balance sheet as Minority Interest in Tower
Ventures.
Minority Interest in United Mobile Networks L.P.
Minority interest in United Mobile Networks L.P. ("UMN L.P."), as
shown on the balance sheets, reflects the capital account balances
attributed to the 1% interest in UMN L.P. in consolidation and
represents the portion of UMN L.P. not owned by the Partnership.
For the three months ended March 31, 1997 and 1996, UMN L.P.
reported net income of $36,096 and $37,553, respectively. The minority
interest's 1% share in this net income is $361 and $376, respectively,
and is reflected on the balance sheet as Minority Interest in UMN L.P.
Depreciation and Amortization
Buildings and the communications tower 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 were 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 to Investor Limited Partners by the weighted
average number of units outstanding during the three months ended March
31, 1997 and 1996 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 three months
ended March 31, 1997 and 1996 were $9,628 and $9,304, respectively.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the three months ended March 31, 1997, Partnership operations
consisted of operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures)
increased $10,928 and costs and expenses decreased $20,647 for the
quarters ended March 31, 1996 and 1997, respectively. For the three
months ended March 31, 1997, rental revenue of $169,952 was earned from
31 tenant lease. Six new tenant leases were added during this quarter.
Operating, general and administrative expense consisted of operating
costs of Tower Ventures and UMN L.P. in the amount of $20,578 and $878,
respectively, for the quarter ended March 31, 1997. The remaining
$18,617 represents legal and accounting fees of $11,778 and other
administrative costs of $6,839. Management fees during this quarter
consisted of fees incurred by Tower Ventures and UMN L.P of $14,151 and
$3,000, respectively, and management fees of $9,628 to
Telecommunications Growth & Income Fund Management Limited Partnership,
the general partner.
Operating income increased by $31,575 from $47,337 to $78, 912 for
the quarters ended March 31, 1996 and 1997, respectively. Depreciation
and amortization decreased $24,600, and operating, general and
administrative expense increased $3,430. Management fees increased
$523.
Interest expense decreased $1,274, from $1,274 to $0 for the
quarters ended March 31, 1996 and 1997, respectively, as a result of the
repayment of the Tower Ventures debt on Marcy 18, 1996. Interest income
represents income of $39,973 on the note receivable from the sale of the
SMR business and $2,639 from cash investments.
For the quarter ended March 31, 1997, the Partnership had positive
cash flow from operations of $69,948. During the quarter ended March
31, 1997, the Partnership made a distribution to investor limited
partners in the amount of 5.5% of contributed capital. This
distribution was funded from operating cash flow without considering
amortization and depreciation and from a principal payment of $200,000
from the note receivable from the sale of the SMR businesses. 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 March 31, 1997,
there were 31 tenant leases in effect with a current rent roll of
$54,781 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 88% and 86% for the quarters ended March 31, 1997
and 1996, respectively, and are expected to range from 85% to 90% in the
future.
The Partnership has current assets in excess of current liabilities
of $121,195 and $66,769 at March 31, 1997 and December 31, 1996,
respectively. The Partnership expects to generate positive cash flows
for 1997. The sale of UMN L.P. assets is expected to generate
additional cash over the next two years of a minimum of $1,500,000. 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: May 7, 1997 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: May 7, 1997 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: May 7, 1997 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary,
Director and Chief Financial and
Accounting Officer