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, 1998 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:
Name of each exchange Title of each class on which registered
None Limited Partnership Interest
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___
Page 1 of 14
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Three Month Period Ended March 31, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 7
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, 1998 (Unaudited) and December 31, 1997 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1998 and 1997 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1997 (Audited) and
for the three months ended March 31, 1998 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998 and 1997 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-11
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
ASSETS
March 31, 1998 Dec. 31,1997
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $147,747 $335,062
RECEIVABLES:
Rent 11,052 22,777
Affiliates 1,844 1,844
Other 17,421 20,044
30,317 44,665
Total current assets 178,064 379,727
LAND 86,643 89,005
BUILDINGS, net of accumulated
depreciation of $114,474 and $111,140 152,271 155,605
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $545,004 and $526,460 812,511 831,055
INTANGIBLE ASSETS, net of accumulated
amortization of $870,834 and $868,334 114,166 116,666
1,165,591 1,192,331
OTHER ASSETS:
Note receivable 1,300,000 1,300,000
Additional consideration receivable 474,115 464,759
Other assets 7,644 10,395
1,781,759 1,775,154
Total Assets $3,125,414 $3,347,212
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, 1998 AND DECEMBER 31, 1997
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
March 31, 1998 Dec.31, 1997
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $11,790 $48,609
Accounts payable-affiliates 7,748 7,376
Deferred income 18,792 9,617
Security deposits 9,625 9,625
Total current liabilities 47,955 75,227
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 10,420 10,656
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 11,979 11,661
PARTNERS' CAPITAL (DEFICIT):
General Partner (32,028) (30,081)
Investor Limited Partners 3,087,088 3,279,749
3,055,060 3,249,668
Total Liabilities and Partners'
Capital (Deficit) $3,125,414 $3,347,212
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, 1998 AND 1997 (UNAUDITED)
Three Months Ended
March 31,
1998 1997
REVENUES:
Rental income $192,440 $169,952
COSTS AND EXPENSES:
Operating, general and administrative 46,446 40,073
Management fees
- affiliates 10,117 9,628
- others 19,479 17,151
Depreciation and amortization 24,764 24,188
100,806 91,040
OPERATING INCOME 91,634 78,912
OTHER INCOME (EXPENSES):
Interest income 38,663 42,612
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 130,297 121,524
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP (1,314) (1,110)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (318) (361)
NET INCOME $128,665 $120,053
ALLOCATION OF NET INCOME:
General Partner $1,286 $1,201
Investor Limited Partners $127,379 $118,852
Net income per Investor
Limited Partner Unit $23.88 $22.28
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, 1997 (AUDITED) AND FOR THE
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1997 $(28,034) $3,482,389 $3,454,355
Distributions (7,004) (693,420) (700,424)
Net Income 4,957 490,780 495,737
BALANCE, December 31,
1997 (30,081) 3,279,749 3,249,668
Distributions (3,233) (320,040) (323,273)
Net Income 1,286 127,379 128,665
BALANCE, March 31,
1998 $(32,028) $3,087,088 $3,055,060
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, 1998 AND 1997
(UNAUDITED)
Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $128,665 $120,053
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 24,763 24,188
Imputed interest on additional consideration
receivable (9,356) (8,640)
Changes in assets and liabilities:
Decrease (increase) in receivables 14,348 (468)
Decrease in accrued liabilities (36,819) (65,279)
Increase (decrease) in deferred revenue 9,175 (5,181)
Increase in minority interests 82 671
Increase (decrease) in accounts
payable-affiliates 372 (133)
Decrease in deposits, prepaid
Expenses and other assets 2,366 4,737
Net cash provided by operating activities 133,596 69,948
CASH FLOWS FROM INVESTING ACTIVITIES:
Discount on cost of capital improvements 2,362 -
Net cash provided by investing activities 2,362 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of Note Receivable - 200,000
Distributions (323,273) (286,583)
Net cash used in financing activities (323,273) (86,583)
DECREASE IN CASH AND CASH EQUIVALENTS (187,315) (16,635)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 335,062 135,527
CASH AND CASH EQUIVALENTS, END OF PERIOD $147,747 $118,892
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 30, 1998 AND 1997
(UNAUDITED)
Three Months Ended
March 31,
1998 1997
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $9,357 $8,640
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
NOTES TO 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 $57,654 and $66,140 at
March 31, 1998 and December 31, 1997, 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 when earned.
Minority Interest in Tower Ventures Limited Partnership
Minority interest in Tower Ventures Limited Partnership, as shown on the
balance sheet, reflects the 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, 1998 and 1997, Tower Ventures reported
net income of $131,381 and $111,034, respectively. The minority interest's 1%
share in this net income is $1,314 and $1,110, 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 attributable 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, 1998 and 1997, UMN L.P. reported net
income of $31,781 and $36,096, respectively. The minority interest's 1% share
in this net income is $318 and $361, respectively, and is reflected on the
balance sheet as Minority Interest in UMN L.P.
Depreciation and Amortization
Computer equipment is stated at cost and depreciated over an estimated
useful life of three years using the straight-line method. 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 (see Note 4).
Repairs and maintenance are expensed as incurred.
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 six months ended March 31, 1998 and
1997 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, 1998
and 1997 were $10,117 and $9,628, respectively.
Item 2. Management's Discussion
and Analysis or Plan of Operation
Results of Operations
For the three months ended March 31, 1998, Partnership operations
consisted of operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures) increased
$22,488 and costs and expenses increased $2,141 for the three months ended
March 31, 1997 and 1998, respectively. For the three months ended March 31,
1998, rental revenue of $192,440 was earned from 34 tenant leases.
Operating, general and administrative expense consisted of operating
costs of Tower Ventures and UMN L.P. in the amount of $20,202 and $1,953,
respectively, for the three months ended March 31, 1998. The remaining
$24,291 represents legal and accounting fees of $16,271 and other
administrative costs of $8,020. Management fees during this three month
period consisted of fees incurred by Tower Ventures and UMN L.P. of $16,479
and $3,000, respectively, and management fees of $10,117 to Telecommunications
Growth & Income Fund Management Limited Partnership, the general partner.
Operating income increased by $12,722 from $78,912 to $91,634 for the
three months ended March 31, 1997 and 1998, respectively. Depreciation and
amortization increased $576, and operating, general and administrative expense
increased $6,373. Management fees increased $2,817.
Interest income represents income of $27,376 on the note receivable and
$9,357 imputed interest income on the additional consideration receivable from
the sale of the SMR business and $1,930 from cash investments.
For the three months ended March 31, 1998, the Partnership had positive
cash flow from operations of $133,596. During the three months ended March
31, 1998, 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 and from
a principal payment of $200,000 on December 30, 1997 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.
The Partnership expects that it will continue generating net income from
operations in the future primarily as a result of the income generated by the
Communications Tower operations and from the interest income from the note
receivable from the sale of the SMR businesses. It is the Partnership's
objective to increase the revenues of Tower Ventures through the addition of
new tenants to the Communications Tower, the provision of additional services
to existing tenants, increased rents from existing tenants as a result of
lease renewals at higher rents, and increased rents occurring as a result of
the annual cost of living adjustments in the existing operating leases.
Financial Condition
At the time of acquisition, the Communications Tower had twelve tenants
with leases generating $34,208 per month. As of March 31, 1998, there were 34
tenant leases in effect with a current rent roll of $59,468 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 89% and 88% for the three
months ended March 31, 1998 and 1997, 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 $130,109 and $304,500 at March 31, 1998 and December 31, 1997,
respectively. The Partnership expects to generate positive cash flows for
1998. The sale of UMN L.P. assets is expected to generate additional cash
during 1998 of a minimum of $1,300,000. 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 14, 1998 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 14, 1998 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: May 14, 1998 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director
and Chief Financial and
Accounting Officer