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 NINE MONTH PERIOD COMMISSION FILE
ENDED SEPTEMBER 30, 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 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___
Page 1 of 14
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Nine Month Period Ended September 30, 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
September 30, 1998 (Unaudited) and December 31, 1997 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1998 and 1997 (Unaudited) 6
Nine months ended September 30, 1998 and 1997 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1997 (Audited) and
for the nine months ended September 30, 1998 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 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 SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
ASSETS
Sept. 30, 1998 Dec. 31,1997
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $186,744 $335,062
RECEIVABLES:
Rent 11,362 22,777
Affiliates 1,844 1,844
Other 17,331 20,044
30,537 44,665
Total current assets 217,281 379,727
LAND 86,643 89,005
BUILDINGS, net of accumulated
depreciation of $121,142 and $111,140 145,603 155,605
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $582,092 and $526,460 779,613 831,055
INTANGIBLE ASSETS, net of accumulated
amortization of $875,834 and $868,334 109,166 116,666
1,121,025 1,192,331
OTHER ASSETS:
Note receivable 1,300,000 1,300,000
Additional consideration receivable 493,399 464,759
Other assets 5,580 10,395
1,798,979 1,775,154
Total Assets $3,137,285 $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 SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Sept. 30, 1998 Dec. 31 1997
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $27,192 $48,609
Accounts payable-affiliates 4,648 7,376
Deferred income 19,635 9,617
Security deposits 9,625 9,625
Total current liabilities 61,100 75,227
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 10,033 10,656
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 12,589 11,661
PARTNERS' CAPITAL (DEFICIT):
General Partner (32,043) (30,081)
Investor Limited Partners 3,085,606 3,279,749
3,053,563 3,249,668
Total Liabilities and Partners'
Capital (Deficit) $3,137,285 $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 AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1998 1997 1998 1997
REVENUES:
Rental income $191,685 $192,697 $582,981 $541,911
COSTS AND EXPENSES:
Operating, general and
administrative 43,779 49,480 126,604 126,488
Management fees
- affiliates 10,535 10,524 31,291 30,044
- others 20,492 20,097 60,803 55,413
Depreciation and amortization 24,764 24,568 74,291 72,945
99,570 104,669 292,989 284,890
OPERATING INCOME 92,115 88,028 289,992 257,021
OTHER INCOME (EXPENSES):
Interest income 36,483 39,812 111,424 122,626
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 128,598 127,840 401,416 379,647
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP (1,241) (1,147) (3,927) (3,453)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (295) (360) (927) (1,066)
NET INCOME $127,062 $126,333 $396,562 $375,128
ALLOCATION OF NET INCOME:
General Partner $1,271 $1,263 $3,965 $3,751
Investor Limited Partners $125,791 $125,070 $392,597 $371,377
Net income per Investor
Limited Partner $23.58 $23.45 $73.60 $69.62
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
NINE MONTHS ENDED SEPTEMBER 30, 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 (5,927) (586,740) (592,667)
Net Income 3,965 392,597 396,562
BALANCE, September 30,1998 $(32,043) $3,085,606 $3,053,563
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, 1998 AND 1997
(UNAUDITED)
Nine Months Ended
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $396,562 $375,128
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 74,290 72,945
Imputed interest on additional consideration
receivable (28,640) (26,446)
Changes in assets and liabilities:
Decrease (increase) in receivables 14,127 (5,180)
Decrease in accrued liabilities (21,416) (51,671)
Increase (decrease) in deferred revenue 10,018 (11,711)
Increase in security deposits - 1,000
Increase in minority interests 305 1,008
Increase (decrease) in accounts payable-affiliates (2,728) 1,165
Decrease in deposits, prepaid
Expenses and other assets 3,659 3,494
Net cash provided by operating activities 446,177 359,732
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Improvements (4,190) (7,601)
Discount on cost of capital improvements 2,362 -
Net cash used in investing activities (1,828) (7,601)
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of Note Receivable - 200,000
Distributions (592,667) (563,429)
Net cash used in financing activities (592,667) (363,429)
DECREASE IN CASH AND CASH EQUIVALENTS (148,318) (11,298)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 335,062 135,527
CASH AND CASH EQUIVALENTS, END OF PERIOD $186,744 $124,229
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, 1998 AND 1997
(UNAUDITED)
Nine Months Ended
September 30,
1998 1997
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $28,641 $26,446
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 $59,547 and $66,140 at
September 30, 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 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 September 30, 1998 and 1997, Tower Ventures
reported net income of $392,712 and $345,296, respectively. The minority
interest's 1% share in this net income is $3,927 and $3,453, 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 nine months ended September 30, 1998 and 1997, UMN L.P. reported
net income of $92,713 and $106,577, respectively. The minority interest's 1%
share in this net income is $927 and $1,066, 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 (loss) to Investor Limited Partners by the weighted
average number of units outstanding during the nine months ended September 30,
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 nine months ended September 30,
1998 and 1997 were $31,291 and $30,044, respectively.
Item 2. Management's Discussion
and Analysis or Plan of Operation
Results of Operations
For the nine months ended September 30, 1998, Partnership operations
consisted of operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures) increased
$41,070 and costs and expenses increased $8,099 for the nine months ended
September 30, 1997 and 1998, respectively. For the nine months ended
September 30, 1998, rental revenue of $582,981 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 $65,331 and $6,304,
respectively, for the nine months ended September 30, 1998. The remaining
$54,970 represents legal and accounting fees of $38,435 and other
administrative costs of $16,534. Management fees during this nine month
period consisted of fees incurred by Tower Ventures and UMN L.P. of $51,803
and $9,000, respectively, and management fees of $31,291 to Telecommunications
Growth & Income Fund Management Limited Partnership, the general partner.
Operating income increased by $32,971 from $257,021 to $289,992 for the
nine months ended September 30, 1997 and 1998, respectively. Depreciation and
amortization increased $1,346, and operating, general and administrative
expense increased $116. Management fees increased $6,637.
Interest income represents income of $79,376 on the note receivable and
$28,641 imputed interest income on the additional consideration receivable
from the sale of the SMR business and $3,407 from cash investments.
For the nine months ended September 30, 1998, the Partnership had
positive cash flow from operations of $446,177. During the nine months ended
September 30, 1998, the Partnership made distributions to investor limited
partners in the amount of 11% 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 Partnerships
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 September 30, 1998, there
were 34 tenant leases in effect with a current rent roll of $62,200 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 86% for
the nine months ended September 30, 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 $156,181 and $304,500 at September 30, 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: November 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: November 14, 1998 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: November 14, 1998 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary,
Director and Chief
Financial and Accounting
Officer