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 SIX MONTH PERIOD COMMISSION FILE
ENDED JUNE 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 Six Month Period Ended June 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
June 30, 1998 (Unaudited) and December 31, 1997 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 1998 and 1997 (Unaudited) 6
Six months ended June 30, 1998 and 1997 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1997 (Audited) and
for the six months ended June 30, 1998 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 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 JUNE 30, 1998 AND DECEMBER 31, 1997
ASSETS
June 30, 1998 Dec. 31,1997
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $194,606 $335,062
RECEIVABLES:
Rent 12,401 22,777
Affiliates 1,844 1,844
Other 17,420 20,044
31,665 44,665
Total current assets 226,271 379,727
LAND 86,643 89,005
BUILDINGS, net of accumulated
depreciation of $117,808 and $111,140 148,937 155,605
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $563,548 and $526,460 793,967 831,055
INTANGIBLE ASSETS, net of accumulated
amortization of $873,334 and $868,334 111,666 116,666
1,141,213 1,192,331
OTHER ASSETS:
Note receivable 1,300,000 1,300,000
Additional consideration receivable 483,662 464,759
Other assets 3,561 10,395
1,787,223 1,775,154
Total Assets $3,154,707 $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 JUNE 30, 1998 AND DECEMBER 31, 1997
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
June 30, 1998 Dec. 31, 1997
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $17,948 $48,609
Accounts payable-affiliates 10,547 7,376
Deferred income 33,004 9,617
Security deposits 9,625 9,625
Total current liabilities 71,124 75,227
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 10,092 10,656
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 12,293 11,661
PARTNERS' CAPITAL (DEFICIT):
General Partner (31,966) (30,081)
Investor Limited Partners 3,093,164 3,279,749
3,061,198 3,249,668
Total Liabilities and Partners'
Capital (Deficit) $3,154,707 $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 SIX MONTHS ENDED
JUNE 30, 1998 AND 1997 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
REVENUES:
Rental income $198,856 $179,262 $391,296 $349,214
COSTS AND EXPENSES:
Operating, general and administrative 36,379 36,935 82,825 77,008
Management fees
- affiliates 10,639 9,892 20,756 19,520
- others 20,832 18,165 40,311 35,316
Depreciation and amortization 24,763 24,189 49,527 48,377
92,613 89,181 193,419 180,221
OPERATING INCOME 106,243 90,181 197,877 168,993
OTHER INCOME (EXPENSES):
Interest income 36,278 40,202 74,941 82,814
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 142,521 130,283 272,818 251,807
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP (1,372) (1,196) (2,686) (2,306)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (314) (345) (632) (706)
NET INCOME $140,835 $128,742 $269,500 $248,795
ALLOCATION OF NET INCOME:
General Partner $1,408 $1,287 $2,695 $2,488
Investor Limited Partners $139,427 $127,455 $266,805 $246,307
Net income per Investor
Limited Partner Unit $26.14 $23.89 $50.02 $46.18
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
SIX MONTHS ENDED JUNE 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 (4,580) (453,390) (457,970)
Net Income 2,695 266,805 269,500
BALANCE, June 30, 1998 $(31,966) $3,093,164 $3,061,198
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 SIX MONTHS ENDED
JUNE 30, 1998 AND 1997
(UNAUDITED)
Six Months Ended June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $269,500 $248,795
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 49,527 48,377
Imputed interest on additional consideration
receivable (18,903) (17,454)
Changes in assets and liabilities:
Decrease in receivables 12,999 4,129
Decrease in accrued liabilities (30,661) (62,184)
Increase (decrease) in deferred revenue 23,387 (9,473)
Increase in security deposits - -
Increase in minority interests 68 851
Increase in accounts payable-affiliates 3,171 111
Decrease in deposits, prepaid
Expenses and other assets 6,064 6,361
Net cash provided by operating activities 315,152 219,513
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 (457,970) (430,454)
Net cash used in financing activities (457,970) (230,454)
DECREASE IN CASH AND CASH EQUIVALENTS (140,456) (10,941)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 335,062 135,527
CASH AND CASH EQUIVALENTS, END OF PERIOD $194,606 $124,586
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 SIX MONTHS ENDED
JUNE 30, 1998 AND 1997
(UNAUDITED)
Six Months Ended June 30,
1998 1997
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $18,903 $17,454
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 $58,802 and $66,140 at
June 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 six months ended June 30, 1998 and 1997, Tower Ventures reported
net income of $268,609 and $230,593, respectively. The minority interest's 1%
share in this net income is $2,686 and $2,306, 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 six months ended June 30, 1998 and 1997, UMN L.P. reported net
income of $63,151 and $70,585, respectively. The minority interest's 1% share
in this net income is $632 and $706, 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 six months ended June 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 six months ended June 30, 1998 and
1997 were $20,756 and $19,520, respectively.
Item 2. Management's Discussion
and Analysis or Plan of Operation
Results of Operations
For the six months ended June 30, 1998, Partnership operations consisted
of operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures) increased
$42,082 and costs and expenses increased $4,065 for the six months ended June
30, 1997 and 1998, respectively. For the six months ended June 30, 1998,
rental revenue of $391,296 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 $39,619 and $3,128,
respectively, for the six months ended June 30, 1998. The remaining $40,078
represents legal and accounting fees of $26,771 and other administrative costs
of $13,307. Management fees during this six month period consisted of fees
incurred by Tower Ventures and UMN L.P. of $34,311 and $6,000, respectively,
and management fees of $20,756 to Telecommunications Growth & Income Fund
Management Limited Partnership, the general partner.
Operating income increased by $28,884 from $168,993 to $197,877 for the
six months ended June 30, 1997 and 1998, respectively. Depreciation and
amortization increased $1,150, and operating, general and administrative
expense increased $5,817. Management fees increased $6,231.
Interest income represents income of $53,376 on the note receivable and
$18,903 imputed interest income on the additional consideration receivable
from the sale of the SMR business and $2,662 from cash investments.
For the six months ended June 30, 1998, the Partnership had positive
cash flow from operations of $315,152. During the six months ended June 30,
1998, the Partnership made distributions to investor limited partners in the
amount of 8.5% 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 June 30, 1998, there were 34
tenant leases in effect with a current rent roll of $61,735 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 87% for the six
months ended June 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 $155,148 and $304,500 at June 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: August 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: August 14, 1998 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
/s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice President,
Secretary, Director and Chief Financial
and Accounting Officer