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, 1999 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 Three Month Period Ended March 31, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or
Plan of Operation 13
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, 1999 (Unaudited) and December 31, 1998 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1999 and 1998 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1998 (Audited) and
for the three months ended March 31, 1999 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999 and 1998 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-12
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS
March 31, 1999 Dec.31,1998
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $258,404 $1,978,000
RECEIVABLES:
Rent 4,160 11,829
Affiliates - 1,844
Other 88 88
4,248 13,761
Total current assets 262,652 1,991,761
LAND - 86,643
BUILDINGS, net of accumulated
depreciation of $-0- and $124,477 - 142,268
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $-0- and $601,133 - 786,167
EQUIPMENT, net of accumulated depreciation
depreciation of $2,953 and $2,568 1,670 2,055
1,670 1,017,133
OTHER ASSETS:
INTANGIBLE ASSETS, net of accumulated
amortization of $-0- and $878,334 - 106,666
Escrow fund receivable 625,000 -
Other assets - 6,936
625,000 113,602
Total Assets $889,322 $3,122,496
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, 1999 AND DECEMBER 31, 1998
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
March 31, 1999 Dec. 31, 1998
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $28,277 $20,559
Accounts payable-affiliates 125 -
Deferred income - 12,620
Security deposits - 9,625
Total current liabilities 28,402 42,804
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP - 9,959
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. - 12,877
PARTNERS' CAPITAL (DEFICIT):
General Partner 215,231 (32,010)
Investor Limited Partners 645,689 3,088,866
860,920 3,056,856
Total Liabilities and Partners'
Capital (Deficit) $889,322 $3,122,496
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, 1999 AND 1998 (UNAUDITED)
Three Months Ended
March 31,
1999 1998
REVENUES:
Rental income $44,420 $192,440
COSTS AND EXPENSES:
Operating, general and administrative 43,814 46,446
Management fees
- affiliates 1,894 10,117
- others 5,253 19,479
Depreciation and amortization 8,511 24,764
59,472 100,806
OPERATING INCOME (15,052) 91,634
OTHER INCOME (EXPENSES):
Interest income 41,085 38,663
Gain on sale of communications business 7,036,658 -
Disposition fees (346,650) -
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 6,716,041 130,297
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 9,959 (1,314)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 12,877 (318)
NET INCOME $6,738,877 $128,665
ALLOCATION OF NET INCOME:
General Partner $671,954 $1,286
Investor Limited Partners $6,066,923 $127,379
Net income per Investor
Limited Partner Unit $1,137.41 $23.88
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, 1998 (AUDITED) AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1998 $(30,081) $3,279,749 $3,249,668
Distributions (7,274) (720,090) (727,364)
Net Income 5,345 529,207 534,552
BALANCE, December 31,
1998 (32,010) 3,088,866 3,056,856
Distributions (424,713) (8,510,100) (8,934,813)
Net Income 671,954 6,066,923 6,738,877
BALANCE, March 31,
1999 $215,231 $645,689 $860,920
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, 1999 AND 1998
(UNAUDITED)
Three Months Ended
March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $6,738,877 $128,665
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 8,511 24,764
Imputed interest on additional consideration
Receivable - (9,356)
Gain on sale of communications business
net of cash transfers 488,618 -
Changes in assets and liabilities:
Decrease in receivables 9,513 14,347
Increase (decrease) in accrued liabilities 7,718 (36,819)
Increase (decrease) in deferred revenue (12,620) 9,175
Increase (decrease) in minority interests(22,836) 82
Increase in accounts payable-affiliates 125 372
Decrease in security deposits (9,625) -
Decrease in deposits, prepaid
expenses and other assets 6,936 2,366
Net cash provided by operating activities 7,215,217 133,596
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:
Distributions (8,934,813) (323,273)
Net cash used in financing activities (8,934,813) (323,273)
DECREASE IN CASH AND CASH EQUIVALENTS (1,719,596) (187,315)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,978,000 335,062
CASH AND CASH EQUIVALENTS, END OF PERIOD $258,404 $147,747
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, 1999 AND 1998
(UNAUDITED)
Three Months Ended
March 31,
1999 1998
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $ - $ 9,356
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 $230,702, and $60,617 at March 31, 1999 and December 31,
1998, 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 the subsequent month 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, 1999 and 1998, Tower Ventures
reported net income of $7,054,827 and $131,381, respectively. The 1%
minority interest of $-0- and $1,314, respectively, is reflected in the
consolidated statement of operations as Minority Interest in Tower
Ventures' net income.
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. UMN
L.P. ceased operations as of December 31, 1998, at which time the
balance of the note receivable and additional consideration were
received.
For the three months ended March 31, 1998, UMN L.P. reported net
income of $31,781. The 1% minority interest of $318 is reflected in the
consolidated statement of operations as Minority Interest in UMN L.P.'s
net income.
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 were
depreciated over estimated useful lives of 20 years using the straight-
line method. Costs assigned to intangible assets were amortized using
the straight-line method over the 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 three months ended March
31, 1999 and 1998 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, 1999 and 1998 were $1,854 and $10,117, respectively.
The General Partner is entitled to a disposition fee (after the
Limited Partners have received from distributions an amount equal to
their Capital Contributions plus a return equal to at least 6% of their
Capital Contributions per annum) of 3% of the sales price of the
Communications Business being sold. Disposition fees paid for the three
months ended March 31, 1999 were $255,930 from the net sales proceeds
from the sale of Tower Ventures and $90,720 from the net sales proceeds
from the sale of UMN L.P.
3. SALE OF COMMUNICATIONS BUSINESS
On January 19, 1999, Tower Ventures ("Seller") entered into an
asset purchase agreement to sell to Pinnacle Towers Inc., a Delaware
corporation ("Purchaser"), all of the tangible and intangible assets
used or held for use in connection with Tower Ventures' tower business
("the Tower Business") located in Montgomery County, Pennsylvania.
Pinnacle Towers Inc. is an unaffiliated third party. The Tower Business
includes a radio tower, associated buildings and equipment and had an
aggregate carrying amount of $1,113,619 as of January 19, 1999. Closing
was completed January 19, 1999 (the "Closing Date").
Total consideration under the asset purchase agreement was
$8,531,000 ("Purchase Price"), which was paid by $7,906,000 in cash to
Tower Ventures and $625,000 in cash to be held in escrow until
distributed in accordance with the terms of an Escrow Agreement (the
"Escrow Agreement"). On January 19, 1999, Tower Ventures received cash
at closing in the amount of $7,797,217, which was the Purchase Price of
$8,531,000, net of closing costs of $86,395, the Escrow Deposit of
$625,000, adjustments for the seller's pro rata share of 1999 prepaid
taxes of $1,582, and the buyer's pro rata share of January lease
receipts of $23,970. Additional closing costs for sales commissions and
legal fees totaling $266,228 were incurred and paid out of cash received
at closing. An additional commission of $28,100 is due to be paid upon
receipt of escrow proceeds.
During the period between the Closing Date and May 17, 1999, the
Purchaser has the right to perform due diligence inspections of the Real
Property and the Tower Business, to determine whether any latent defects
exist in the structural integrity of the tower based on its use as of
the Closing Date, and the validity of the Seller's representations in
the Purchase Agreement. Purchaser may provide Seller and the Escrow
Agent with written notification, no later than May 17, 1999, of any
adjustments, up to a maximum of $625,000, to the Purchase Price
resulting from the inspection that materially adversely affect the Real
Property or the Tower Business. If Purchaser fails to provide Seller
and the Escrow Agent with any such notice by May 17, 1999, then
Purchaser shall be deemed to have waived any right to adjust the Final
Payment, and the Escrow Agent shall release the entire Escrow Deposit
and all interest thereon to Seller.
The Partnership intends to wind-up the affairs of the Partnership
during 1999 and to make a final distribution to the Partners after the
collection of funds held in escrow, due in May, 1999.
Item 2. Management's
Discussion and Analysis or Plan of Operation
Results of Operations
For the three months ended March 31, 1999, Partnership operations
consisted of operating the communications tower owned by Tower Ventures
until the sale on January 19, 1999 of the tangible and intangible assets
used or held for use in connection with Tower Ventures' tower business.
Rental revenues from the communications tower (Tower Ventures) for
the period January 1 - 19, 1999, the date of sale, were $44,420. Costs
and expenses were $26,252 for the three months ended March 31, 1999.
Operating, general and administrative expense consisted of
operating costs of Tower Ventures were $12,873 for the three months
ended March 31, 1999. The remaining $30,942 represents legal and
accounting fees of $17,807 and other administrative costs of $13,135.
Management fees during this three month period consisted of fees
incurred by Tower Ventures of $5,253 and management fees of $1,895 to
Telecommunications Growth & Income Fund Management Limited Partnership,
the general partner.
Operating loss was $15,053 for the three months ended March 31,
1999. Depreciation and amortization was $8,511. Management fees were
$7,147.
Interest income of $41,085 represents income earned on cash
investment of the collected note receivable and additional consideration
receivable from the sale of the SMR business of $1,800,000 and of the
net proceeds from the sale of Tower Ventures of $7,502,888.
For the three months ended March 31, 1998, the Partnership had
positive cash flow from operations of $7,215,217. During the three
months ended March 31, 1999, the Partnership made distributions to
investor limited partners in the amount of $8,510,100, or 160% of
contributed capital. These distributions were funded from operating
cash flow without considering amortization and depreciation; from the
final principal payment of the note receivable of $1,300,000 and payment
of additional consideration receivable of $500,000 on December 31, 1998
from the sale of the SMR businesses; and, from the $7,502,888 net sales
proceeds received from the sale of Tower Ventures. Future distributions
will be determined by management based on the collection of the escrow
funds from the sale of Tower Ventures, net of cash reserves set aside to
wind-up the affairs of the Partnership.
Financial Condition
The Partnership has current assets in excess of current
liabilities of $234,250 at March 31, 1999. The Partnership expects to
collect approximately $625,000 from funds held in escrow from the sale
of Tower Ventures
The Partnership intends to make a final distribution to the
partners after the collection of the funds held in escrow, due in May,
1999, and to wind-up the affairs of the Partnership during 1999. The
Partnership will file its final tax return during 1999 and the
Partnership will be liquidated.
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, 1999 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, 1999 BY: /s/ Randall N. Smith
Randall N. Smith, President
Chief Executive Officer and
Director
DATE: May 14, 1999 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director
and Chief Financial and
Accounting Officer