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, 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)
6107 Arlington Blvd., Su. A, Falls Church, VA 22044
(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, 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
June 30, 1999 (Unaudited) and December 31, 1998 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30, 1999 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1998 (Audited) and
for the six months ended June 30, 1999 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 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 JUNE 30, 1999 AND DECEMBER 31, 1998
ASSETS
June 30, 1999 Dec. 31,1998
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $216,433 $1,978,000
RECEIVABLES:
Rent - 11,829
Affiliates - 1,844
Other - 88
- 13,761
Total current assets 216,433 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 $-0- and $2,568 - 2,055
- 1,017,133
OTHER ASSETS:
INTANGIBLE ASSETS, net of accumulated
amortization of $-0- and $878,334 - 106,666
Escrow fund receivable - -
Other assets - 6,936
- 113,602
Total Assets $216,433 $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 JUNE 30, 1999 AND DECEMBER 31, 1998
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
June 30,1999 Dec. 31, 1998
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $216,433 $20,559
Deferred income - 12,620
Security deposits - 9,625
Total current liabilities 216,433 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 - (32,010)
Investor Limited Partners - 3,088,866
- 3,056,856
Total Liabilities and Partners'
Capital (Deficit) $216,433 $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 SIX MONTHS ENDED
JUNE 30, 1999 AND 1998 (UNAUDITED)
Six Months Ended
June 30,
1999 1998
REVENUES:
Rental income $51,384 $391,296
COSTS AND EXPENSES:
Operating, general and administrative 191,791 82,825
Management fees
- affiliates 1,894 20,756
- others 7,441 40,311
Depreciation and amortization 8,897 49,527
210,023 193,419
OPERATING INCOME (158,640) 197,877
OTHER INCOME (EXPENSES):
Interest income 51,418 74,941
Gain on sale of communications business 7,036,658 -
Loss on disposition of equipment (1,284) -
Disposition fees (346,650) -
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 6,581,502 272,818
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 9,959 (2,686)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 12,877 (632)
NET INCOME $6,604,338 $269,500
ALLOCATION OF NET INCOME:
General Partner $639,223 $2,695
Investor Limited Partners $5,965,115 $266,805
Net income per Investor Limited Partner Unit $1,118.32 $50.02
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
SIX MONTHS ENDED JUNE 30, 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 (607,213) (9,053,981) (9,661,194)
Net Income 639,223 5,965,115 6,604,338
BALANCE, June 30,
1999 $ - $ - $ -
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, 1999 AND 1998
(UNAUDITED)
Six Months Ended
June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $6,604,338 $269,500
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 771 49,527
Imputed interest on additional consideration
Receivable - (18,903)
Gain on sale of communications business
net of cash transfers 1,121,744 -
Loss on disposition of equipment 1,284 -
Changes in assets and liabilities:
Decrease in receivables 13,761 12,999
Increase (decrease) in accrued liabilities 195,874 (30,661)
Increase (decrease) in deferred revenue (12,620) 23,387
Increase (decrease) in minority interests (22,836) 68
Increase in accounts payable-affiliates - 3,171
Decrease in security deposits (9,625) -
Decrease in deposits, prepaid
expenses and other assets 6,936 6,064
Net cash provided by operating activities 7,899,627 315,152
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 (9,661,194) (457,970)
Net cash used in financing activities (9,661,194) (457,970)
DECREASE IN CASH AND CASH EQUIVALENTS (1,761,567) (140,456)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,978,000 335,062
CASH AND CASH EQUIVALENTS, END OF PERIOD $216,433 $194,606
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, 1999 AND 1998
(UNAUDITED)
Six Months Ended June 30,
1999 1998
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $ - $ 18,903
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 $173,025, and $60,617 at
June 30, 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 six months ended June 30, 1999 and 1998, Tower Ventures reported net
income of $7,036,658 and $269,609 respectively. The 1% minority interest of
$-0- and $2,696, 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 six months ended June 30, 1998, UMN L.P. reported net income of
$63,151. The 1% minority interest of $632 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 six months ended June 30, 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 six months ended June 30, 1999 and
1998 were $1,894 and $20,756, 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 six months ended June 30, 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 was due to be paid upon receipt
of escrow proceeds.
During the period between the Closing Date and May 17, 1999, the Purchaser
had 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 was to 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 failed to
provide Seller and the Escrow Agent with any such notice by May 17, 1999,
then Purchaser would be deemed to have waived any right to adjust the Final
Payment, and the Escrow Agent should release the entire Escrow Deposit and
all interest thereon to Seller. On May 17, 1999, the full amount of the
Escrow Deposit was paid to the Partnership. All interest on the escrowed
funds in the amount of $8,009 was also received during the quarter ended
June 30, 1999.
As all business activities of the Partnership are completed, all
liabilities are accrued and all cash available for distribution has been paid
as of June 30, 1999, the Partnership will be dissolved before the end of
1999. This report is the final filing of the Partnership.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the six months ended June 30, 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. All business activities of the
Partnership have ceased as of June 30, 1999. All future liabilities of the
Partnership have been accrued and final distributions have been made to the
partners. The Partnership will be dissolved before the end of 1999.
Rental revenues from the communications tower (Tower Ventures) for the
period January 1 - 19, 1999, the date of sale, were $51,384. Costs and
expenses were $52,754 for the six months ended June 30, 1999.
Operating, general and administrative expense consisted of operating costs
of Tower Ventures were $37,187 for the six months ended June 30, 1999. The
remaining $154,605 represents legal and accounting fees of $77,137 and other
administrative costs of $77,468, and includes costs of winding-up the affairs
of the Partnership. Management fees during this six month period consisted of
fees incurred by Tower Ventures of $7,441 and management fees of $1,895 to
Telecommunications Growth & Income Fund Management Limited Partnership, the
general partner.
Operating loss was $158,640 for the six months ended June 30, 1999.
Depreciation and amortization was $8,897.
Interest income of $51,417 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 $8,127,888.
For the six months ended June 30, 1998, the Partnership had positive cash
flow from operations of $7,899,647. During the six months ended June 30, 1999,
the Partnership made distributions to investor limited partners in the amount
of $9,053,981, or 170% 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 $8,127,888 net sales
proceeds received from the sale of Tower Ventures.
Financial Condition
The Partnership has current assets consisting of cash and cash equivalents
equal to current liabilities of $216,433 at June 30, 1999.
The Partnership has made a final distribution to the partners after the
collection of the funds held in escrow, received in May, 1999, and is
winding-up the affairs of the Partnership. The Partnership will file its
final tax return during 1999 and the Partnership will be liquidated. This is
the final financial statement for the Partnership.
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, 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: August 14, 1999 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: August 14, 1999 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary,
Director
and Chief Financial and
Accounting Officer