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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
Commission File Number: 0-25574
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TELECOMMUNICATIONS INCOME FUND X, L.P.
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(Exact name of Registrant as specified in its charter)
Iowa 42-1401715
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Tama Street, Marion, Iowa 52302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 447-5700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interest (the "Units")
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Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days.
Yes X No
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As of April 20, 2000, 88,747 units were issued and outstanding. Based on the
book value at March 31, 2000 of $74.32 per unit, the aggregate market value at
April 20, 2000 was $6,595,677.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
INDEX
Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis)-
March 31, 2000 and December 31, 1999 3
Statement of Income and Comprehensive Income (Going Concern Basis)-
three months ended March 31, 1999 4
Statement of Changes in Net Assets-three months ended March 31, 2000 5
Statements of Cash Flows-three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Signatures 11
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)
March 31, 2000 December 31, 1999
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ASSETS
Cash and cash equivalents $ 406,548 $ 4,147
Available-for-sale equity security 144,477 305,952
Not readily marketable equity security 367,663 778,602
Net investment in direct financing leases
and notes receivable (Note B) 6,324,932 10,652,042
Other assets 52,863 88,212
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TOTAL ASSETS 7,296,483 11,828,955
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LIABILITIES
Line of credit agreement (Note C) -0- 2,556,214
Outstanding checks in excess of bank balance 13,562 37,127
Due to affiliates -0- 317,474
Distributions payable to partners -0- 199,762
Accrued expenses and other liabilities 158,669 153,769
Lease security deposits 72,822 133,376
Reserve for estimated costs during the period of liquidation 455,628 550,000
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TOTAL LIABILITIES 700,681 3,947,722
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NET ASSETS $ 6,595,802 $ 7,881,233
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(GOING CONCERN BASIS) (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1999
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Revenues:
Lease income $398,903
Interest income 54,342
Gain on lease terminations 1,735
Other 10,619
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Total revenues 465,599
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Expenses:
Management fees 54,888
Administrative services 21,000
Interest 34,867
Professional fees 47,054
Provision for possible losses 64,103
Other 18,156
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Total expenses 240,068
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Net income 225,531
Other comprehensive income:
Unrealized gain on available-for-sale securities 564,691
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Comprehensive income $790,222
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Net income per partnership unit $ 2.52
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Weighted average partnership units outstanding 89,471
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000
Net Assets at December 31, 1999 $ 7,881,233
Income from direct financing leases,
interest, and other income 91,761
Distributions to partners (1,500,000)
Withdrawals of limited partners (4,109)
Change in estimate of liquidation value of net assets 126,917
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Net Assets at March 31, 2000 $ 6,595,802
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
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OPERATING ACTIVITIES
Net Income/changes in net assets excluding withdrawals and distributions $ 218,678 $ 225,531
Adjustments to reconcile to net cash from operating activities:
Amortization -0- 4,821
Provision for possible losses -0- 64,103
Gain on lease terminations -0- (1,735)
Liquidation basis adjustments (126,917) -0-
Changes in operating assets and liabilities:
Other assets 35,349 (24,843)
Outstanding checks in excess of bank balance (23,565) (436,199)
Due to affiliates (317,474) 42,554
Accrued expenses and other liabilities 4,900 45,552
Reserve for estimated costs during the period of liquidation (94,372) -0-
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Net cash from operating activities (303,401) (80,216)
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INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment for, direct financing leases -0- (1,886,783)
Repayments of direct financing leases 325,553 621,313
Proceeds from early termination of direct financing leases 4,699,822 30,705
Net lease security deposits repaid (60,554) (3,107)
Issuance of notes receivable -0- (376,000)
Repayments of notes receivable 1,066 55,875
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Net cash from investing activities 4,965,887 (1,557,997)
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FINANCING ACTIVITIES
Borrowings from line of credit 346,936 3,208,930
Net repayments of line of credit (2,903,150) (931,437)
Distributions and withdrawals paid to partners (1,703,871) (626,945)
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Net cash from financing activities (4,260,085) 1,650,548
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Net increase in cash and cash equivalents 402,401 12,335
Cash and cash equivalents at beginning of period 4,147 67,570
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Cash and cash equivalents at end of period $ 406,548 $ 79,905
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 55,400 $ 19,407
Unrealized gain on securities available for sale -0- 564,691
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1999.
On December 31, 1999, the Partnership ceased reinvestment in equipment and
leases and began the orderly liquidation of the Partnership in accordance with
the partnership agreement. As a result, the unaudited financial statements have
been presented under the liquidation basis of accounting. Under the liquidation
basis of accounting, assets are stated at their estimated net realizable values
and liabilities include estimated costs associated with carrying out the plan of
liquidation.
NOTE B -- NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes receivable
consists of the following:
(Liquidation Basis) (Liquidation Basis)
March 31, 2000 December 31, 1999
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Minimum lease payments receivable $ 6,879,813 $ 12,223,103
Estimated unguaranteed residual values 352,062 645,025
Unamortized initial direct costs 24,930 24,022
Unearned income (1,395,076) (2,354,280)
Notes receivable 1,642,626 1,773,820
Adjustment to net realizable (1,179,423) (1,659,648)
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Net investment in direct financing
leases and notes receivable $ 6,324,932 $ 10,652,042
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Note C -- CREDIT ARRANGEMENTS
The Partnership had a line-of-credit agreement with a bank carrying interest at
1% over prime. The agreement was amended August 26, 1998 to extend the maturity
date to June 30, 2000, reduce the borrowing amount to the lesser of $4.0
million, or 40% of the Partnership's Qualified Accounts, as defined in the
agreement, and require minimum monthly interest payments of $4,000 beginning in
December 1998. The agreement was cancelable by the lender after giving a 90-day
notice and was collateralized by substantially all assets of the Partnership.
The line-of-credit was guaranteed by the General Partner and certain affiliates
of the General Partner. The line-of-credit was paid off in full during the first
quarter of 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On December 31, 1999, the Partnership ceased reinvestment in equipment and
leases and began the orderly liquidation of the Partnership in accordance with
the partnership agreement. As a result, the unaudited financial statements have
been presented under the liquidation basis of accounting. Under the liquidation
basis of accounting, assets are stated at their estimated net realizable values
and liabilities include estimated costs associated with carrying out the plan of
liquidation.
As discussed above, the Partnership is in liquidation and does not believe a
comparison of results would be meaningful. The Partnership realized $91,761 in
income from direct financing leases, notes receivable, and other income during
the first quarter of 2000. This represents an annualized return on average net
assets of approximately 5.1%.
Management increased its estimate of the liquidation value of net assets during
the first quarter of 2000 by $126,917. This increase was due to several factors
including an increase in the estimated net realizable value of the lease and
note portfolio offset by the decreased market value of the Partnership's equity
security. The increased net realizable value of the lease and note portfolio is
primarily due to several contract payoffs in the first quarter of 2000, which
resulted in proceeds of $4,699,822 and a gain on terminations of $213,849. The
proceeds were used to pay off the Partnership's line-of-credit, a note payable
to the General Partner, and make distributions to partners. The Partnership has
accrued the estimated expenses of liquidation, which is $455,628 at March 31,
2000. The General Partner reviews this estimate and will adjust quarterly, as
needed.
The Partnership will continue to make distributions to the partners as leases
and notes receivable are collected or sold and other assets are sold. The
valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are uncertainties in carrying out the liquidation of the
Partnership's net assets. The actual value of the liquidating distributions will
depend on a variety of factors, including the actual timing of distributions to
the partners. The actual amounts are likely to differ from the amounts presented
in the financial statements.
As of March 31, 2000 there were four customers with payments over 90 days past
due. When payments are past due more than 90 days, the Partnership discontinues
recognizing income on those contracts. The Partnership's net investment in these
contracts at March 31, 2000 was $5,042,522. Three customers that are past due
account for a significant percentage of the Partnership's lease and notes
receivable portfolio as of March 31, 2000, as outlined in the following table:
Net Investment % of Portfolio
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Customer A $2,443,740 32.6%
Customer B 532,017 7.1%
Customer C 2,061,359 27.5%
Customer B is an affiliate of Customer A. Management believes its reserve is
adequate related to these customers. Management will continue to monitor the
past due contracts and take the necessary steps to protect the Partnership's
investment.
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The Partnership's portfolio of leases and notes receivable are concentrated in
pay telephones, representing approximately 80% of the portfolio at March 31,
2000. As noted in the above table, three customers account for approximately 67%
of the Partnership's portfolio at March 31, 2000 and are past due. No other
customers account for more than 10% of the Partnership's portfolio.
YEAR 2000 ISSUE
As of the date of this filing, the Partnership and its General Partner have
encountered no problems relating to the year 2000 issue. The Partnership and its
General Partner are not aware of any year 2000 problems or situations
encountered by its customers, vendors, affiliates, or others.
LIQUIDITY AND CAPITAL RESOURCES
Early contract terminations in the first quarter of 2000 resulted in cash
proceeds of $4,699,822. The proceeds were used to pay off the Partnership's
line-of-credit, a note payable to the General Partner, and make distributions to
partners.
The Partnership had a line-of-credit agreement with a bank carrying interest at
1% over prime. The agreement was amended August 26, 1998 to extend the maturity
date to June 30, 2000, reduce the borrowing amount to the lesser of $4.0
million, or 40% of the Partnership's Qualified Accounts, as defined in the
agreement, and require minimum monthly interest payments of $4,000 beginning in
December 1998. The agreement was cancelable by the lender after giving a 90-day
notice and was collateralized by substantially all assets of the Partnership.
The line-of-credit was guaranteed by the General Partner and certain affiliates
of the General Partner. The line-of-credit was paid off in full during the first
quarter of 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EQUITY PRICE SENSITIVITY
The table below provides information about the Partnership's marketable and not
readily marketable equity securities that are sensitive to changes in prices.
The table presents the carrying amount and fair value at March 31, 2000.
Carrying Amount Fair Value
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Common Stock-Murdock $ 144,477 $ 144,477
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Total Available-for-Sale $ 144,477 $ 144,477
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Carrying Amount Fair Value
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Common Stock-Murdock $ 367,663 $ 367,663
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Total Not Readily Marketable $ 367,663 $ 367,663
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The Partnership's primary market risk exposure with respect to equity securities
is equity price. The Partnership's general strategy in owning equity securities
is long-term growth in the equity value of emerging companies in order to
increase the rate of return to the limited partners over the life of the
Partnership. The primary risk of the portfolio is derived from the underlying
ability of the entity invested in to satisfy debt obligations and its ability to
maintain or improve common equity values. The Partnership holds 159,975 shares
of Murdock Communications Corporation ("Murdock") as available for sale and
432,525 shares as not readily marketable, due to restrictions imposed by rule
144 of the
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Securities and Exchange Commission. Murdock is an emerging company whose stock
price can be volatile. At March 31, 2000, the market price of Murdock was $1.06
per share. As of April 20, 2000, the price of Murdock had dropped approximately
40% to $.64 per share. The effect of this decrease in market price decreases the
book value of the Partnership units by $2.80, or 3.8% of the total book value.
At March 31, 2000, the total amount at risk was $512,140.
INTEREST RATE SENSITIVITY
The table below provides information about the Partnership's notes receivable
that are sensitive to changes in interest rates. The table presents the
principal amounts and related weighted average interest rates by expected
maturity dates as of March 31, 2000.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
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2000 $ 300,627 14.8%
2001 661,779 14.9%
2002 281,786 15.4%
2003 398,434 15.5%
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Total $ 1,642,626
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Fair Value $ 1,478,363
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The Partnership manages interest rate risk, its primary market risk exposure
with respect to notes receivable, by limiting the terms of notes receivable to
no more than five years and generally requiring full repayment ratably over the
term of the note.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
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SIGNATURES
Pursuant to the requirements 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 INCOME FUND X, L.P.
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(Registrant)
Date: May 4, 2000 /s/ Ronald O. Brendengen
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Ronald O. Brendengen, Chief Financial Officer, Treasurer
Date: May 4, 2000 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
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