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, 2002
Commission File Number: 0-25574
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")
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 11, 2002, 87,372 units were issued and outstanding. Based on the
book value at March 31, 2002 of $4.89 per unit, the aggregate market value at
April 11, 2002 was $427,249.
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, 2002 and December 31, 2001 3
Statement of Changes in Net Assets (Liquidation Basis)-
three months ended March 31, 2002 and 2001 4
Statements of Cash Flows-three months ended March 31, 2002 and 2001 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Signatures 9
2
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)
March 31, 2002 December 31, 2001
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ASSETS
Cash and cash equivalents $ 85,228 $ 46,197
Marketable equity security 25,383 11,281
Not readily marketable equity security 61,435 27,305
Net investment in direct financing leases
and notes receivable (Note B) 351,849 492,538
Other assets 97,048 116,328
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TOTAL ASSETS 620,943 693,649
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LIABILITIES
Accounts payable and accrued expenses 63,035 62,963
Lease security deposits 18,479 21,982
Reserve for estimated costs during the
period of liquidation 112,514 175,000
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TOTAL LIABILITIES 194,028 259,945
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CONTINGENCY (Note C)
NET ASSETS $426,915 $433,704
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See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
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Net assets at beginning of period $ 433,704 $ 4,825,280
Income from direct financing leases,
interest, and other income 6,519 62,014
Distributions to partners -0- (599,864)
Withdrawals of limited partners (507) (2,640)
Change in estimate of liquidation value of net assets (12,801) (2,271,630)
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Net assets at end of period $ 426,915 $ 2,013,160
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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, 2002 March 31, 2001
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OPERATING ACTIVITIES
Changes in net assets excluding withdrawals and distributions $ (6,282) $ (2,209,616)
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 12,801 2,271,630
Changes in operating assets and liabilities:
Other assets 19,280 (32,420)
Accounts payable and accrued expenses 72 (43,809)
Reserve for estimated costs during the period of liquidation (62,486) (33,658)
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Net cash from operating activities (36,615) (47,873)
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INVESTING ACTIVITIES
Repayments of direct financing leases 68,412 262,365
Proceeds from termination of direct financing leases 13,931 126,815
Net lease security deposits repaid (3,503) (5,301)
Issuance on notes receivable (15,400) -0-
Repayments of notes receivable 12,713 1,798
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Net cash from investing activities 76,153 385,677
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FINANCING ACTIVITIES
Distributions and withdrawals paid to partners (507) (602,504)
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Net cash from financing activities (507) (602,504)
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Net increase (decrease) in cash and cash equivalents 39,031 (264,700)
Cash and cash equivalents at beginning of period 46,197 350,601
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Cash and cash equivalents at end of period $ 85,228 $ 85,901
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Noncash investing and financing activities:
Sale of equipment under operating lease $ -0- $ 224,805
See accompanying notes.
5
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 in the United States 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, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. For further information, refer to the financial
statements and notes thereto included in the Partnership's annual report on Form
10-K for the year ended December 31, 2001.
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, 2002 December 31, 2001
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Minimum lease payments receivable $ 475,645 $ 579,335
Estimated unguaranteed residual values 58,075 65,769
Unamortized initial direct costs 2,149 2,155
Unearned income (99,977) (124,298)
Notes receivable 188,696 186,008
Adjustment to net realizable value (272,739) (216,431)
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Net investment in direct financing leases and notes receivable $ 351,849 $ 492,538
=============== ===============
Note C - CONTINGENCY
The General Partner's parent has approximately $2.2 million of unsecured
subordinated debt due on December 31, 2002 and may not have sufficient liquid
assets to repay such amounts. The General Partner's parent is pursuing
additional financing, refinancing, and asset sales to meet its obligations. No
assurance can be provided that the General Partner's parent will be successful
in its efforts. The inability of the General Partner to continue as a going
concern as a result of the parent's inability to restructure its debts would
require the Partnership to elect a successor general partner.
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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 $6,519 in
income from direct financing leases, notes receivable, and other income during
the first quarter of 2002. This represents an annualized return on average net
assets of approximately 5.6%. Management decreased its estimate of the
liquidation value of net assets during the first three months of 2002 by
$12,801, resulting primarily from an increase in the allowance for possible loan
and lease losses of $65,000 and an increase in the estimated net realizable
value of an equity security held by the Partnership of $48,232. The Partnership
has accrued the estimated expenses of liquidation, which is $112,514 at March
31, 2002. The General Partner reviews this estimate and will adjust quarterly,
as needed.
The Partnership will continue to make distributions to the partners as leases,
notes receivable, and other assets are collected or 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, 2002, there were two 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, 2002 was $397,437. One lessee, Alpha Tel-Com, filed for
bankruptcy during 2001, and has a net investment of $371,840 at March 31, 2002,
representing approximately 61% of the Partnership's portfolio of direct
financing leases and notes receivable. The value of the phones under the Alpha
Tel-Com have deteriorated significantly, resulting in the Partnership increasing
the allowance for possible loan and lease losses by $65,000 during the first
quarter. The Partnership anticipates total proceeds from the sale of the Alpha
Tel-Com phones to approximate $130,000, of which approximately $113,000 was sold
in April, 2002. The remainder is expected to be sold in the second quarter of
2002. Management believes its reserves are adequate related to these past due
customers. Management will continue to monitor the past due contracts and take
the necessary steps to protect the Partnership's investment.
The Partnership's portfolio of leases and notes receivable are concentrated in
pay telephones, representing approximately 97% of the portfolio at March 31,
2002. Two customers account for approximately 89% of the Partnership's portfolio
of leases and notes receivable at March 31, 2002. One of these customers, Alpha
Tel-Com, filed for bankruptcy during 2001, and accounted for approximately 61%
of the Partnership's portfolio of leases and notes receivable at March 31, 2002.
7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK EQUITY PRICE
SENSITIVITY
The tables below provide information about the Partnership's marketable and not
readily marketable equity securities that are sensitive to changes in prices as
of March 31, 2002.
Carrying Amount Fair Value
Common Stock-Murdock $ 25,383 $ 25,383
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Marketable equity security $ 25,383 $ 25,383
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Carrying Amount Fair Value
Common Stock-Murdock $ 61,435 $ 61,435
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Total Not Readily Marketable $ 61,435 $ 61,435
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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 companies invested in to satisfy debt obligations and their
ability to maintain or improve common equity values. The Partnership holds
165,900 shares of Murdock as marketable and 426,600 shares as not readily
marketable, due to restrictions imposed by Rule 144 of the Securities and
Exchange Commission. Murdock is a shell company with no operations whose stock
price can be volatile. At March 31, 2002, the total amount at risk was $86,818.
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, 2002.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
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2002 $ 176,027 8.4%
2003 3,618 9.4%
2004 3,985 9.4%
2005 4,374 9.4%
2006 692 9.4%
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Total $ 188,696
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Fair Value $ 188,696
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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.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
8
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 3, 2002 /s/ Ronald O. Brendengen
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Ronald O. Brendengen, Chief Financial Officer,
Treasurer
Date: May 3, 2002 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
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