SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2002
Commission File Number 0-21458
TELECOMMUNICATIONS INCOME FUND IX, L.P.
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(Exact name of Registrant as specified in its charter)
Iowa 42-1367356
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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 July 15, 2002, 65,760 units were issued and outstanding. Based on the book
value at June 30, 2002 of $.94 per unit, the aggregate market value at July 15,
2002 was $61,814.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
INDEX
<Table>
<Caption>
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis) - June 30, 2002
and December 31, 2001 3
Statements of Changes in Net Assets (Liquidation Basis) - three months
ended and six months ended June 30, 2002 and 2001 4
Statements of Cash Flows - six months ended June 30, 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
Certification of Chief Executive Officer 10
Certification of Chief Financial Officer 11
</Table>
2
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)
(UNAUDITED)
<Table>
<Caption>
June 30, 2002 December 31, 2001
------------- -----------------
ASSETS
Cash and cash equivalents $ 57,352 $ 51,213
Marketable equity security 7,086 4,724
Not readily marketable equity security 17,151 11,434
Net investment in direct financing leases (Note B) 34,110 59,446
Other assets -0- 3,002
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TOTAL ASSETS 115,699 129,819
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LIABILITIES
Accounts payable 4,512 3,469
Lease security deposits 831 4,763
Reserve for estimated costs during the period of liquidation 48,190 87,922
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TOTAL LIABILITIES 53,533 96,154
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CONTINGENCIES (Note C)
NET ASSETS $ 62,166 $ 33,665
============= =============
</Table>
See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND IX, LP.
STATEMENTS OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
Net assets at beginning of period $ 72,236 $ 537,794 $ 33,665 $ 793,644
Income from direct financing leases 1,844 1,999 4,405 4,365
Interest and other income 253 544 434 2,921
Distributions to partners -0- -0- -0- (99,940)
Withdrawals of limited partners (49) (521) (141) (1,042)
Change in estimate of liquidation
value of net assets (12,118) (192,218) 23,803 (352,350)
-------------- ------------- ------------- --------------
Net assets at end of period $ 62,166 $ 347,598 $ 62,166 $ 347,598
============== ============= ============= ==============
</Table>
See accompanying notes.
4
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2001
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OPERATING ACTIVITIES
Changes in net assets excluding distributions and withdrawals $ 28,642 $ (345,064)
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments (23,803) 352,350
Changes in operating assets and liabilities:
Other assets 3,002 (20,340)
Accounts payable 1,043 743
Reserve for estimated costs during the period of liquidation (39,732) (49,844)
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Net cash from operating activities (30,848) (62,155)
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INVESTING ACTIVITIES
Repayments of direct financing leases 36,421 116,687
Proceeds from sale of direct financing leases 4,639 10,084
Security deposits paid (3,932) (4,058)
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Net cash from investing activities 37,128 122,713
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FINANCING ACTIVITIES
Withdrawals paid to partners (141) (1,042)
Distributions paid to partners -0- (99,940)
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Net cash from financing activities (141) (100,982)
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Net increase (decrease) in cash and cash equivalents 6,139 (40,424)
Cash and cash equivalents at beginning of period 51,213 137,712
----------- -----------
Cash and cash equivalents at end of period $ 57,352 $ 97,288
=========== ===========
</Table>
See accompanying notes.
5
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2002
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
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 six months ended June
30, 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 May 1, 1998, 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
The Partnership's net investment in direct financing leases consists of the
following:
<Table>
<Caption>
(Liquidation Basis) (Liquidation Basis)
June 30, 2002 December 31, 2001
---------------- ----------------
Minimum lease payments receivable $ 63,838 $ 82,272
Estimated unguaranteed residual values 2 13,047
Unearned income (6,318) (9,472)
Unamortized initial direct costs -0- 2
Adjustment to estimated net realizable value (23,412) (26,403)
---------------- ----------------
Net investment in direct financing leases $ 34,110 $ 59,446
================ ================
</Table>
NOTE C - CONTINGENCIES
Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of a bankruptcy for
approximately $450,000. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title. The
General Partner filed a Motion for Summary Judgment, which was denied. After
filing the suit, the plaintiff transferred assets in lieu of bankruptcy. No
further action has been taken at this time by the plaintiff. No loss, if any,
has been recorded in the financial statements with respect to this matter.
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.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On May 1, 1998, 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 $4,839 in
income from direct financing leases, notes receivable, and other income during
the first six months of 2002. Management increased its estimate of the
liquidation value of net assets during the first six months of 2002 by $23,803,
due to changes in the estimated net realizable values of certain equity
securities held by the Partnership ($8,079) and changes in the estimated net
investment in direct financing leases ($15,724). The Partnership has accrued the
estimated expenses of liquidation, which is $48,190 at June 30, 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
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.
Two lease contracts remain as of June 30, 2002, one of which had 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 this contract at June 30, 2002 was $8,836. Management has adequate
reserves for this contract. Management will continue to monitor any past due
contracts and take the necessary steps to protect the Partnership's investment.
The Partnership's portfolio of direct financing leases consists of pay
telephones and computer equipment, representing approximately 84% and 16%,
respectively, of the portfolio at June 30, 2002.
7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EQUITY PRICE SENSITIVITY
The tables provide information about the Partnership's marketable and not
readily marketable equity securities that are sensitive to changes in prices as
of June 30, 2002.
<Table>
<Caption>
Carrying Amount Fair Value
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Common Stock-Murdock Communications Corporation $ 7,086 $ 7,086
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Marketable equity security $ 7,086 $ 7,086
============= =============
<Caption>
Carrying Amount Fair Value
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Common Stock-Murdock Communications Corporation $ 17,151 $ 17,151
------------- -------------
Not readily marketable equity security $ 17,151 $ 17,151
============= =============
</Table>
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 securities held 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. Since the investments
are in a shell company with no operations, the equity price can be volatile. The
Partnership holds 69,473 shares of Murdock as a marketable equity security and
178,645 shares as not readily marketable, due to restrictions imposed by Rule
144 of the Securities and Exchange Commission. At June 30, 2002, the total
amount at risk was $24,237.
PART II
ITEM 1. LEGAL PROCEEDINGS
Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of a bankruptcy for
approximately $450,000. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title. The
General Partner filed a Motion for Summary Judgment, which was denied. After
filing the suit, the plaintiff transferred assets in lieu of bankruptcy. No
further action has been taken at this time by the plaintiff. No loss, if any,
has been recorded in the financial statements with respect to this matter.
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 IX, L.P.
(Registrant)
<Table>
<Caption>
Date: August 9, 2002 Ronald O. Brendengen/s/
--------------------- --------------------------------------------------------
Ronald O. Brendengen, Chief Financial Officer, Treasurer
Date: August 9, 2002 Daniel P. Wegmann/s/
--------------------- --------------------------------------------------------
Daniel P. Wegmann, Controller
</Table>
9
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Telecommunications Income Fund IX
(the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas J. Berthel, Chief Executive Officer of Berthel Fisher & Company Leasing,
Inc., General Partner of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbaines-Oxley Act of 2002,
that:
(1) The Company's Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
August 9, 2002 Thomas J. Berthel/s/
--------------------------------------
Thomas J. Berthel
President and Chief Executive Officer
Berthel Fisher & Company Leasing, Inc.
General Partner
Telecommunications Income Fund IX, L.P.
10
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Telecommunications Income Fund IX
(the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Ronald O. Brendengen, Chief Financial Officer of Berthel Fisher & Company
Leasing, Inc., General Partner of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbaines-Oxley Act of
2002, that:
(1) The Company's Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
August 9, 2002 Ronald O. Brendengen/s/
--------------------------------------
Ronald O. Brendengen
Chief Financial Officer
Berthel Fisher & Company Leasing, Inc.
General Partner
Telecommunications Income Fund IX, L.P.
11