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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, 1997 Commission File Number 33-40091
TELECOMMUNICATIONS INCOME FUND IX, L.P.
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(Exact name of Registrant as specified in its charter)
Iowa 42-1367356
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Second Street S.E., Cedar Rapids, Iowa 52401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 365-2506
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
---- -----
As of April 30, 1997, 67,902 Units were issued and outstanding. Based on the
original sales price of $250 per Unit, the aggregate market value at April 30,
1997 was $16,975,500.
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TELECOMMUNICATIONS INCOME FUND IX, LP.
INDEX
Part I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements (unaudited).
Balance Sheets - March 31, 1997 and December 31, 1996.
Statements of Income - three months ended March 31, 1997 and
three months ended March 31, 1996.
Statement of Changes in Partners' Equity - three months ended
March 31, 1997
Statements of Cash Flows - three months ended March 31, 1997 and
three months ended March 31, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Signatures
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
BALANCE SHEETS (UNAUDITED)
March 31 December 31
1997 1996
------------- -------------
ASSETS
Cash and cash equivalents $ 161,783 $ 497,144
Available-for-sale security 62,676 60,310
Net investment in direct financing leases (Note B) 14,102,658 13,575,298
Allowance for possible lease losses (285,298) (244,814)
----------- -----------
Direct financing leases net 13,817,360 13,330,484
Equipment leased under operating leases, less
accumulated depreciation of $238,021 at March 31,
1997 and $23,144 at December 31, 1996 1,237,397 1,307,948
Equipment held for sale 153,632 164,487
Intangibles 6,577 7,615
Other assets 250,245 274,191
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TOTAL ASSETS $15,689,670 $15,642,179
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Line of credit agreement (Note C) $1,430,038 $1,060,490
Trade accounts payable 697 4,059
Due to affiliates 22,404 47,719
Accrued expenses and other liabilities 38,597 61,352
Lease security deposits 442,528 439,033
Note payable (Note C) 743,243 845,149
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Total Liabilities 2,677,507 2,457,802
PARTNERS' EQUITY, 100,000 units authorized
General partner, 40 units issued and outstanding 11,729 11,832
Limited partners: 67,862 units issued and outstanding 13,018,172 13,192,649
Unrealized loss on available-for-sale security (17,738) (20,104)
----------- -----------
Total partners' equity 13,012,163 13,184,377
----------- -----------
TOTAL LIABILITIES & PARTNERS' EQUITY $15,689,670 $15,642,179
=========== ===========
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
Income:
Lease income $588,355 $703,892
Interest income 1,484 -0-
Gain on lease terminations 12,130 25,039
Other 1,262 28,774
--------- ---------
Total Income 603,231 757,705
Expenses:
Management fees 77,235 76,882
Administrative services 23,867 18,354
Interest 43,165 124,648
Professional fees 2,931 36,118
Provision for possible losses 31,659 (69,578)
Depreciation 77,405 75,271
Other 12,284 20,023
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Total expenses 268,546 281,718
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Net income $334,685 $475,987
========= =========
Net income per partnership unit $ 4.93 $ 7.00
Weighted average Partnership units outstanding 67,902 68,007
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND IX, LP.
STATEMENT OF CHANGES IN PARTNERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
Unrealized
Loss on
General Limited Partners Available- Total
Partner ------------------ for-Sale Partners'
(40 Units) Units Amount Security Equity
---------- -------- ----------- ----------- -----------
Balance at December 31, 1996 $11,832 67,862 $13,192,649 $(20,104) $13,184,377
Change in unrealized loss on
available-for-sale security --- --- --- 2,366 2,366
Distributions (300) --- (508,965) --- (509,265)
Net income 197 --- 334,488 --- 334,685
------- ------ ----------- --------- -----------
Balance at March 31, 1997 $11,729 67,862 $13,018,172 $(17,738) $13,012,163
======= ====== =========== ========= ===========
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
OPERATING ACTIVITIES
Net income for period $ 334,685 $ 475,987
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred organization costs 1,038 441
Provision for possible losses 31,659 (69,578)
Depreciation 77,405 75,271
Gain on lease terminations (12,130) (25,039)
Changes in operating assets and liabilities:
(Increase) decrease in other assets 23,946 (16,178)
Decrease in trade accounts payable
excluding equipment purchase cost accrued (3,362) 49,429
Increase (decrease) in due to affiliates (25,315) (96,765)
Increase (decrease) in accrued expenses (22,755) (45,992)
----------- -----------
Net cash provided by operating activities 405,171 347,576
INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment
for direct financing leases (1,739,542) (1,491,424)
Purchase of equipment for an operating lease -0- (9,802)
Repayments of direct financing leases 986,154 849,060
Proceeds from sale of direct financing leases 250,984 1,243,190
Issuance of notes receivable -0- (94,048)
Repayments of notes receivable -0- 4,229
Security deposits collected 3,495 15,863
----------- -----------
Net cash used in investing activities (498,909) 517,068
FINANCING ACTIVITIES
Distributions paid to partners (509,265) (510,053)
Repayment of note payable (101,906) (92,753)
Net (payments on) proceeds from line-of-
credit borrowings 369,548 (297,244)
----------- -----------
Net cash used by financing activities (241,623) (900,050)
----------- -----------
Net decrease in cash and cash equivalents (335,361) (35,406)
Cash and cash equivalents at beginning of period 497,144 161,866
----------- -----------
Cash and cash equivalents at end of period $ 161,783 $ 126,460
=========== ===========
Supplemental Disclosures
Cash paid during the period for interest $ 55,447 $ 124,335
See accompanying notes
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
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, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1996.
NOTE B -- NET INVESTMENT IN DIRECT FINANCING LEASES
Components of the net investment in direct financing leases are as follows:
March 31, 1997 December 31, 1996
--------------- -----------------
Lease payments receivable $16,344,349 $15,905,074
Estimated unguaranteed residual values
of leased equipment 1,706,014 1,740,217
Unearned lease income (3,963,830) (4,077,214)
Unamortized initial direct costs 16,125 7,221
------------ ------------
Net investment in direct financing leases $14,102,658 $13,575,298
============ ===========
NOTE C --CREDIT ARRANGEMENTS
The Partnership has a line-of-credit agreement with a bank that allows the
Partnership to borrow the lesser of $6.25 million, or 32% of the Partnership's
Qualified Accounts, as defined in the agreement. The line-of-credit expires
November 30, 1997 and carries interest at 1% over prime (9.50% at March 31,
1997). The agreement carries a minimum interest charge of $7,500 per month.
The agreement is cancelable by the lender after giving a 90-day notice and is
secured by substantially all assets of the Partnership. This line-of-credit is
guaranteed by the General Partner and certain affiliates of the General
Partner.
The Partnership also has an installment loan agreement which bears interest at
8.91% and is due in monthly installments through November, 1998. The agreement
is collateralized by certain direct financing leases and a second interest in
all other Partnership assets. The agreement is also guaranteed by the General
Partner. Covenants under the agreement require the Partnership, among other
things, to be profitable, not exceed 40% debt to original equity raised ratio,
and not sell a material portion of its assets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
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Three Months Ended March 31
1997 1996
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Description:
------------
Investment in direct financing leases $14,102,658 $16,909,652
Lease income 588,355 703,892
Management fees 77,235 76,882
Interest expense 43,165 124,648
Provision for possible losses 31,659 (69,578)
Lease income decreased in the first three months of 1997 as compared to the
same period in 1996 due to the decrease in the Partnership's net investment in
direct financing leases in 1997. Lease income will decline as the lease
portfolio matures and the Partnership nears its liquidation. The Partnership
is currently in it's fifth year of operations and the liquidation phase must
begin no later than April 30, 1998. Initial leases are expiring and the amount
of equipment being sold will increase. As a result, the size of the
Partnership lease portfolio and the amount of lease income will decline.
Management fees are paid to the General Partner and represent 5% of the gross
rental payments received. Rental payments increased from $1,537,646 in the
three months ended March 31, 1996 to $1,544,700 for the three months ended
March 31, 1997.
The decrease in interest expense is a result of the Partnership borrowing less
funds to acquire equipment for investment in direct financing leases.
The Partnership accrued a $31,659 provision for possible losses for the three
months ended March 31, 1997. For the period ended March 31, 1996, an adjustment
was made to reduce the loss reserve to equal 1.5 percent of leases and
equipment under operating lease. This adjustment of $111,404 resulted in the
total expense provision for the quarter ended March 31, 1996 to be a negative
$69,578. It is the Partnership's intent to accrue a 1.5% reserve expense based
on equipment recorded as an investment in financing leases. However, if a lease
is determined to be non-performing, an additional specific reserve may be
accrued for the troubled lease.
At March 31, 1997, the allowance for possible lease losses was comprised of a
general reserve of $276,473 and a specific reserve of $8,825 for United
Tele-Systems. The specific reserve of $8,825 was established to cover
anticipated legal costs associated with the sale of the United Tele-Systems
equipment. Lease payments receivable of 31 or more days past due amounted to
$72,162 at March 31, 1997. This represents .44% of the Partnership's lease
payments receivable. While these leases are identified as requiring additional
monitoring, they do not necessarily represent non-performing assets.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
- -----------------------------------------------------------------------------------------------
Major Cash Sources:
Principal portion of lease payments received $ 986,154 $ 849,060
Proceeds received on sale of leases 250,984 1,243,190
Net proceeds from debt -0- 389,997
Major Cash Uses:
Purchase of equipment and leases 1,739,542 1,491,424
Net payments on debt 267,642 -0-
Distributions to partners 509,265 510,053
============================================================================================
The Partnership increased the amount owed on a $6.25 million line-of-credit
agreement by $369,548 in the three month period ended March 31, 1997, leaving
an outstanding balance at March 31, 1997 of $1,430,038. This left $4,819,962
available to borrow under this agreement at March 31, 1997. In August, 1995,
the Partnership borrowed $1,350,000 from a bank under terms of a long-term note
payable for purposes of investing in additional leases. The balance due on
this note payable at March 31, 1997 was $743,243. This note payable requires
monthly payments of $39,996 through its maturity on November 30, 1998.
The credit agreement establishing the line of credit contains various covenants
which the Partnership was in compliance with at March 31, 1997. Management
expects to renew the line of credit with the lender when it becomes due in
November 1997.
At the present time the Partnership has not encountered any significant
competition thus enabling the Partnership to obtain its desired lease rates.
The Partnership is required to establish working capital reserves of no less
than 1% of the gross proceeds to satisfy general liquidity requirements,
operating costs for equipment, and the maintenance and refurbishment of
equipment. At March 31, 1997 that working capital reserve, as defined, would
be $170,018. Actual cash on hand at period end March 31, 1997 was $161,783.
The actual cash on hand at March 31, 1997 was below the required level,
however, the Partnership has funds readily available from the line of credit
agreement.
Equipment purchases for investment in direct financing leases has increased
from the corresponding period of one year ago due to the demand for equipment
financing. Equipment purchases are funded through available excess operating
cash and borrowed funds.
At March 31, 1997 adequate cash is being generated to make projected
distributions.
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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 IX, L.P.
(Registrant)
Date__________ Ronald O. Brendengen/s/
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Ronald O. Brendengen, Chief Financial
Officer, Treasurer
Date__________ Daniel P. Wegmann/s/
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Daniel P. Wegmann, Controller
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