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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 March 31, 1997 Commission File Number:33-62228
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.)
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, 90,195 Units were issued and outstanding. Based on the
original sales price of $250 per Unit, the aggregate market value at April 30,
1997 was $22,548,750.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
INDEX
Part I. FINANCIAL INFORMATION
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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. Managements's Discussion and Analysis of Financial Condition and
Results of Operations.
Signatures
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TELECOMMUNICATIONS INCOME FUND X, L.P.
BALANCE SHEETS (UNAUDITED)
March 31, 1997 December 31, 1996
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ASSETS
Cash and cash equivalents $ 212,926 $ 516,612
Available-for-sale security 135,043 129,945
Net investment in direct financing leases (Note B) 19,197,124 20,323,138
Allowance for possible losses (355,904) (323,398)
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Direct financing leases, net 18,841,220 19,999,740
Equipment leased under operating leases, less
accumulated depreciation of $79,305 in 1996 -0- 103,722
Equipment held for sale 330,307 317,693
Intangibles 13,656 15,872
Other assets 145,625 177,512
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TOTAL ASSETS $19,678,777 $ 21,261,096
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Line of credit agreement (Note C) $ 1,376,823 $ 2,607,911
Due to affiliates 70,268 89,870
Distributions payable to partners 202,938 204,800
Accrued expenses and other liabilities 94,670 87,430
Lease security deposits 512,552 551,376
Note payable (Note C) 1,191,932 1,386,361
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TOTAL LIABILITIES 3,449,183 4,927,748
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PARTNERS' EQUITY, 100,000 units authorized:
General partner, 40 units issued and outstanding 10,170 10,194
Limited partners, 90,155 units in 1997 and 90,370
units in 1996 issued and outstanding 16,257,642 16,366,470
Unrealized loss on available-for-sale security (38,218) (43,316)
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TOTAL PARTNERS' EQUITY 16,229,594 16,333,348
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TOTAL LIABILITIES & PARTNERS' EQUITY $19,678,777 $ 21,261,096
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
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March 31, 1997 March 31, 1996
INCOME:
Lease income $734,917 $902,118
Gain on lease terminations 36,937 197,390
Other 9,196 27,255
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Total Income 781,050 1,126,763
EXPENSES:
Management fees 90,329 93,345
Administrative services 23,867 18,466
Interest 68,481 185,629
Professional fees 6,566 37,825
Provision for possible losses 4,500 (65,478)
Depreciation 14,746 85,324
Other 17,924 26,590
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Total expenses 226,413 381,701
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Net income $554,637 $745,062
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Net income per partnership unit $6.14 $8.24
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Weighted average partnership units outstanding 90,368 90,455
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
Unrealized
Loss on
General Limited Partners Available Total
Partner --------------------- for-Sale Partners'
(40 Units) Units Amount Security Equity
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Balance at December 31, 1996 $10,194 90,370 $16,366,470 $(43,316) $16,333,348
Withdrawal of limited partners --- (215) (53,750) --- (53,750)
Change in unrealized loss on
available-for-sale security --- --- --- 5,098 5,098
Distributions (270) --- (609,469) --- (609,739)
Net income 246 --- 554,391 --- 554,637
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Balance at March 31, 1997 $10,170 90,155 $16,257,642 $(38,218) $16,229,594
=========================================================
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
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OPERATING ACTIVITIES
Net Income $ 554,637 $ 745,062
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 2,216 3,177
Provision for possible losses 4,500 (65,478)
Gain on lease terminations (36,937) (197,390)
Depreciation 14,746 85,323
Changes in operating assets and liabilities:
Other assets 31,887 86,702
Due to affiliates (19,602) (154,116)
Accrued expenses and other liabilities 7,240 87,909
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Net cash provided by operating activities 558,687 591,189
INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment for,
direct financing leases (300,000) (1,354,454)
Repayments of direct financing leases 895,830 911,800
Purchase of equipment for an operating lease -0- (40,093)
Proceeds from early termination of direct financing leases 616,317 1,879,439
Net lease security deposits collected(repaid) (38,824) (20,275)
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Net cash provided by (used in) investing activities 1,173,323 1,376,417
FINANCING ACTIVITIES
Net proceeds from (repayments of) line-of-credit (1,231,088) (1,172,040)
Repayments of long term debt (194,429) (177,015)
Distributions paid to partners (610,179) (610,673)
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Net cash used in financing activities (2,035,696) (1,959,728)
Net increase (decrease) in cash and cash equivalents (303,686) 7,878
Cash and cash equivalents at beginning of period 516,612 262,963
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Cash and cash equivalents at end of period $ 212,926 $ 270,841
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 88,183 $ 186,515
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, 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
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Lease payments receivable $21,889,795 $23,482,180
Unamortized initial direct costs 162,639 194,303
Estimated residual values of leased equip. 2,282,136 2,459,691
Unearned lease income (5,137,446) (5,813,036)
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Net investment in direct financing leases $19,197,124 $20,323,138
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Note C -- CREDIT ARRANGEMENTS
The Partnership has a line-of-credit agreement with a bank that carries
interest (9.5% at March 31, 1997) at 1% over prime, with a minimum interest
charge of $7,500 per month. The line-of-credit agreement allows the Partnership
to borrow to the lesser of $7.25 million, or 40% of the Partnership's Qualified
Accounts, as defined in the agreement. The agreement, which expires November
30, 1997, is cancellable 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. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS: Three Months Ended
March 31, 1997 March 31, 1996
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Description
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Investment in direct financing leases $19,197,124 $24,621,956
Lease income 734,917 902,118
Gain on lease terminations 36,937 197,390
Management fee expense 90,329 93,345
Interest expense 68,481 185,629
Lease income declined during the three month period ended March 31, 1997 as
compared to the same period in 1996 due to the decrease in net investment in
direct financing leases. The decrease in net investment in direct financing
leases is attributable to the early termination of certain leases in 1996 at
the request of the lessee which enabled the Partnership to recognize total
gains on those terminations of $197,390. During the first quarter of 1997, the
Partnership realized gains of $36,937 on the early termination of certain
leases at the request of the lessee.
Management fees are paid to the General Partner and represent 5% of the gross
rental payments received. Rental payments decreased from $1,866,900 in the
three months ended March 31, 1996 to $1,806,580 for the three months ended
March 31, 1997. These decreases are attributed to the early termination of
certain leases as described above and other lessees being delinquent in making
their lease payments as noted below. Although there can be no assurances, the
Partnership expects these delinquent payments to be fully collected and all
future lease payments to be fully collected.
The decrease in interest expense is a result of the Partnership using the
proceeds of various lease terminations in 1996 to reduce the balance of its
line of credit.
The Partnership had $2,661,884 of equipment being depreciated at March 31,
1996. The depreciation expense associated with this equipment amounted to
$85,234 for the quarter ended March 31, 1996. Since March of 1996, most of
this equipment has been sold or re-leased. In addition, the Partnership has
reduced the carrying value of this equipment to fair market value. The
remaining equipment cost relates to hotel satelite television equipment and is
expected by Management to be recovered under a direct financing lease or sold.
The possibility remains that these transactions will not materialize, however,
Management's best current information indicates that these transactions will be
completed.
Prior to the first quarter of 1996, the Partnership had reserved for possible
lease losses based on 1.5% of equipment purchased, excluding any specific
reserves. At March 31, 1996, the Partnership adjusted the allowance for
possible losses to reflect 1.5% of the investment in direct financing and
operating leases. This resulted in a credit to the expense provision of
approximately $84,000. The provision for possible losses expense for the first
quarter of 1997 reflects 1.5% of the cost of equipment purchased during the
first quarter of 1997.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED):
At March 31, 1997, the allowance for possible losses was comprised of a general
reserve of $306,897, a specific reserve for Telecable/VisionCom equipment of
$21,000, and a specific reserve for United TeleServices of $28,006. The
$21,000 reserve remaining for the Telecable/VisionCom equipment is for
anticipated costs associated with either selling or re-leasing of this
equipment. The remaining equipment associated with the United TeleSystems
lease was sold to a lessee during the quarter ended March 1997. The re-lease
of this equipment resulted in a $28,006 gain which has been classified to a
specific allowance for possible losses. This specific reserve is being carried
in anticipation of legal and review costs associated with the sale of this
equipment.
A lessee of the Partnership was informed by a state public service commission
that the lessee's permit to operate payphones in the state was being withdrawn
due to complaints regarding the service provided by the lessee on a particular
payphone route. The site contractor for these phones has asked the lessee to
either remove the phones or sell them to another payphone operator. The lessee
will, in all likelihood, sell the payphones for approximately $290,000. The
Partnership's net investment in these phones at March 31, 1997 was
approximately $700,000. When this sale occurs, the Partnership will no longer
have equipment associated with this lease. The lessee has indicated it will
continue to make lease payments, however, there is no assurance the lessee will
be able to sustain payments without the associated cash flow that was generated
by the equipment.
LIQUIDITY AND CAPITAL RESOURCES Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
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MAJOR CASH SOURCES:
Principal portion of lease payments received $895,830 $911,800
Proceeds received on sale of leases 616,317 1,879,439
MAJOR CASH USES:
Purchase of equipment and leases 300,000 1,354,454
Net Payments on debt 1,425,517 1,349,055
Distributions to partners 610,179 610,673
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At March 31, 1997, a total of $117,561 of lease payments were thirty-one days
or more past due. The total past due amount represents .5% of the
Partnership's lease payments receivable. While these leases are identified as
requiring additional monitoring, they do not necessarily represent
non-performing assets.
The Partnership is required to establish working capital reserves of no less
than 1% of the proceeds to satisfy general liquidity requirements, operating
costs of equipment, and the maintenance and refurbishment of equipment. At
March 31, 1997 that requirement would be $226,175. Actual cash on hand was
$212,926. The actual cash on hand at period end March 31, 1997 was below the
required level, however, the Partnership has funds readily available from the
line of credit agreement.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED):
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.
The demand for equipment leases remains strong and the Partnership's available
cash will be used to acquire equipment for investment in direct financing
leases.
At the present time, the Partnership has not encountered any significant
competition. The Partnership, therefore, is able to obtain its desired lease
rates.
At March 31, 1997, adequate cash is being generated to make projected
distributions The present value of the lease portfolio cash flows discounted
at 8% was $19,697,478 at March 31, 1997.
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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 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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