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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 June 30, 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
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As of July 31, 1997, 89,945 Units were issued and outstanding. Based on the
original sales price of $250 per Unit, the aggregate market value at July 31,
1997 was $22,486,250.
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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 - June 30, 1997 and December 31, 1996.
Statements of income (loss) - three months ended June 30, 1997 and
three months ended June 30, 1996. Six months ended June 30, 1997 and
six months ended June 30, 1996.
Statement of changes in partners' equity - six months ended June 30,
1997.
Statements of cash flows - six months ended June 30, 1997 and six
months ended June 30, 1996.
Item 2. Management'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)
June 30, 1997 December 31, 1996
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ASSETS
Cash and cash equivalents $ 25,358 $ 516,612
Available-for-sale security 143,886 129,945
Net investment in direct financing leases (Note B) 18,579,857 20,323,138
Allowance for possible losses (423,574) (323,398)
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Direct financing leases, net 18,156,283 19,999,740
Equipment leased under operating leases, less
accumulated depreciation of $93,334 and
$79,305 in 1997 and 1996, respectively (Note C) 2,706,666 103,722
Equipment held for sale 294,574 317,693
Intangibles 11,441 15,872
Other assets 150,458 177,512
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TOTAL ASSETS $ 21,488,666 $ 21,261,096
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Line of credit agreement (Note D) $ 3,756,781 $ 2,607,911
Payable to affiliates 29,386 89,870
Distributions payable to partners 202,376 204,800
Accrued expenses and other liabilities 170,225 87,430
Lease security deposits 517,063 551,376
Note payable (Note D) 993,681 1,386,361
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TOTAL LIABILITIES 5,669,512 4,927,748
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PARTNERS' EQUITY, 100,000 units authorized:
General partner, 40 units issued and outstanding 10,006 10,194
Limited partners, 89,905 units in 1997 and 90,370
units in 1996 issued and outstanding 15,826,786 16,366,470
Gain on redemption of units 11,737 -0-
Unrealized loss on available-for-sale security (29,375) (43,316)
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TOTAL PARTNERS' EQUITY 15,819,154 16,333,348
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 21,488,666 $ 21,261,096
=========== ===========
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
June 30, 1997 June 30, 1996
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INCOME:
Lease income $684,184 $797,403
Gain on lease terminations 133 33,359
Other 241 6,339
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Total income 684,558 837,101
EXPENSES:
Management fees 78,002 84,297
Administrative services 21,955 18,465
Interest 80,386 155,519
Professional fees 58,956 56,851
Provision for possible losses (Note B) 45,480 739,228
Depreciation 131,234 96,757
Other 29,542 27,044
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Total expenses 445,555 1,178,161
Net income (loss) $239,003 $ (341,060)
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Net income (loss) per partnership unit $ 2.66 $ (3.77)
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Weighted average partnership units outstanding 90,007 90,470
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended
June 30, 1997 June 30, 1996
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INCOME:
Lease income $1,419,101 $1,699,521
Gain on lease terminations 37,070 230,749
Other 9,437 33,594
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Total income 1,465,608 1,963,864
EXPENSES:
Management fees 168,331 177,642
Administrative services 45,822 36,931
Interest 148,867 341,148
Professional fees 65,522 94,676
Provision for possible losses (Note B) 49,980 673,750
Depreciation 145,980 182,081
Other 47,466 53,634
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Total expenses 671,968 1,559,862
Net income $ 793,640 $ 404,002
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Net income per partnership unit $ 8.80 $ 4.47
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Weighted average partnership units outstanding 90,164 90,470
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
Unrealized
(Gain) Loss
General Gain on on Available
Partner Limited Partners Redeemed for-Sale Partners'
(40 Units) Units Amount Units Security Equity
- -------------------------------------------------------------------------------------------------------
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
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Withdrawal of limited partners --- (250) (62,500) --- --- (62,500)
Distributions (270) --- (607,253) --- --- (607,523)
Net Income 106 --- 238,897 --- --- 239,003
Change in unrealized loss on
available-for-sale security --- --- --- --- 8,843 8,843
Gain on redeemed units --- --- --- 11,737 --- 11,737
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Balance at June 30, 1997 $10,006 89,905 $15,826,786 $11,737 $(29,375) $ 15,819,154
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
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OPERATING ACTIVITIES
Net Income $ 793,640 $ 404,002
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 4,431 13,134
Provision for possible losses 49,980 673,750
Gain on lease terminations (37,070) (230,749)
Depreciation 145,980 182,081
Changes in operating assets and liabilities:
Other assets 27,054 53,463
Due to affiliates (60,484) (239,841)
Accrued expenses and other liabilities 82,795 20,152
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Net cash provided by operating activities 1,006,326 835,688
INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment for,
direct financing leases (532,000) (3,860,147)
Repayments of direct financing leases 1,809,313 1,780,947
Purchase of equipment for an operating lease (2,800,000) (44,076)
Proceeds from early termination of direct financing leases 623,672 2,545,214
Net lease security deposits repaid (34,313) (35,655)
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Net cash provided by (used in) investing activities (933,328) 386,283
FINANCING ACTIVITIES
Net proceeds from line-of-credit 1,148,870 94,899
Repayments of long term debt (392,680) (358,487)
Distributions paid to partners (1,217,702) (1,221,346)
Redemption of partnership units (102,740) -0-
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Net cash used in financing activities (564,252) (1,484,934)
Net decrease in cash and cash equivalents (491,254) (262,963)
Cash and cash equivalents at beginning of period 516,612 262,963
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Cash and cash equivalents at end of period $ 25,358 $ -0-
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 149,775 $ 344,536
Reclassification of direct financing lease
to other receivable -0- 400,000
Forfeiture of security deposit upon lease write-off -0- 101,287
Reclassification of direct financing lease to equipment -0- 686,037
See accompanying notes
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TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 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 six months ended June 30, 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:
June 30, 1997 December 31, 1996
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Lease payments receivable $20,619,111 $23,482,180
Unamortized initial direct costs 134,946 194,303
Estimated residual values of leased equipment 2,293,711 2,459,691
Unearned lease income (4,467,911) (5,813,036)
Allowance for possible losses (423,574) (323,398)
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Net investment in direct financing leases $18,156,283 $19,999,740
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NOTE C -- EQUIPMENT
During the second quarter of 1997, the Partnership entered into an agreement to
finance $2,800,000 of equipment. Since the terms of the agreement allowed the
customer to cancel, the transaction was classified as an operating lease. The
equipment is being depreciated over its estimated useful life of 60 months.
Note D -- CREDIT ARRANGEMENTS
The Partnership has a line-of-credit agreement with a bank that carries
interest (9.5% at June 30, 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 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.
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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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
1997 1996 1997 1996
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Results of Operations:
Description
- -----------
Lease income $684,184 $797,403 $1,419,101 $1,699,521
Gain on lease terminations 133 33,359 37,070 230,749
Management fee expense 78,002 84,297 168,331 177,642
Interest expense 80,386 155,519 148,867 341,148
Professional fees 58,956 56,851 65,522 94,676
Depreciation 131,234 96,757 145,980 182,081
Provision for possible losses 45,480 739,228 49,980 673,750
Lease income declined during the six month and three month periods ended June
30, 1997 as compared to the same periods 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 $230,749.
Management fees are paid to the General Partner and represent 5% of the gross
rental payments received. Rental payments decreased from $3,552,840 in the six
months ended June 30, 1996 to $3,366,620 for the six months ended June 30,
1997. These decreases are primarily attributable to the early termination of
certain leases as described above.
The decrease in interest expense is a result of the Partnership using the
proceeds of various lease terminations to reduce the balance of its line of
credit.
The Partnership had $3,152,955 of equipment being depreciated at June 30, 1996.
The depreciation expense associated with this equipment amounted to $182,081 for
the six months ended June 30, 1996. Since June of 1996, most of this equipment
has been sold or re-leased. In addition, the Partnership reduced the carrying
value of this equipment to fair market value. As such, at June 30, 1997,
$605,583 of this equipment remains on the Partnerships books generating
depreciation expense of $52,646 for the six months ended June 30, 1997 and has
been classified as equipment held for sale. The remaining equipment cost
relates to hotel satellite 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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
transactions will be completed. The Partnership also entered into an operating
lease in the second quarter of 1997. The equipment cost of $2,800,000 has
generated $93,334 depreciation expense in 1997.
Currently the Partnership provides for possible lease losses at a rate of 1.5%
of the equipment purchased. This amounts to $49,980 for the six months ended
June 30, 1997. As discussed in previous 10-Q Reports, the Partnership realized
losses of $646,307 on leases associated with Value Added Communications as of
June 30, 1996. This specific loss plus the accrual for other possible losses
amounted to $673,750 through June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Six Months Ended
June 30, 1997 June 30, 1996
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Major Cash Sources:
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Principal portion of lease payments received $1,809,313 $1,780,947
Proceeds received on sale of leases 623,672 2,545,214
Net proceeds from debt 1,148,870 94,899
Major Cash Uses:
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Purchase of equipment and leases 3,332,000 3,904,223
Net Payments on debt 392,680 358,487
Distributions to partners 1,217,702 1,221,346
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The Partnership's line of credit agreement is cancelable by the lender after
giving a 90 day notice. The agreement matures in November 1997. The
Partnership has entered into preliminary discussions with the lender and
anticipates renewing the agreement for a yet to be determined term.
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. These
funds are available under the Partnership's line-of-credit.
At the present time, the Partnership has not encountered any significant
competition. The Partnership, therefore, is able to obtain its desired lease
rates.
At June 30, 1997, adequate cash is being generated to make projected
distributions and allow for reinvestment of a portion of the cash to fund
additional leases.
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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 August 13, 1997 Ronald O. Brendengen/s/
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Ronald O. Brendengen, Chief Financial
Officer, Treasurer
Date August 13, 1997 Daniel P. Wegmann/s/
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Daniel P. Wegmann, Controller
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