SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2005
Commission File Number 000-25593
TELECOMMUNICATIONS INCOME FUND XI, L.P.
---------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Iowa 39-1904041
------------------------------ -----------------
(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)
Issuer's telephone number: (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
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
As of October 6, 2005, 12,257 units were issued and outstanding.
TELECOMMUNICATIONS INCOME FUND XI, L.P.
INDEX
Page
Part I. FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis)-
September 30, 2005 and December 31, 2004 3
Statement of Changes in Net Assets (Liquidation Basis)-
three and nine months ended September 30, 2005 4
Statement of Operations (Going Concern Basis)-
three and nine months ended September 30, 2004 5
Statements of Cash Flows-nine months ended
September 30, 2005 and 2004 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Controls and Procedures 9
Part II. OTHER INFORMATION
- ----------------------------
Item 6. Exhibits 9
Signatures 10
2
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)
September 30, December 31,
2005 2004
--------- ---------
ASSETS
Cash and cash equivalents $ 65,307 $ 134,156
Net investment in direct financing leases
and notes receivable (Note B) 170,356 380,560
Allowance for possible loan and lease losses (83,968) (137,613)
--------- ---------
Direct financing leases and notes receivable, net 86,388 242,947
Other receivables 9,800 16,476
--------- ---------
TOTAL ASSETS $ 161,495 $ 393,579
========= =========
LIABILITIES AND NET ASSETS
LIABILITIES
Due to affiliates $ -0- $ 413
Distributions payable to partners -0- 85,000
Accounts payable and accrued expenses 3,338 5,658
Lease security deposits 2,130 10,334
Reserve for estimated costs during the period of liquidation 99,075 205,000
--------- ---------
TOTAL LIABILITIES 104,543 306,405
--------- ---------
NET ASSETS 56,952 87,174
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TOTAL LIABILITIES AND NET ASSETS $ 161,495 $ 393,579
========= =========
See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
------------------ ------------------
Net assets at beginning of period $ 34,663 $ 87,174
Income from direct financing leases,
notes receivable, and other income 4,973 26,782
Distributions to partners --- (120,000)
Change in estimate of liquidation
value of net assets 17,316 62,996
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Net assets at end of period $ 56,952 $ 56,952
============= ==============
See accompanying notes.
4
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENT OF OPERATIONS (GOING CONCERN BASIS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, 2004 September 30, 2004
------------------ ------------------
REVENUES:
Income from direct financing leases and notes receivable $ 14,107 $ 58,883
Gain (loss) on lease terminations 3,918 3,109
Other 4,431 8,911
--------- ---------
Total revenues 22,456 70,903
--------- ---------
EXPENSES:
Management fees 2,706 9,463
Administrative services 22,500 67,500
Provision for possible loan and lease losses -- 50,000
Other 11,324 73,911
--------- ---------
Total expenses 36,530 200,874
--------- ---------
Net loss $ (14,074) $(129,971)
========= =========
Net loss per partnership unit $ (1.14) $ (10.56)
========= =========
Weighted average partnership units outstanding 12,294 12,310
========= =========
See accompanying notes.
5
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30
2005 2004
---- ----
Operating Activities
Net changes (loss) in net assets, excluding distributions $ 89,778 $(129,971)
Adjustments to reconcile to net cash from operating activities:
Loss on lease terminations -- (3,109)
Provision for possible loan and lease losses -- 50,000
Liquidation basis adjustments (62,996) --
Changes in operating assets and liabilities:
Other receivables 13,350 44,723
Due to affiliates (413) (936)
Accounts payable and accrued expenses (2,320) (2,975)
Reserve for estimated costs during the period of liquidation (105,925) --
--------- ---------
Net cash from operating activities (68,526) (42,268)
--------- ---------
Investing Activities
Repayments of direct financing leases 118,605 266,560
Repayments of notes receivable 85,064 111,003
Proceeds from termination of direct financing leases and notes receivable 9,212 49,323
Net lease security deposits paid (8,204) (4,818)
--------- ---------
Net cash from investing activities 204,677 422,068
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Financing Activities
Withdrawals paid to partners -- (2,714)
Distributions paid to partners (205,000) (473,584)
--------- ---------
Net cash from financing activities (205,000) (476,298)
--------- ---------
Net decrease in cash and cash equivalents (68,849) (96,498)
Cash and cash equivalents at beginning of period 134,156 312,480
--------- ---------
Cash and cash equivalents at end of period $ 65,307 $ 215,982
========= =========
See accompanying notes
6
TELECOMMUNICATIONS INCOME FUND XI, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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-QSB and
Regulation S-B. 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 nine months ended September 30, 2005
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2005. For further information, refer to the financial
statements and notes thereto included in the Partnership's annual report on Form
10-KSB for the year ended December 31, 2004.
Effective December, 2004, 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)
September 30, 2005 December 31, 2004
------------------ -----------------
Minimum lease payments receivable $ 44,664 $ 218,685
Estimated unguaranteed residual values 7,832 15,496
Unearned income (6,220) (62,766)
Notes receivable 124,080 209,145
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Net investment in direct financing leases and notes receivable $ 170,356 $ 380,560
============= =============
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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Results of Operations
Effective December, 2004, 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 $26,782 in
income from direct financing leases, notes receivable, and other income during
the first nine months of 2005. Management increased its estimate of the
liquidation value of net assets during the first nine months of 2005 by $62,996.
This increase was due to a decrease in the reserve for estimated losses of
$62,153 and a gain on lease terminations of $843. The Partnership has accrued
the estimated expenses of liquidation, which is $99,075 at September 30, 2005.
The General Partner reviews this estimate and will adjust quarterly, as needed.
Management is attempting to liquidate the remaining assets of the Partnership as
soon as feasibly possible while trying to obtain the highest proceeds possible.
The Partnership will make distributions to the partners, to the extent cash is
available, 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 September 30, 2005, the Partnership had
$65,307 of cash on hand.
At September 30, 2005, three customers were past due over 90 days. When a
payment is past due more than 90 days, the Partnership discontinues recognizing
income on the contract. The net investment in these contracts was $83,418 as of
September 30, 2005. Management believes its reserves are adequate as of
September 30, 2005. 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 leases and notes receivable are concentrated in
pay telephones and industrial equipment, representing approximately 69% and 31%,
respectively, of the portfolio at September 30, 2005. Three customers account
for approximately 77% of the Partnership's portfolio at September 30, 2005.
Market Risk
The table below presents the principal amounts due and related weighted average
interest rates by expected maturity dates pertaining to the Partnership's notes
receivable as of September 30, 2005.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
------------- ---------------- -------------
2005 $ 25,387 9.64%
2006 87,321 8.00%
2007 11,372 8.00%
-------------
Total $ 124,080
=============
Fair Value $ 82,000
=============
8
The Partnership manages interest rate risk, its primary market risk exposure, by
limiting terms of notes receivable to no more than five years and generally
requiring full repayment ratably over the term of the note.
Item 3. Controls and Procedures
-----------------------
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of
the Partnership's management, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), of the effectiveness of our disclosure controls
and procedures. Based on that evaluation, the CEO and CFO concluded that as of
the end of the period covered by this report, our disclosure controls and
procedures are effective to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange of 1934 is recorded, processed, summarized, and timely
reported as provided in the SEC's rules and forms.
Changes in Internal Controls
No changes occurred since the quarter ended June 30, 2005 in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Part II. Other Information
Item 6. Exhibits
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Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Chief Financial Officer
Exhibit 32.1 Certification of Financial Statements-Chief Executive Officer
Exhibit 32.2 Certification of Financial Statements-Chief Financial Officer
9
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 XI, L.P.
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(Registrant)
Date: November 4, 2005 /s/ Ronald O. Brendengen
---------------- -----------------------------------
Ronald O. Brendengen,
Chief Financial Officer,
Treasurer
Date: November 4, 2005 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
10