<PAGE> 1
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, 2000
Commission File Number 000-25593
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TELECOMMUNICATIONS INCOME FUND XI, L.P.
---------------------------------------
(Exact name of Registrant 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)
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
--- ---
As of April 20, 2000, 12,593 units were issued and outstanding. Based on the
book value at March 31, 2000 of $861.38 per unit, the aggregate market value at
April 20, 2000 was $10,847,358.
<PAGE> 2
TELECOMMUNICATIONS INCOME FUND XI, L.P.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 2000 and December 31, 1999 3
Statements of Operations and Comprehensive Income -
three months ended March 31, 2000 and 1999 4
Statement of Changes in Partners' Equity - three months ended March 31, 2000 5
Statements of Cash Flows - three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Signatures 11
</TABLE>
2
<PAGE> 3
TELECOMMUNICATIONS INCOME FUND XI, L.P.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,005,674 $ 1,926
Net investment in direct financing leases
and notes receivable (Note B) 10,707,014 13,423,757
Allowance for possible losses (263,682) (239,857)
------------ ------------
Direct financing leases and notes receivable, net 10,443,332 13,183,900
Other assets 470 11,079
------------ ------------
TOTAL ASSETS $ 11,449,476 $ 13,196,905
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Line of credit agreement (Note C) $ 412,980 $ 1,973,142
Outstanding checks in excess of bank balance 175,685 196,859
Due to affiliates 12,405 41,913
Distributions payable to partners 100,744 97,527
Accrued expenses and other liabilities 43,600 46,573
Lease security deposits 131,950 198,148
------------ ------------
TOTAL LIABILITIES 877,364 2,554,162
------------ ------------
PARTNERS' EQUITY, 25,000 units authorized:
General partner, 10 units issued and outstanding 8,968 9,024
Limited partners, 12,583 units issued
and outstanding 10,563,144 10,633,719
------------ ------------
TOTAL PARTNERS' EQUITY 10,572,112 10,642,743
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 11,449,476 $ 13,196,905
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
MARCH 31, 2000 MARCH 31, 1999
--------------- --------------
<S> <C> <C>
REVENUES:
Income from direct financing leases
and notes receivable $321,338 $168,403
Gain on lease terminations 69,028 -0-
Other 25,949 493
-------- --------
Total revenues 416,315 168,896
-------- --------
EXPENSES:
Management fees 74,617 7,084
Administrative services 36,000 21,000
Interest expense 32,313 3,673
Provision for possible losses 23,825 25,070
Other 17,960 35,184
-------- --------
Total expenses 184,715 92,011
-------- --------
Net income $231,600 $ 76,885
======== ========
Net income per partnership unit (Note D) $ 18.39 $ 11.69
======== ========
Weighted average partnership units outstanding 12,593 6,577
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
GENERAL
PARTNER LIMITED PARTNERS TOTAL
---------------- PARTNERS'
(10 UNITS) UNITS AMOUNTS EQUITY
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 9,024 12,583 $ 10,633,719 $ 10,642,743
Distributions to partners (240) 0 (301,991) (302,231)
Net income 184 0 231,416 231,600
------------------------------------------------------------------------
Balance at March 31, 2000 $ 8,968 12,583 $ 10,563,144 $ 10,847,347
========================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
TELECOMMUNICATIONS INCOME FUND XI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 231,600 $ 76,885
Adjustments to reconcile net income to net cash from operating activities:
Gain on lease terminations (69,028) -0-
Amortization 192 414
Provision for possible losses 23,825 25,070
Changes in operating assets and liabilities:
Other assets 10,609 (227)
Outstanding checks in excess of bank balance (21,174) -0-
Due to affiliates (29,508) 605
Accrued expenses and other liabilities (2,973) 23,297
----------- -----------
Net cash from operating activities 143,543 126,044
----------- -----------
INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment for, direct financing leases (499,997) (1,496,401)
Issuance of notes receivable (919,364) -0-
Repayments of direct financing leases 338,911 110,263
Repayments of notes receivable 194,771 75,520
Proceeds from termination of direct financing leases and notes receivable 3,671,258 -0-
Net lease security deposits collected (paid) (66,198) 751
----------- -----------
Net cash from investing activities 2,719,381 (1,309,867)
----------- -----------
FINANCING ACTIVITIES
Borrowings from line of credit 2,450,999 600,000
Repayments of line of credit (4,011,160) (600,000)
Proceeds from sale of partnership interests -0- 1,723,000
Syndication costs incurred -0- (215,375)
Distributions paid to partners (299,015) (145,537)
----------- -----------
Net cash from financing activities (1,859,176) 1,362,088
----------- -----------
Net increase in cash and cash equivalents 1,003,748 178,265
Cash and cash equivalents at beginning of period 1,926 500,713
----------- -----------
Cash and cash equivalents at end of period $ 1,005,674 $ 678,978
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 45,128 $ 3,673
</TABLE>
See accompanying notes.
6
<PAGE> 7
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 generally accepted accounting principles for interim financial information.
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, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1999.
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 financial statement presentation.
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:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Minimum lease payments receivable $ 7,999,020 $ 11,272,568
Estimated residual values of leased equipment 562,418 876,936
Unamortized initial direct costs 545 738
Unearned income (1,831,137) (2,547,160)
Notes receivable 3,976,168 3,820,675
------------- -------------
Net investment in direct financing leases and notes receivable $ 10,707,014 $ 13,423,757
============= =============
</TABLE>
NOTE C - BORROWING AGREEMENTS
In January 1999, the Partnership obtained financing under a line of credit
agreement with a bank. The amount available to borrow under the line of credit
was limited to $2,000,000 or 32% of qualified accounts, primarily leases and
notes receivable. On October 26, 1999, the agreement was amended to increase the
available amount from $2,000,000 to $4,400,000 (limited by 32% of qualified
accounts) and extend the maturity from June 30, 2000 to June 30, 2002. The line
of credit agreement bears interest at 1% over the prime, with a $4,000 minimum
monthly interest charge beginning in July 1999, and is collateralized by
substantially all assets of the Partnership. The line of credit is guaranteed by
the General Partner and certain affiliates of the General Partner. This
agreement is cancelable by the lender after giving a 90-day notice. The General
Partner believes amounts available under the line of credit are adequate for the
foreseeable future. The amount outstanding under this line of credit at March
31, 2000 was $412,980.
NOTE D - NET INCOME PER PARTNERSHIP UNIT
Net income per partnership unit is based on the weighted average number of units
outstanding (including both general and limited partners) which were 12,593 and
6,577 units for the periods from January 1, 2000 to March 31, 2000 and January
1, 1999 to March 31, 1999, respectively.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Income from direct financing leases and notes receivable $ 321,338 $ 168,403
Gain on lease terminations 69,028 -0-
Management fees 74,617 7,084
Administrative services 36,000 21,000
Interest expense 32,313 3,673
Provision for possible losses 23,825 25,070
</TABLE>
The increase in lease and interest income is due to the acquisition of equipment
for investment in direct financing leases and notes receivable. The
Partnership's net investment in direct financing leases and notes receivable was
$5,950,717 at March 31, 1999 and $10,707,014 at March 31, 2000. Equipment
acquisitions for investment in direct financing leases and issuance of notes
receivable totalled $1,419,361 for the first quarter of 2000. The Partnership
had other income of $25,949 for the first quarter of 2000, compared to $493 for
the same period a year ago. Other income consists primarily of interest income
on a money market account and other investments, late charges on lease payments,
and loan origination fees.
The gain on lease terminations of $69,028 is due to several contract payoffs in
the first quarter of 2000. Proceeds from these contract terminations totalled
$3,671,258. The proceeds were used to reduce the Partnership's line of credit,
acquire equipment for direct financing lease, and issue notes receivable. The
Partnership also had cash and cash equivalents at the end of the first quarter
of $1,005,674, primarily invested in a money market account.
Management fees are paid to the General Partner and represent 2% of the gross
rental payments, loan payments, and other financing payments received. These
payments were $3,730,850 for the first quarter of 2000. The increased management
fees are due to an increase in the lease and note portfolio and also resulting
from the proceeds received from the contract terminations.
Administrative services of $36,000 represent fees paid to the General Partner
for the operation of the Partnership as defined in the Partnership Agreement.
The Partnership pays the General Partner $12,000 per month for these services.
The increase in administrative fees paid is due to an increase in administrative
costs incurred by the General Partner on behalf of the Partnership.
Interest expense is incurred on the Partnership's line of credit that was
obtained in January 1999. Interest expense for the first quarter of 2000 was
$32,313 and is the result of borrowings on the line of credit, with the proceeds
of the borrowings used to finance leases and notes receivable. The balance
outstanding on the line of credit at March 31, 2000 was $412,980.
At March 31, 2000, two customers were past due over 90 days. The Partnership's
net investment in the past due contracts was $2,656,946. One customer has 10
contracts past due with a total net investment of $2,631,270. When a payment is
past due more than 90 days, the Partnership discontinues recognizing income on
the contract. Management will continue to monitor the past due contracts and
take the necessary steps to protect the Partnership's investment.
8
<PAGE> 9
At March 31, 2000, the allowance for possible losses was $263,682 and represents
2.5% of the lease and note portfolio of $10,707,014. Management continually
reviews its reserves and will make adjustments as needed.
The Partnership's portfolio of leases and notes receivable are concentrated in
pay telephones, manufacturing equipment, and computer equipment, representing
approximately 60%, 12%, and 10%, respectively, of the portfolio at March 31,
2000. Two lessees account for approximately 37% of the Partnership's portfolio
at March 31, 2000. One of these customers is past due over 90 days, as mentioned
above, and represents approximately 25% of the portfolio.
YEAR 2000 ISSUE
As of the date of this filing, the Partnership and its General Partner have
encountered no problems relating to the year 2000 issue. The Partnership and its
General Partner are not aware of any year 2000 problems or situations
encountered by its customers, vendors, affiliates, or others.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Major Cash Sources:
Proceeds from issuance of units $ -0- $ 1,723,000
Borrowings from line of credit 2,450,999 600,000
Proceeds from termination of direct financing
leases and notes receivable 3,671,258 -0-
Major Cash Uses:
Payments for syndication costs -0- 215,375
Purchases of equipment for direct financing leases 499,997 1,496,401
Issuance of notes receivable 919,364 -0-
Repayments of line of credit 4,011,160 600,000
Distributions paid to partners 299,015 145,537
</TABLE>
In January 1999, the Partnership obtained financing under a line of credit
agreement with a bank. The amount available to borrow under the line of credit
was limited to $2,000,000 or 32% of qualified accounts, primarily leases and
notes receivable. On October 26, 1999, the agreement was amended to increase the
available amount from $2,000,000 to $4,400,000 (limited by 32% of qualified
accounts) and extend the maturity from June 30, 2000 to June 30, 2002. The line
of credit agreement bears interest at 1% over the prime, with a $4,000 minimum
monthly interest charge beginning in July 1999, and is collateralized by
substantially all assets of the Partnership. The line of credit is guaranteed by
the General Partner and certain affiliates of the General Partner. This
agreement is cancelable by the lender after giving a 90-day notice. The General
Partner believes amounts available under the line of credit are adequate for the
foreseeable future. The amount outstanding under this line of credit at March
31, 2000 was $412,980.
At March 31, 2000, adequate cash is being generated to make projected
distributions and allow for reinvestment of a portion of the cash to fund
additional leases and notes. However, the Partnership has not yet achieved an
earnings level equivalent to its operating distributions to partners.
9
<PAGE> 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The table below provides information about the Partnership's notes receivable
and line of credit agreement that are sensitive to changes in interest rates.
The table presents the principal amounts due and related weighted average
interest rates by expected maturity dates as of March 31, 2000.
<TABLE>
<CAPTION>
Assets Liabilities
---------------------------------- --------------------------
Expected Fixed Rate Average Variable Rate Interest
Maturity Date Notes Receivable Interest Rate Line of Credit Rate
------------- ---------------- ------------- -------------- ----
<S> <C> <C> <C> <C>
2000 $ 857,985 15.84% $ -0- -
2001 831,517 15.88% -0- -
2002 892,121 16.00% 412,980 10.00%
2003 818,847 16.18% -0- -
2004 and thereafter 575,698 16.35% -0- -
------------- -------------
Total $ 3,976,168 $ 412,980
============= =============
Fair Value $ 3,976,168 $ 412,980
============= =============
</TABLE>
The Partnership manages interest rate risk, its primary market risk exposure, by
limiting the terms of notes receivable to no more than five years and generally
requiring full repayment ratably over the term of the note.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
10
<PAGE> 11
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.
---------------------------------------
(Registrant)
Date: May 4, 2000 /s/ Ronald O. Brendengen
----------- --------------------------------------------------------
Ronald O. Brendengen, Chief Financial Officer, Treasurer
Date: May 4, 2000 /s/ Daniel P. Wegmann
----------- --------------------------------------------------------
Daniel P. Wegmann, Controller
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of Telecommunications Income Fund XI, L.P. as of
March 31, 2000, and the three months ended March 31, 2000, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,005,674
<SECURITIES> 0
<RECEIVABLES> 10,707,014
<ALLOWANCES> (263,682)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,449,476
<CURRENT-LIABILITIES> 877,364
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,572,112
<TOTAL-LIABILITY-AND-EQUITY> 11,449,476
<SALES> 0
<TOTAL-REVENUES> 416,315
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 128,577
<LOSS-PROVISION> 23,825
<INTEREST-EXPENSE> 32,313
<INCOME-PRETAX> 231,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 231,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231,600
<EPS-BASIC> 18.39<F1>
<EPS-DILUTED> 18.39<F1>
<FN>
<F1>Net Income (Loss) per Partnership Unit
</FN>
</TABLE>
