UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD COMMISSION FILE
ENDED JUNE 30, 1996 NUMBER 033-26427
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
(Name of small business issuer in its charter)
Virginia 54-1482898
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2201 Wilson Boulevard, Arlington, VA 22201
(Address of principal executive offices) (Zip Code)
(703) 247-2900
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Limited Partnership Interest None
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 and
(2) has been subject to such filing requirements for the past ninety days.
Yes x No
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Six Month Period Ended June 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Signatures 14
Part I - Financial Information
Item 1. Financial Statements
Telecommunications Growth & Income Fund L.P.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
CONSOLIDATED BALANCE SHEETS
June 30, 1996 (Unaudited) and December 31, 1995 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 1996 and 1995 (Unaudited) 6
Six months ended June 30, 1996 and 1995 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1995 (Audited) and
for the six months ended June 30, 1996 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-12
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
June 30,1996 Dec. 31, 1995
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $146,399 $175,561
RECEIVABLES:
Customer accounts receivable 88 88
Rent 8,120 17,505
Affiliates 1,844 1,844
Other 22,667 22,667
32,719 42,104
Total current assets 179,118 217,665
LAND 74,624 74,624
BUILDINGS, net of accumulated
depreciation of $91,134 and $84,465 175,611 182,280
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $418,048 and $386,025 813,403 845,426
INTANGIBLE ASSETS, net of accumulated
amortization of $853,334 and $848,334 131,666 136,666
1,195,304 1,238,996
OTHER ASSETS:
Note receivable 1,700,000 1,700,000
Additional consideration receivable 412,368 396,251
Other assets 779 37,747
2,113,147 2,133,998
Total Assets $3,487,569 $3,590,659
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
June 30, 1996 Dec. 31, 1995
(Unaudited) (Audited)
CURRENT LIABILITIES:
Notes payable, current portion $ - $24,456
Accrued liabilities 14,802 24,047
Accounts payable-affiliates 6,232 6,238
Deferred income 15,677 19,571
Security deposits 8,625 9,625
Total current liabilities 45,336 83,937
NOTES PAYABLE, less current portion - 52,068
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 10,511 10,078
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 9,475 8,742
PARTNERS' CAPITAL (DEFICIT):
General Partner (28,355) (28,218)
Investor Limited Partners 3,450,602 3,464,052
3,422,247 3,435,834
Total Liabilities and Partners'
Capital (Deficit) $3,487,569 $3,590,659
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
REVENUES:
Rental income $157,651 $151,254 $316,675 $296,800
COSTS AND EXPENSES:
Operating, general and administrative 37,102 36,137 73,745 84,497
Management fees
- affiliates 9,213 8,984 18,517 17,774
- others 17,521 19,132 34,473 39,484
Depreciation and amortization 21,846 39,586 70,634 79,172
85,682 103,839 197,369 220,927
OPERATING INCOME 71,969 47,415 119,306 75,873
OTHER INCOME (EXPENSES):
Interest income 43,404 43,134 86,372 86,119
Interest expense - (1,944) (1,274) (3,866)
43,404 41,190 85,098 82,253
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 115,373 88,605 204,404 158,126
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP'S NET INCOME (1,011) (821) (1,742) (1,588)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (357) (284) (733) (421)
NET INCOME $114,005 $87,500 $201,929 $156,117
ALLOCATION OF NET INCOME:
General Partner $1,140 $ 875 $2,019 $1,561
Investor Limited Partners $112,865 $ 86,625 $199,910 $154,556
Net income per Investor
Limited Partner Unit $21.16 $16.24 $37.48 $28.98
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995 (AUDITED) AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1995 $(28,593) $3,446,591 $3,417,998
Distributions (3,573) (373,380) (376,953)
Net Income 3,948 390,841 394,789
BALANCE, December 31,
1995 (28,218) 3,464,052 3,435,834
Distributions (2,156) (213,360) (215,516)
Net Income 2,019 199,910 201,929
BALANCE, June 30,
1996 $ (28,355) $3,450,602 $3,422,247
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
Six Months Ended June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $201,929 $156,117
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 70,634 79,172
Imputed interest on additional consideration
receivable (16,117) (14,882)
Changes in assets and liabilities:
Decrease in receivables 9,385 1,217
Decrease in accrued liabilities (9,245) (42,243)
Decrease in deferred revenue (3,894) (2,854)
Increase (decrease) in security deposits (1,000) 2,000
Increase in minority interests 1,165 2,009
Decrease in accounts payable-affiliates (6) (36,895)
Decrease in deposits and
prepaid expenses 10,026 8,902
Net cash provided by operating activities 262,877 152,543
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (215,516) (160,020)
Repayment of borrowings (76,523) (9,467)
Net cash used in financing activities (292,039) (169,487)
DECREASE IN CASH AND CASH EQUIVALENTS (29,162) (16,944)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 175,561 173,793
CASH AND CASH EQUIVALENTS, END OF PERIOD $146,399 $156,849
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
Six Months Ended June 30,
1996 1995
Supplementary information:
Cash paid during the period for interest $878 $3,780
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $16,117 $14,882
The accompanying notes are an integral part of these
consolidated financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis of accounting and include the accounts of the Partnership
and its 99% owned subsidiary, Tower Ventures Limited Partnership, a
Pennsylvania limited partnership ("Tower Ventures"), on a consolidated
basis. The remaining 1% limited partnership interest in Tower Ventures
is held by DCOA and Malarkey-Taylor in trust for the Partnership until the
property is sold.
On November 9, 1990, the Partnership purchased a 29.5% limited
partnership interest in United Mobile Networks L.P. ("UMN L.P."), a
Delaware limited partnership. On June 29, 1992, the Partnership's limited
partnership interest increased to a 99% limited partnership interest,
pursuant to the Third Amendment to the Limited Partnership Agreement
of UMN L.P. As a result of the provisions of UMN L.P.'s partnership
agreement, the Partnership was deemed to control UMN L.P. as of
November 9, 1990 (date of purchase). Accordingly, the accompanying
consolidated financial statements include the accounts of UMN L.P.
since November 9, 1990 on a consolidated basis.
All intercompany transactions have been eliminated in consolidation.
Cash Equivalents
For purposes of the statement of cash flows, the Partnership
considers all highly liquid instruments purchased with a maturity of three
months or less to be cash equivalents. Cash equivalents include an
investment in a mutual fund investing in short-term U.S. Treasury
obligations of $88,601 and $121,345 at June 30, 1996 and December 31,
1995, respectively.
Income Taxes
No provision has been made for Federal and state income taxes since
the Partnership's profits and losses are reported by the individual
partners on their respective income tax returns.
Deferred Income
Deferred income represents prepayments of rent by certain tenants of
the communications tower owned by Tower Ventures that are recognized
as revenue in subsequent months.
Minority Interest in Tower Ventures Limited Partnership
Minority interest in Tower Ventures Limited Partnership, as shown on
the balance sheet, reflects the remaining capital account balances
attributable to the 1% interest in Tower Ventures owned by DCOA and
Malarkey-Taylor Associates, Inc.
For the six months ended June 30, 1996 and 1995, Tower Ventures
reported net income of $174,239 and $158,752, respectively. The minority
interest's 1% share in this net income is $1,742 and $1,588, respectively,
and is reflected on the balance sheet as Minority Interest in Tower
Ventures.
Minority Interest in United Mobile Networks L.P.
Minority interest is reflected in consolidation and represents the 1%
of UMN L.P. not owned by the Partnership.
For the six months ended June 30, 1996 and 1995, UMN L.P. reported
net income of $73,321 and $42,090, respectively. The minority interest's
1% share in this net income is $733 and $421, respectively, and is
reflected on the balance sheet as Minority Interest in UMN L.P.
Depreciation and Amortization
Buildings and the communications towers are stated at cost and
depreciated over estimated useful lives of 20 years using the straight-line
method. Costs assigned to intangible assets are being amortized using
the straight-line method over the remaining estimated useful lives of
from 4 months to 20 years (see Note 4). Loan fees are amortized on a
straight-line basis over the term of the loan and were fully amortized as
of March 31, 1996.
Income per Investor Limited Partner Unit
Income per Investor Limited Partner Unit is calculated by dividing the
allocation of income (loss) to Investor Limited Partners by the weighted
average number of units outstanding during the six months ended June
30, 1996 and 1995 of 5,334 units.
2. RELATED PARTY TRANSACTIONS
The General Partner is entitled to a management fee of 5% of the
gross revenues, not including proceeds from the sale, exchange or other
disposition of the businesses. Management fees for the six months
ended June 30, 1996 and 1995 were $18,517 and $17,774, respectively.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the six months ended June 30, 1996, Partnership operations
consisted of operating the communications tower owned by Tower
Ventures and managing the remaining business of UMN L.P. ("ETCLP"),
consisting of collecting the interest and principal on the note receivable
and additional consideration receivable from, and monitoring the
operations of, East Texas Communications L.P., the purchaser of the
specialized mobile radio businesses (the "SMR business") owned by
UMN L.P. The SMR business was sold to ETCLP effective July 14, 1994.
Rental revenues from the communications tower (Tower Ventures)
increased $19,875 and costs and expenses increased $6,981 for the six
months ended June 30, 1995 and 1996, respectively. For the six months
ended June 30, 1996, rental revenue of $316,675 was earned from 25
tenant leases. The increase was attributable to the addition of one new
tenant, consumer price index rent adjustments and increases in charges
to various tenants during this six month period. Tenants are charged for
utilities and for their equipment additions to the tower or building.
Operating, general and administrative expense consisted of operating
costs of Tower Ventures and UMN L.P. in the amount of $42,055 and
$4,796, respectively, for the six months ended June 30, 1996. The
remaining $26,894 represents legal and accounting fees of $22,796 and
other administrative costs of $4,098. Management fees during this six
month period consisted of fees incurred by Tower Ventures and UMN
L.P. of $28,473 and $6,000, respectively, and management fees of $18,517
to Telecommunications Growth & Income Fund Management Limited
Partnership, the general partner.
Operating income increased by $43,433 from $75,873 to $119,306 for
the six months ended June 30, 1995 and 1996, respectively. Depreciation
and amortization decreased $8538, and operating, general and
administrative expense decreased $10,752. Management fees decreased
$4,268.
Interest expense decreased $2,592, from $3,866 to $1,274 for the six
months ended June 30, 1995 and 1996, respectively, as a result of the
repayment of the Tower Ventures debt on March 18, 1996. Interest
income represents income of $68,000 on the note receivable and $16,117
imputed interest income on the additional consideration receivable from
the sale of the SMR business and $2,255 from cash investments.
For the six months ended June 30, 1996, the Partnership had positive
cash flow from operations of $262,877. During the six months ended
June 30, 1996, the Partnership made distributions to investor limited
partners in the amount of 4% of contributed capital. These distributions
were funded from operating cash flow without considering amortization
and depreciation. Future distributions will be determined by
management based on operating performance and available positive
cash flow.
Financial Condition
On November 9, 1993, Tower Ventures entered into a $1,000,000 line
of credit/term agreement (the "Loan") with a commercial bank to finance
repayment of advances from the Partnership, to pay certain fees and
costs of obtaining the Loan in the amount of $33,500, and to provide
financing for future capital expenditures. The loan was a line of credit
which converted to a term loan at the end of the first year and was
scheduled to mature on October 8, 1998. On March 18, 1996, Tower
Ventures repaid the balance of the Loan from working capital.
At the time of acquisition, the Communications Tower had twelve
tenants with leases generating $34,208 per month. As of June 30, 1996,
there were 25 tenant leases in effect with a current rent roll of $50,616
per month. Each lease has a cost of living adjustment resulting in
annual increases ranging from 3% to 10%. Management continues to
seek to acquire additional tenants for the Communications Tower and
operating expenses are generally fixed and relatively low. Operating
cash flow margins were 87% and 89% for the six month ended June 30,
1996 and 1995, respectively, and are expected to range from 85% to 90%
in the future. Operating cash flow is determined by subtracting
operating expenses, excluding management fees, depreciation and
amortization, from rental revenues.
The Partnership had current assets in excess of current liabilities of
approximately $133,782 and $133,728 at June 30, 1996 and December 31,
1995, respectively. The Partnership expects to generate positive cash
flows for 1996. The sale of UMN L.P. assets is expected to generate
additional cash over the next five years of a minimum of $1,700,000. As
a result, future cash flows are expected to be more than sufficient to
cover the Partnership's cash flow needs.
Part II - Other Information
None.
Pursuant to the requirements of Section 13 or 15(d) 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 GROWTH &
INCOME FUND L.P.
BY: TELECOMMUNICATIONS GROWTH
& INCOME FUND MANAGEMENT
LIMITED PARTNERSHIP
General Partner
BY: TELECOMMUNICATIONS GROWTH
& INCOME FUND, INC.
General Partner
DATE: August 14, 1996 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacity and on the dates indicated.
DATE: August 14, 1996 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: August 14, 1996 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director and
Chief Financial and Accounting
Officer
