UNITED STATESSECURITIES 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 NINE MONTH PERIOD COMMISSION FILE
ENDED SEPTEMBER 30, 1997 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)
1525 Wilson Boulevard, Arlington, VA 22209
(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__.
Page 1
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Nine Month Period Ended September 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis or Plan of Operation 12
PART II - OTHER INFORMATION 13
Signatures 14
Part I - Financial Information
Item 1. Financial Statements
Telecommunications Growth & Income Fund L.P.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
CONSOLIDATED BALANCE SHEETS
September 30, 1997 (Unaudited) and December 31, 1996 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1997 and 1996 (Unaudited) 6
Nine months ended September 30, 1997 and 1996 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1996 (Audited) and
for the nine months ended September 30, 1997 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997 and 1996 (Unaudited) 8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10-11
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
Sept. 30, 1997 Dec. 31,1996
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $124,229 $135,527
RECEIVABLES:
Rent 18,271 10,336
Affiliates 1,844 1,844
Other 20,000 22,755
40,115 34,935
Total current assets 164,344 170,462
LAND 74,624 74,624
BUILDINGS, net of accumulated
depreciation of $107,805 and $97,802 158,940 168,943
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $507,726 and $452,284 849,789 897,630
INTANGIBLE ASSETS, net of accumulated
amortization of $865,834 and $858,334 119,166 126,666
1,202,519 1,267,863
OTHER ASSETS:
Note receivable 1,500,000 1,700,000
Additional consideration receivable 455,586 429,140
Other assets 8,315 11,809
1,963,901 2,140,949
Total Assets $3,330,764 $3,579,274
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH AND INCOME FUND L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Sept. 30, 1997 Dec. 31, 1996
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $21,881 $73,552
Accounts payable-affiliates 8,319 7,154
Deferred income 2,651 14,362
Security deposits 9,625 8,625
Total current liabilities 42,476 103,693
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 10,912 10,969
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 11,322 10,257
PARTNERS' CAPITAL (DEFICIT):
General Partner (28,593) (28,034)
Investor Limited Partners 3,294,647 3,482,389
3,266,054 3,454,355
Total Liabilities and Partners'
Capital (Deficit) $3,330,764 $3,579,274
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 NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1997 1996 1997 1996
REVENUES:
Rental income $192,697 $153,588 $541,911 $470,263
COSTS AND EXPENSES:
Operating, general and
administrative 49,480 24,728 126,488 98,473
Management fees
- affiliates 10,524 9,252 30,044 27,769
- others 20,097 16,526 55,413 50,999
Depreciation and amortization 24,568 22,045 72,945 92,679
104,669 72,551 284,890 269,920
OPERATING INCOME 88,028 81,037 257,021 200,343
OTHER INCOME (EXPENSES):
Interest income 39,812 43,368 122,626 129,740
Interest expense - - - (1,274)
39,812 43,368 122,626 128,466
INCOME BEFORE ALLOCATION TO
MINORITY INTERESTS 127,840 124,405 379,647 328,809
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP (1,147) (1,049) (3,453) (2,791)
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. (360) (390) (1,066) (1,123)
NET INCOME $126,333 $122,966 $375,128 $324,895
ALLOCATION OF NET INCOME:
General Partner $1,263 $1,230 $3,751 $3,249
Investor Limited Partners $125,070 $121,736 $371,377 $321,646
Net income per Investor
Limited Partner Unit $23.45 $22.82 $69.62 $60.30
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, 1996 (AUDITED) AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
Investor
General Limited
Partner Partners Total
BALANCE, January 1,
1996 $(28,218) $3,464,052 $3,435,834
Distributions (4,312) (426,720) (431,032)
Net Income 4,496 445,057 449,553
BALANCE, December 31,
1996 (28,034) 3,482,389 3,454,355
Distributions (4,310) (559,119) (563,429)
Net Income 3,751 371,377 375,128
BALANCE, September 30,
1997 $(28,593) $3,294,647 $3,266,054
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 NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Nine Months Ended September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $375,128 $324,895
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 72,945 92,679
Imputed interest on additional
consideration receivable (26,446) (24,420)
Changes in assets and liabilities:
Decrease (increase) in receivables (5,180) 8,909
Increase (decrease) in accrued liabilities (51,671) 13,519
Decrease in deferred revenue (11,711) (4,123)
Increase (decrease) in security deposits 1,000 (1,000)
Increase in minority interests 1,008 2,203
Increase in accounts payable-affiliates 1,165 -
Decrease (increase) in other assets 3,494 (6,153)
Net cash provided by operating activities 359,732 406,855
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Improvements (7,601) (33,940)
Net cash used in investing activities (7,601) (33,940)
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of Note Receivable 200,000 -
Distributions (563,429) (322,196)
Repayment of borrowings - (76,523)
Net cash used in financing activities (363,429) (398,719)
DECREASE IN CASH AND CASH EQUIVALENTS (11,298) (25,804)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 135,527 175,561
CASH AND CASH EQUIVALENTS, END OF PERIOD $124,229 $149,757
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 NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Nine Months Ended September 30,
1997 1996
Supplementary information:
Cash paid during the period for interest $ - $878
The following non-cash activities
resulted from the sale of
of UMN L.P. assets:
Imputed interest receivable $26,446 $24,420
The accompanying notes are an integral
part of these consolidated financial statements.
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
NOTES TO 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 $65,587 and $90,740
at September 30, 1997 and December 31, 1996, 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 nine months ended September 30, 1997 and 1996, Tower Ventures
reported net income of $345,296 and $279,085, respectively. The minority
interest's 1% share in this net income is $3,453 and $2,791, respectively,
and is reflected on the balance sheet as Minority Interest in Tower Ventures.
Minority Interest in United Mobile Networks L.P.
Minority interest in United Mobile Networks L.P. ("UMN L.P."), as shown on
the balance sheets, reflects the capital account balances attributed to the
1% interest in UMN L.P. in consolidation and represents the portion of
UMN L.P. not owned by the Partnership.
For the nine months ended September 30, 1997 and 1996, UMN L.P. reported net
income of $106,577 and $112,265, respectively. The minority interest's 1%
share in this net income is $1,066 and $1,123, respectively, and is reflected
on the balance sheet as Minority Interest in UMN L.P.
Depreciation and Amortization
Buildings and the communications tower 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. 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 nine months ended
September 30, 1997 and 1996 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 nine months ended September 30,
1997 and 1996 were $30,044 and $27,769, respectively.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the nine months ended September 30, 1997, Partnership operations
consisted of operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures) increased
$71,648 and costs and expenses increased $14,970 for the nine months ended
September 30, 1996 and 1997, respectively. For the nine months ended
September 30, 1997, rental revenue of $541,911 was earned from 34 tenant
leases.
Operating, general and administrative expense consisted of operating
costs of Tower Ventures and UMN L.P. in the amount of $77,256 and $2,203,
respectively, for the nine months ended September 30, 1997. The remaining
$47,030 represents legal and accounting fees of $34,590 and other
administrative costs of $12,440. Management fees during this nine month
period consisted of fees incurred by Tower Ventures and UMN L.P. of $46,413
and $9,000, respectively, and management fees of $30,044 to
Telecommunications Growth & Income Fund Management Limited Partnership, the
general partner.
Operating income increased by $56,678 from $200,343 to $257,021 for the nine
months ended September 30, 1996 and 1997, respectively. Depreciation and
amortization decreased $19,734, and operating, general and administrative
expense increased $28,015. Management fees increased $6,689.
Interest expense decreased $1,274, from $1,274 to $0 for the nine months
ended September 30, 1996 and 1997, respectively, as a result of the repayment
of the Tower Ventures debt of March 18, 1996. Interest income represents
income of $91,333 on the note receivable and $26,446 imputed interest income on
the additional consideration receivable from the sale of the SMR business and
$4,887 from cash investments.
For the nine months ended September 30, 1997, the Partnership had positive
cash flow from operations of $359,732. During the nine months ended
September 30, 1997, the Partnership made distributions to investor limited
partners in the amount of 10.5% of contributed capital. These distributions
were funded from operating cash flow without considering amortization and
depreciation and from a principal payment of $200,000 from the note
receivable from the sale of the SMR businesses. 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 rom 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 September 30, 1997, there were 34
tenant leases in effect with a current rent roll of $60,066 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 86% and 87% for the nine
months ended September 30, 1997 and 1,996, 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 $121,868 and $66,769 at September 30, 1997 and December 31,
1996, respectively. The Partnership expects to generate positive cash flows
for 1997. The sale of UMN L.P. assets is expected to generate additional
cash of $200,000 in the fourth quarter of 1997 and a minimum of $1,300,000
in the fourth quarter of 1998. 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: November 14, 1997 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: November 14, 1997 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: November 14, 1997 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director
and Chief Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 124,229
<SECURITIES> 0
<RECEIVABLES> 40,115
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 164,334
<PP&E> 1,698,884
<DEPRECIATION> 615,531
<TOTAL-ASSETS> 3,330,764
<CURRENT-LIABILITIES> 42,476
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,266,054
<TOTAL-LIABILITY-AND-EQUITY> 3,330,764
<SALES> 0
<TOTAL-REVENUES> 541,911
<CGS> 0
<TOTAL-COSTS> 284,890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 375,128
<INCOME-TAX> 375,128
<INCOME-CONTINUING> 375,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 375,128
<EPS-PRIMARY> 69.62
<EPS-DILUTED> 69.62
</TABLE>
