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 SIX MONTH PERIOD COMMISSION FILE
ENDED JUNE 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 of 14
TELECOMMUNICATIONS GROWTH & INCOME FUND L.P.
FORM 10-QSB
For the Six Month Period Ended June 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 7
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
June 30, 1997 (Unaudited) and December 31, 1996 (Audited) 4-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30, 1997 and 1996 (Unaudited) 6
Six months ended June 30, 1997 and 1996 (Unaudited) 6
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the year ended December 31, 1996 (Audited) and
for the six months ended June 30, 1997 (Unaudited) 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 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 JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
June 30, 1997 Dec. 31,1996
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS $ 124,586 $ 135,527
RECEIVABLES:
Rent 8,874 10,336
Affiliates 1,844 1,844
Other 20,087 22,755
30,805 34,935
Total current assets 155,391 170,462
LAND 74,624 74,624
BUILDINGS, net of accumulated
depreciation of $104,371 and $97,802 162,274 168,943
COMMUNICATIONS TOWERS, net of accumulated
depreciation of $488,992 and $452,284 860,923 897,630
INTANGIBLE ASSETS, net of accumulated
amortization of $863,334 and $858,334 121,666 126,666
1,219,487 1,267,863
OTHER ASSETS:
Note receivable 1,500,000 1,700,000
Additional consideration receivable 446,594 429,140
Other assets 5,448 11,809
1,952,042 2,140,949
Total Assets $3,326,920 $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 JUNE 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
June 30, 1997 Dec. 31, 1996
(Unaudited) (Audited)
CURRENT LIABILITIES:
Accrued liabilities $ 11,368 $ 73,552
Accounts payable-affiliates 7,265 7,154
Deferred income 4,889 14,362
Security deposits 8,625 8,625
Total current liabilities 32,147 103,693
MINORITY INTEREST IN TOWER VENTURES
LIMITED PARTNERSHIP 11,115 10,969
MINORITY INTEREST IN UNITED MOBILE
NETWORKS L.P. 10,962 10,257
PARTNERS' CAPITAL (DEFICIT):
General Partner (29,856) (28,034)
Investor Limited Partners 3,302,552 3,482,389
3,272,696 3,454,355
Total Liabilities and Partners'
Capital (Deficit) $3,326,920 $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 SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
REVENUES:
Rental income $179,262 $ 157,651 $ 349,214 $ 316,675
COSTS AND EXPENSES:
Operating, general
and administrative 36,935 37,102 77,008 73,745
Management fees
- affiliates 9,892 9,213 19,520 18,517
- others 18,165 17,521 35,316 34,473
Depreciation and
amortization 24,189 21,846 48,377 70,634
89,181 85,682 180,221 197,369
OPERATING INCOME 90,081 71,969 168,993 119,306
OTHER INCOME (EXPENSES):
Interest income 40,202 43,404 82,814 86,372
Interest expense - - - (1,274)
40,202 43,404 82,814 85,098
INCOME BEFORE ALLOCATION
TO MINORITY INTERESTS 130,283 115,373 251,807 204,404
MINORITY INTEREST IN
TOWER VENTURES
LIMITED PARTNERSHIP (1,196) (1,011) (2,306) (1,742)
MINORITY INTEREST IN
UNITED MOBILE
NETWORKS L.P. (345) (357) (706) (733)
NET INCOME $128,742 114,005 $248,795 $201,929
ALLOCATION OF NET INCOME:
General Partner $1,287 $1,140 $2,488 $2,019
Investor Limited
Partners $127,455 $112,865 $246,307 $199,910
Net income per Investor
Limited Partner Unit $23.89 $21.16 $46.18 $37.48
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
SIX MONTHS ENDED JUNE 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) (426,144) (430,454)
Net Income 2,488 246,307 248,795
BALANCE, June 30,
1997 $(29,856) $3,302,552 $3,272,696
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
JUNE 30, 1997 AND 1996
(UNAUDITED)
Six Months Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 248,795 $ 201,929
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 48,377 70,634
Imputed interest on additional consideration
receivable (17,454) (16,117)
Changes in assets and liabilities:
Decrease in receivables 4,129 9,385
Decrease in accrued liabilities (62,184) (9,245)
Decrease in deferred revenue (9,473) (3,894)
Increase (decrease) in security deposits - (1,000)
Increase in minority interests 851 1,165
Increase (decrease) in accounts
payable-affiliates 111 (6)
Decrease in deposits, prepaid
Expenses and other assets 6,361 10,026
Net cash provided by operating activities 219,513 262,877
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of Note Receivable 200,000 -
Distributions (430,454) (215,516)
Repayment of borrowings - (76,523)
Net cash used in financing activities (230,454) (292,039)
DECREASE IN CASH AND CASH EQUIVALENTS (10,941) (29,162)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 135,527 175,561
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 124,586 $ 146,399
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, 1997 AND 1996
(UNAUDITED)
Six Months Ended June 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 $ 17,454 $ 16,117
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 $64,796 and
$88,601 at June 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 six months ended June 30, 1997 and 1996, Tower Ventures reported
net income of $230,593 and $174,239, respectively. The minority interest's
1% share in this net income is $2,306 and $1,742, 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 six months ended June 30, 1997 and 1996, UMN L.P. reported net
income of $70,585 and $73,321, respectively. The minority interest's 1%
share in this net income is $706 and $733, 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 (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,
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 six months ended
June 30, 1996 and 1996 were $19,520 and $18,517, respectively.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the six months ended June 30, 1997, Partnership operations consisted of
operating the communications tower owned by Tower Ventures.
Rental revenues from the communications tower (Tower Ventures) increased
$32,539 and costs and expenses decreased $17,148 for the six months ended
June 30, 1996 and 1997, respectively. For the six months ended June 30,
1997, rental revenue of $349,214 was earned from 31 tenant leases.
Operating, general and administrative expense consisted of operating costs
of Tower Ventures and UMN L.P. in the amount of $40,928 and $2,203,
respectively, for the six months ended June 30, 1997. The remaining
$33,877 represents legal and accounting fees of $24,090 and other
administrative costs of $9,787. Management fees during this six month
period consisted of fees incurred by Tower Ventures and UMN L.P. of $29,316
and $6,000, respectively, and management fees of $19,520 to
Telecommunications Growth and Income Fund Management Limited Partnership,
the general partner.
Operating income increased by $49,687 from $119,306 to $168,993 for the
six months ended June 30, 1996 and 1997, respectively. Depreciation and
amortization decreased $22,257, and operating, general and administrative
expense increased $3,263. Management fees increased $1,846.
Interest expense decreased $1,274, from $1,274 to $0 for the six months
ended June 30, 1996 and 1997, respectively, as a result of the repayment of
the Tower Ventures debt on March 18, 1996. Interest income represents
income of $61,333 on the note receivable and $17,454 imputed interest
income on the additional consideration receivable from the sale of the SMR
business and $4,027 from cash investments. For the six months ended
June 30, 1997, the Partnership had positive cash flow from operations of
$219,513. During the six months ended June 30, 1997, the Partnership made
distributions to investor limited partners in the amount of 8% 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 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, 1997, there were
31 tenant leases in effect with a current rent roll of $56,634 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 88% an
tively, 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 $123,244 and $66,769 at June 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 over
the next five years of a minimum of $1,500,000. 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, 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: August 14, 1997 BY: /s/ Randall N. Smith
Randall N. Smith, President,
Chief Executive Officer and
Director
DATE: August 14, 1997 BY: /s/ B. Eric Sivertsen
B. Eric Sivertsen, Vice-
President, Secretary, Director and
Chief Financial and Accounting
Officer
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